10-Q

@

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 25, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39651

McAfee Corp.

(Exact Name of Registrant as Specified in its Charter)

Delaware	84-2467341
( State or other jurisdiction of incorporation or organization)	(I.R.S. 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

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2021, there were 182,658,495 shares of the Registrant’s Class A common stock, $0.001 par value per share, outstanding and 254,297,067 shares of the Registrant’s Class B Common Stock, par value $0.001 per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	82
Item 3.	Defaults Upon Senior Securities	82
Item 4.	Mine Safety Disclosures	82
Item 5.	Other Information	82
Item 6.	Exhibits	83
	Signatures	85

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” and other similar expressions, although not all forward-looking statements contain these identifying words.

We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements in making your investment decision. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, the following:

our ability to consummate the proposed Merger (as defined herein), and the timing, costs and any benefits of such transaction;

the efficiency and success of our transition to a pure-play Consumer cybersecurity company following the sale of our Enterprise Business;

plans to develop and offer new products and services and enter new markets;

our expectations with respect to the continued stability and growth of our customer base;

anticipated trends, growth rates, and challenges in our business and in domestic and international markets;

our financial performance, including changes in and expectations with respect to revenues, and our ability to maintain profitability in the future;

investments or potential investments in new or enhanced technologies;

market acceptance of our solutions;

the success of our business strategy and changes in our business model and operations;

our ability to renew existing customer relationships and sell additional products and services to existing customers;

our ability to maintain and expand our relationships with partners and on commercially acceptable terms, including our channel and strategic partners;

the effectiveness of our sales force, distribution channel, and marketing activities;

the growth and development of our direct and indirect channels of distribution;

our response to emerging and future cybersecurity risks;

our ability to continue to innovate and enhance our solutions;

our ability to develop new solutions and bring them to market in a timely manner;

our ability to prevent serious errors, defects, or vulnerabilities in our solutions;

our ability to develop solutions that interoperate with our customers’ existing systems and devices;

our ability to maintain, protect, and enhance our brand and intellectual property;

our continued use of open source software;

our ability to compete against established and emerging cybersecurity companies;

risks associated with fluctuations in exchange rates of the foreign currencies in which we conduct business;

past and future acquisitions, investments, and other strategic investments;

our ability to remain in compliance with laws and regulations that currently apply or become applicable to our business both domestically and internationally;

the attraction, transition, and retention of management and other qualified personnel;

economic and industry trend analysis;

litigation, investigations, regulatory inquiries, and proceedings;

the increased expenses associated with being a public company;

our estimated total addressable market;

the impact of macroeconomic conditions on our business, including the impact of the COVID-19 pandemic on economic activity and financial markets;

our expectation regarding the impact of the COVID-19 pandemic, including its geographic spread and severity, and the related responses by governments and private industry on our business and financial condition, as well as the businesses and financial condition of our customers and partners;

the adequacy of our capital resources to fund operations and growth;

TPG Global LLC’s (“TPG”), Thoma Bravo L.P.’s (“Thoma Bravo”), and Intel Americas, Inc’s (“Intel”) significant influence over us and our status as a “controlled company” under the rules of The Nasdaq Global Select Market (the “Exchange”);

risks relating to our corporate structure, tax rates, and tax receivable agreement (“TRA”); and

the other factors identified under the heading “Risk Factors” in our Item 1A of this Quarterly Report on Form 10-Q.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Report. We undertake no obligation to update any forward-looking statements whether as a result of new information, future developments or otherwise.

SUMMARY OF RISKS ASSOCIATED WITH OUR BUSINESS

The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations.

Failure to consummate the proposed Merger within the expected timeframe or at all could have a material adverse impact on our business, financial condition and results of operations.

The COVID-19 pandemic has affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

If we are unsuccessful at executing our business plan and necessary transition activities as a standalone consumer cybersecurity company following the recent sale of our Enterprise Business (as defined herein), our business and results of operations may be adversely affected and our ability to invest in and grow our business could be limited.

We may not achieve the intended benefits of the sale of our Enterprise Business.

Our future results of operations are dependent solely on the operations of our pure play consumer cybersecurity business and will differ materially from our previous results.

The cybersecurity market is rapidly evolving and becoming increasingly competitive in response to continually evolving cybersecurity threats from a variety of increasingly sophisticated cyberattackers. If we fail to anticipate changing customer requirements or industry and market developments, or we fail to adapt our business model to keep pace with evolving market trends, our financial performance will suffer.

We operate in a highly competitive environment, and we expect competitive pressures to increase in the future, which could cause us to lose market share.

Our results of operations can be difficult to predict and may fluctuate significantly, which could result in a failure to meet investor expectations.

As a multinational corporation, forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates.

We face risks associated with past and future investments, acquisitions, and other strategic transactions.

Over the last several years, we have pursued a variety of strategic initiatives designed to optimize and reinforce our cybersecurity platform. If the benefits of these initiatives are less than we anticipate, or if the realization of such benefits is delayed, our business and results of operations may be harmed.

If our solutions have or are perceived to have defects, errors, or vulnerabilities, or if our solutions fail or are perceived to fail to detect, prevent, or block cyberattacks, including in circumstances where customers may fail to take action on attacks identified by our solutions, our reputation and our brand could suffer, which would adversely impact our business, financial condition, results of operations, and cash flows.

If the protection of our proprietary technology is inadequate, we may not be able to adequately protect our innovations and brand.

We rely significantly on third-party channel partners to facilitate the sale of our products and solutions. If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.

If our security measures are breached or unauthorized access to our data is otherwise obtained, our brand, reputation, and business could be harmed, and we may incur significant liabilities.

We operate globally and are subject to significant business, economic, regulatory, social, political, and other risks in many jurisdictions.

We may become involved in litigation, investigations, and regulatory inquiries and proceedings that could negatively affect us and our reputation.

Our substantial leverage could adversely affect our financial condition.

Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to take certain actions.

Our principal asset is our interest in Foundation Technology Worldwide LLC, and we are dependent upon Foundation Technology Worldwide LLC and its consolidated subsidiaries for our results of operations, cash flows, and distributions.

We are required to pay certain Continuing Owners and certain Management Owners (in each case as defined herein) for certain tax benefits we may realize or are deemed to realize in accordance with the tax receivable agreement between us and such Continuing Owners and Management Owners, and we expect that the payments we will be required to make will be substantial.

In certain circumstances, under its limited liability company agreement, Foundation Technology Worldwide LLC will be required to make tax distributions to us, the Continuing Owners and certain Management Owners and the distributions that Foundation Technology Worldwide LLC will be required to make may be substantial.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

MCAFEE CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)

	September 25, 2021			December 26, 2020
Assets
Current assets:
Cash and cash equivalents	$	848		$	231
Accounts receivable, net		124			102
Deferred costs		171			137
Receivable from Enterprise Business		116			—
Other current assets		36			42
Held-for-sale assets		31			—
Current assets of discontinued operations		—			402
Total current assets		1,326			914
Property and equipment, net		55			98
Goodwill		1,018			1,018
Identified intangible assets, net		595			729
Deferred tax assets		398			24
Other long-term assets		92			67
Long-term assets of discontinued operations		—			2,578
Total assets	$	3,484		$	5,428
Liabilities, redeemable noncontrolling interests and deficit
Current liabilities:
Accounts payable and other current liabilities	$	303		$	235
Accrued compensation and benefits		66			179
Accrued marketing		101			118
Income taxes payable		207			14
Long-term debt, current portion		44			44
Deferred revenue		953			823
Payable to Enterprise Business		50			—
Current liabilities of discontinued operations		—			972
Total current liabilities		1,724			2,385
Long-term debt, net		2,889			3,943
Deferred tax liabilities		17			5
Tax receivable agreement liability, less current portion		392			—
Other long-term liabilities		136			155
Deferred revenue, less current portion		91			80
Long-term liabilities of discontinued operations		—			660
Total liabilities		5,249			7,228
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests		5,836			4,840
Equity (deficit):
Class A common stock, $0.001 par value - 1,500,000,000 shares authorized,      179,848,875 shares issued and outstanding as of September 25, 2021 and      161,267,412 shares issued and outstanding as of December 26, 2020		—			—
Class B common stock, $0.001 par value - 300,000,000 shares authorized,     255,490,562 shares issued and outstanding as of September 25, 2021 and     267,065,127 shares issued and outstanding as of December 26, 2020		—			—
Additional paid-in capital		(7,571	)		(6,477	)
Accumulated deficit		—			(118	)
Accumulated other comprehensive income (loss)		(30	)		(45	)
Total deficit		(7,601	)		(6,640	)
Total liabilities, redeemable noncontrolling interests and deficit	$	3,484		$	5,428

See the accompanying notes to the condensed consolidated financial statements.

1

MCAFEE CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Net revenue	$	491		$	395		$	1,400		$	1,132
Cost of sales		118			112			349			321
Gross profit		373			283			1,051			811
Operating expenses:
Sales and marketing		91			87			264			225
Research and development		48			35			138			109
General and administrative		51			43			143			141
Amortization of intangibles		13			36			63			108
Restructuring and transition charges (Note 9)		27			—			35			1
Total operating expenses		230			201			643			584
Operating income		143			82			408			227
Interest expense		(61	)		(72	)		(170	)		(222	)
Foreign exchange gain (loss), net		14			(43	)		29			(49	)
Other income (expense), net		(292	)		(1	)		(301	)		—
Income (loss) from continuing operations before income taxes		(196	)		(34	)		(34	)		(44	)
Provision for income tax expense (benefit)		(166	)		5			(159	)		—
Income (loss) from continuing operations		(30	)		(39	)		125			(44	)
Income from discontinued operations, net of taxes		2,420			39			2,467			75
Net income	$	2,390		$	—		$	2,592		$	31
Less: Net income attributable to redeemable noncontrolling interests		1,648		N/A				1,784		N/A
Net income attributable to McAfee Corp.	$	742		N/A			$	808		N/A
Net income (loss) attributable to McAfee Corp.:
Loss from continuing operations attributable to McAfee Corp.	$	(92	)	N/A			$	(40	)	N/A
Income from discontinued operations attributable to McAfee Corp.		834		N/A				848		N/A
Net income attributable to McAfee Corp.	$	742		N/A			$	808		N/A
Earnings per share attributable to McAfee Corp., basic and diluted:
Continuing operations	$	(0.54	)	N/A			$	(0.24	)	N/A
Discontinued operations		4.90		N/A				5.11		N/A
Earnings per share, basic and diluted(1)	$	4.36		N/A			$	4.87		N/A
Weighted-average shares outstanding, basic and diluted		170.3		N/A				165.9		N/A

(1)Basic and diluted earnings per share of Class A common stock are not applicable prior to the initial public offering (“IPO”) and related Reorganization Transactions (as defined in Note 1 to the condensed consolidated financial statements). See Note 15 Earnings Per Share in the notes to the condensed consolidated financial statements for the number of shares used in the computation of earnings per share of Class A common stock and the basis for the computation of earnings per share.

See the accompanying notes to the condensed consolidated financial statements.

2

MCAFEE CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

	Three Months Ended					Nine Months Ended
	September 25, 2021		September 26, 2020			September 25, 2021		September 26, 2020
Net income	$	2,390	$	—		$	2,592	$	31
Other comprehensive income (loss):
Interest rate cash flow hedges:
Gain (loss) on interest rate cash flow hedges, net of tax		—		(7	)		9		(102	)
Reclassification adjustments for income on interest rate       cash flow hedges		12		13			36		27
Pension and postretirement benefits income, net of tax		—		—			1		—
Total comprehensive income (loss)	$	2,402	$	6		$	2,638	$	(44	)
Less: Comprehensive income attributable to redeemable noncontrolling interests		1,655	N/A				1,813	N/A
Total comprehensive income attributable to McAfee Corp.	$	747	N/A			$	825	N/A

See the accompanying notes to the condensed consolidated financial statements.

3

MCAFEE CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Nine Months Ended
	September 25, 2021			September 26, 2020
Cash flows from operating activities:
Net income	$	2,592		$	31
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		195			372
Equity-based compensation		85			25
Deferred taxes		(161	)		3
Foreign exchange (gain) loss, net		(29	)		49
Pre-tax gain on divestiture of Enterprise Business		(2,634	)		—
Tax Receivable Agreement remeasurement		310			—
Other operating activities		31			40
Change in assets and liabilities:
Receivable and payable from/to Enterprise Business		(36	)		—
Accounts receivable, net		108			94
Deferred costs		(34	)		(29	)
Other assets		(42	)		(10	)
Income taxes payable		193			(2	)
Other current liabilities		24			(10	)
Deferred revenue		(10	)		(26	)
Other liabilities		(54	)		(73	)
Net cash provided by operating activities		538			464
Cash flows from investing activities:
Acquisitions, net of cash acquired		—			(5	)
Additions to property and equipment		(19	)		(32	)
Proceeds from divestiture of Enterprise Business, net of transaction costs (Note 3)		3,880			—
Other investing activities		(4	)		(3	)
Net cash provided by (used in) investing activities		3,857			(40	)
Cash flows from financing activities:
Proceeds from issuance of equity		11			2
Payment for long-term debt		(1,027	)		(33	)
Distributions to members of FTW		(1,860	)		(200	)
Payment of dividends		(812	)		—
Payment of tax withholding for shares and units withheld		(79	)		(4	)
Other financing activities		(3	)		(10	)
Net cash used in financing activities		(3,770	)		(245	)
Effect of exchange rate fluctuations on cash and cash equivalents		(8	)		2
Change in cash and cash equivalents		617			181
Cash and cash equivalents, beginning of period		231			167
Cash and cash equivalents, end of period	$	848		$	348
Supplemental disclosures of noncash investing and financing activities and cash flow information:
Acquisition of property and equipment included in current liabilities	$	(4	)	$	(2	)
Distributions to members of FTW included in liabilities		(45	)		(5	)
Dividends payable included in liabilities		(21	)		—
Other financing activities included in liabilities		(8	)		—
Tax withholding for shares and units withheld included in liabilities		(5	)		—
Proceeds receivable related to divestiture of Enterprise Business		65			—
Transaction costs payable related to divestiture of Enterprise Business		(28	)		—
Cash paid during the period for:
Interest, net of cash flow hedges		(148	)		(210	)
Income taxes, net of refunds		(51	)		(35	)

See the accompanying notes to the condensed consolidated financial statements.

4

MCAFEE CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

AND REDEEMABLE NONCONTROLLING INTERESTS

(in millions, except share amounts)

	Foundation Technology Worldwide, LLC (prior to Reorganization Transactions)						McAfee Corp. Stockholders' Equity
							Class A Common Stock				Class B Common Stock
	Accumulated Other Comprehensive Income (Loss)		Members’ Equity (Deficit)		Accumulated Deficit		Shares		Amount		Shares			Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Deficit			Redeemable Noncontrolling Interests			Total
Balance at June 26, 2021	$	—	$	—	$	—		166,004,840	$	—		265,376,691		$	—	$	(9,306	)	$	(52	)	$	(33	)	$	(9,391	)	$	7,687		$	(1,704	)
Distributions to RNCI		—		—		—		—		—		—			—		—			—			—			—			(1,726	)		(1,726	)
Dividend declared		—		—		—		—		—		—			—		(91	)		(690	)		—			(781	)		—			(781	)
Other comprehensive    loss, net of tax		—		—		—		—		—		—			—		—			—			5			5			7			12
Equity-based awards    expense, net of    equity withheld to    cover taxes		—		—		—		3,013,153		—		—			—		(39	)		—			—			(39	)		—			(39	)
Stock issuances		—		—		—		355,629		—		—			—		6			—			—			6			—			6
RNCI units conversion   into Class A shares		—		—		—		10,475,253		—		(9,886,129	)		—		—			—			—			—			—			—
Deferred tax adjustments		—		—		—		—		—		—			—		167			—			—			167			—			167
TRA adjustments		—		—		—		—		—		—			—		(82	)		—			—			(82	)		—			(82	)
Net income		—		—		—		—		—		—			—		—			742			—			742			1,648			2,390
Other		—		—		—		—		—		—			—		(8	)		—			—			(8	)		—			(8	)
Impact of change   in ownership in   RNCI		—		—		—		—		—		—			—		(34	)		—			(2	)		(36	)		36			—
Fair value adjustment     for RNCI		—		—		—		—		—		—			—		1,816			—			—			1,816			(1,816	)		—
Balance at September 25, 2021	$	—	$	—	$	—		179,848,875	$	—		255,490,562		$	—	$	(7,571	)	$	—		$	(30	)	$	(7,601	)	$	5,836		$	(1,765	)

	Foundation Technology Worldwide, LLC (prior to Reorganization Transactions)									McAfee Corp. Stockholders' Equity
										Class A Common Stock				Class B Common Stock
	Accumulated Other Comprehensive Income (Loss)			Members’ Equity (Deficit)			Accumulated Deficit			Shares		Amount		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Deficit		Redeemable Noncontrolling Interests		Total
Balance at June 27, 2020	$	(143	)	$	(785	)	$	(1,354	)		—	$	—		—	$	—	$	—	$	—	$	—	$	—	$	—	$	(2,282	)
Distributions to    Members		—			(70	)		—			—		—		—		—		—		—		—		—		—		(70	)
Other comprehensive    loss, net of tax		6			—			—			—		—		—		—		—		—		—		—		—		6
Equity-based awards    expense, net of    equity withheld to    cover taxes		—			5			—			—		—		—		—		—		—		—		—		—		5
Unit issuances		—			1			—			—		—		—		—		—		—		—		—		—		1
Reclassification of     redeemable units     (Note 6)		—			(24	)		—			—		—		—		—		—		—		—		—		—		(24	)
Net income		—			—			—			—		—		—		—		—		—		—		—		—		—
Balance at September 26, 2020	$	(137	)	$	(873	)	$	(1,354	)		—	$	—		—	$	—	$	—	$	—	$	—	$	—	$	—	$	(2,364	)

5

	Foundation Technology Worldwide, LLC (prior to Reorganization Transactions)						McAfee Corp. Stockholders' Equity
							Class A Common Stock				Class B Common Stock
	Accumulated Other Comprehensive Income (Loss)		Members’ Equity (Deficit)		Accumulated Deficit		Shares		Amount		Shares			Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Deficit			Redeemable Noncontrolling Interests			Total
Balance at December 26, 2020	$	—	$	—	$	—		161,267,412	$	—		267,065,127		$	—	$	(6,477	)	$	(118	)	$	(45	)	$	(6,640	)	$	4,840		$	(1,800	)
Distributions to RNCI		—		—		—		—		—		—			—		—			—			—			—			(1,878	)		(1,878	)
Dividend declared		—		—		—		—		—		—			—		(129	)		(690	)		—			(819	)		—			(819	)
Other comprehensive    loss, net of tax		—		—		—				—		—			—		—			—			17			17			29			46
Equity-based awards    expense, net of    equity withheld    to cover taxes		—		—		—		5,250,424		—		—			—		6			—			—			6			—			6
Stock issuances		—		—		—		577,782		—		—			—		11			—			—			11			—			11
RNCI units conversion into Class A shares		—		—		—		12,753,257		—		(11,574,565	)		—		—			—			—			—			—			—
Deferred tax adjustments		—		—		—		—		—		—			—		167			—			—			167			—			167
TRA adjustments		—		—		—		—		—		—			—		(82	)		—			—			(82	)		—			(82	)
Net income		—		—		—		—		—		—			—		—			808			—			808			1,784			2,592
Other		—		—		—		—		—		—			—		(8	)		—			—			(8	)		—			(8	)
Impact of change    in ownership in    RNCI		—		—		—		—		—		—			—		(76	)		—			(2	)		(78	)		78			—
Fair value adjustment     for RNCI		—		—		—		—		—		—			—		(983	)		—			—			(983	)		983			—
Balance at September 25, 2021	$	—	$	—	$	—		179,848,875	$	—		255,490,562		$	—	$	(7,571	)	$	—		$	(30	)	$	(7,601	)	$	5,836		$	(1,765	)

	Foundation Technology Worldwide, LLC (prior to Reorganization Transactions)									McAfee Corp. Stockholders' Equity
										Class A Common Stock				Class B Common Stock
	Accumulated Other Comprehensive Income (Loss)			Members’ Equity (Deficit)			Accumulated Deficit			Shares		Amount		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Deficit		Redeemable Noncontrolling Interests		Total
Balance at December 28, 2019	$	(62	)	$	(647	)	$	(1,385	)		—	$	—		—	$	—	$	—	$	—	$	—	$	—	$	—	$	(2,094	)
Distributions to    Members		—			(201	)		—			—		—		—		—		—		—		—		—		—		(201	)
Other comprehensive    loss, net of tax		(75	)		—			—			—		—		—		—		—		—		—		—		—		(75	)
Equity-based awards    expense, net of    equity withheld to    cover taxes		—			22			—			—		—		—		—		—		—		—		—		—		22
Unit issuances		—			2			—			—		—		—		—		—		—		—		—		—		2
Unit repurchases    (Note 6)		—			(10	)		—			—		—		—		—		—		—		—		—		—		(10	)
Reclassification of     redeemable units     (Note 6)		—			(41	)		—			—		—		—		—		—		—		—		—		—		(41	)
Net income		—			—			31			—		—		—		—		—		—		—		—		—		31
Other		—			2			—			—		—		—		—		—		—		—		—		—		2
Balance at September 26, 2020	$	(137	)	$	(873	)	$	(1,354	)		—	$	—		—	$	—	$	—	$	—	$	—	$	—	$	—	$	(2,364	)

See the accompanying notes to the condensed consolidated financial statements.

6

MCAFEE CORP.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION

Background

McAfee is a leading-edge cybersecurity company that provides advanced security solutions to consumers. Security technologies from McAfee use a unique, predictive capability that is powered by McAfee Global Threat Intelligence, which enables home users to stay one step ahead of the next wave of fileless attacks, viruses, malware, and other online threats.

McAfee Corp. (the “Corporation”) was formed as a Delaware corporation on July 19, 2019 for the purpose of facilitating an initial public offering (“IPO”) and related transactions in order to carry on the business of Foundation Technology Worldwide LLC (“FTW”) and its subsidiaries (the Corporation, FTW and its subsidiaries are collectively the “Company,” “we,” “us” or “our”). On October 21, 2020, the Corporation became the sole managing member and holder of 100% of the voting power of FTW due to the reorganization transactions described below. With respect to the Corporation and FTW, each entity owns only the respective entities below it in the corporate structure and each entity has no other material operations, assets, or liabilities.

In October 2020, the Corporation completed an IPO pursuant to which the Corporation and selling stockholders sold an aggregate of 37 million shares of Class A common stock par value $0.001 per share (“Class A common stock”) at a public offering price of $20.00 per share. The Corporation issued 31 million shares and received $586 million in proceeds, net of underwriting discounts and commissions, of which $553 million was used to purchase newly-issued limited liability company units (“LLC Units”) and $33 million was used to purchase LLC Units from existing holders (“Continuing LLC Owners”) of interests in FTW, at a purchase price per unit equal to the public offering price per share of Class A common stock, less underwriting discounts and commissions.

We refer to the holders of management incentive units of FTW (“MIUs”) as well as members of management who hold LLC Units following the closing of the offering or are to receive Class A common stock in satisfaction of existing incentive awards as “Management Owners.” We refer to those of our pre-IPO investors and certain of their affiliates who received shares of Class A common stock in connection with the Reorganization Transactions (as defined below) and who do not hold LLC Units as “Continuing Corporate Owners,” and together with the Continuing LLC Owners, as “Continuing Owners.”

The Reorganization Transactions

Reorganization

In connection with the closing of the IPO, the following Reorganization Transactions were consummated:

a new limited liability company operating agreement (“New LLC Agreement”) was adopted for FTW making the Corporation the sole managing member of FTW;

the Corporation’s certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing Owners and Management Owners, on a one-to-one basis with the number of LLC Units they own (except that Management Owners will not receive shares of Class B common stock in connection with their exchange of Management Incentive Units (“MIUs”)), the exchange of which will be settled in cash or shares of Class A common stock, at the option of the Company, for nominal consideration;

the Corporation (i) issued 126.3 million shares of its Class A common stock to certain of the Continuing Owners in exchange for their contribution of LLC units or the equity of certain other entities, which pursuant to the Reorganization Transactions, became its direct or indirect subsidiaries and (ii) settled 5.7 million restricted stock units (“RSUs”) with shares of its Class A common stock, net of tax withholding, held by certain employees, which were satisfied in connection with the Reorganization Transactions; and

the Corporation entered into (i) a tax receivable agreement (“TRA”) with certain of our Continuing Owners and certain Management Owners (collectively “TRA Beneficiaries”) and (ii) a stockholders agreement and a registration rights agreement with investment funds affiliated with or advised by TPG Global, LLC (“TPG”) and Thoma Bravo, L.P. (“Thoma Bravo”), respectively, and Intel Americas, Inc. (“Intel”).

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Divestiture of Enterprise Business

On March 6, 2021, we entered into a definitive agreement (the “Purchase Agreement”) with a consortium led by Symphony Technology Group (“STG”) under which STG agreed to purchase certain of our Enterprise assets together with certain of our Enterprise liabilities (“Enterprise Business”), representing substantially all of our Enterprise segment, for an all-cash purchase price of $4.0 billion. The divestiture transaction closed on July 27, 2021. The divestiture of our Enterprise Business represents a strategic shift in our operations that allows us to focus on our Consumer business. As a result of the divestiture, the results of our Enterprise Business were reclassified as discontinued operations in our condensed consolidated statements of operations and excluded from both continuing operations and segment results for all periods presented. Starting in the first quarter of fiscal 2021, we began to operate in one reportable segment as the Enterprise Business comprised substantially all of our Enterprise segment. Results of discontinued operations includes all revenues and expenses directly derived from our Enterprise Business, with the exception of general corporate overhead costs that were previously allocated to our Enterprise segment but have not been allocated to discontinued operations. The Enterprise Business, as specified in the Purchase Agreement and related Amendments, was reclassified as discontinued operations in our condensed consolidated balance sheets. See Note 3 for additional information about the divestiture of our Enterprise Business.

Principles of Consolidation

Subsequent to the Reorganization Transactions and IPO, the Corporation is a holding company, and its sole material asset held directly or through wholly-owned subsidiaries is its equity interest in FTW. The Corporation, as the sole managing member of FTW, exclusively operates and controls the business and affairs of FTW. The Corporation consolidates the financial results of FTW and reports a redeemable noncontrolling interest (“RNCI”) related to the LLC Units held by the Continuing LLC Owners and vested MIUs held by Management Owners (Note 14 and 16).

As the Continuing LLC Owners control both the Corporation and FTW, before and after the Reorganization Transactions, the Reorganization Transactions were accounted for as a reorganization of entities under common control. As a result, the financial statements for periods prior to the IPO and the Reorganization Transactions are the financial statements of FTW as the predecessor to the Corporation for accounting and reporting purposes.

Financial information includes the accounts of the Company and was prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany balances and transactions within the Company have been eliminated in consolidation. These condensed consolidated financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of our financial information. The condensed consolidated balance sheet as of December 26, 2020, has been derived from the audited financial statements as of that date, but it does not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying Notes thereto included in our Annual Report on Form 10-K for the year ended December 26, 2020, which were recast to reflect discontinued operations and filed with our Current Report on Form 8-K on August 2, 2021. The results of operations for the three and nine months ended September 25, 2021 are not necessarily indicative of the results expected for the entire fiscal year. We have reclassified certain prior period amounts to conform to our current period presentation.

We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. We also consider for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it (Note 16).

Our functional currency for all of our subsidiaries is the U.S. dollar (“USD”).

Use of Estimates

The preparation of the condensed consolidated financial statements required us to make certain estimates and judgments that affect the amounts reported. Actual results may differ materially from our estimates. The accounting estimates that required our most significant and subjective judgments include:

projections of future cash flows related to revenue share and related agreements with our personal computer original equipment manufacturer partners;

amounts classified as discontinued operations;

the valuation and recoverability of identified intangible assets and goodwill;

recognition and measurement of current and deferred income taxes as well as our uncertain tax positions, including the income tax impact of the gain on the divestiture of the Enterprise Business;

fair value of our equity awards;

8

fair value of long-term debt and related swaps;

amount of liability related to the tax receivable agreement;

determining the nature and timing of satisfaction of performance obligations, assessing any associated material rights and determining the standalone selling price (“SSP”) of performance obligations; and

determining our technology constrained customer life.

The effect of the novel coronavirus (“COVID-19”) pandemic on our business, operations, and financial results is dependent upon future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are unknown at this time. As a result, some of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, several of our estimates and assumptions may change materially in future periods due to the impact of the COVID-19 pandemic.

Fiscal Calendar

We maintain a 52- or 53-week fiscal year that ends on the last Saturday in December. The year ending December 25, 2021 is a 52-week year starting on December 27, 2020. These condensed consolidated financial statements are presented as of September 25, 2021 and December 26, 2020, and for the three and nine months ended September 25, 2021 and the three and nine months ended September 26, 2020. The three and nine months ended September 25, 2021 consisted of 13 and 39 weeks, respectively, and the three and nine months ended September 26, 2020 consisted of 13 and 39 weeks, respectively.

Significant Accounting Policies

There have been no material changes to our significant accounting policies as of and for the nine months ended September 25, 2021, except for those related to discontinued operations, assets held for sale, and those noted in Note 2, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 26, 2020, which were recast to reflect discontinued operations and filed with our Current Report on Form 8-K on August 2, 2021.

Discontinued Operations

We review the presentation of planned business dispositions in the condensed consolidated financial statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business, and if so, whether it is anticipated that after the disposal the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results. In addition, we evaluate whether the business has met the criteria as a business held for sale. In order for a planned disposition to be classified as a business held for sale, the established criteria must be met as of the reporting date, including an active program to market the business and the expected disposition of the business within one year.

Planned business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that qualify as discontinued operations, all comparative periods presented are reclassified in the condensed consolidated balance sheets. Additionally, the results of operations of a discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the condensed consolidated statements of operations. Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations.

Assets Held for Sale

Long-lived assets held for sale are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets and external data available.

NOTE 2: RECENT ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. ASU 2019-12 also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. We adopted ASU 2019-12 on December 27, 2020 and it had no material impact on our consolidated financial statements and related disclosures.

9

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies current guidance for convertible financial instruments. ASU 2020-06 also amends derivatives guidance for certain contracts in an entity’s own equity. Finally, ASU 2020-06 amends earnings per share guidance related to convertible instruments. ASU 2020-06 is effective for us in the first quarter of fiscal year 2022. We do not expect adoption of ASU 2020-06 to have a material effect on our consolidated financial statements. 

NOTE 3: DISCONTINUED OPERATIONS AND HELD-FOR-SALE ASSETS

Divestiture of Enterprise Business

On March 6, 2021, we entered into a definitive agreement with a consortium led by STG, pursuant to which STG agreed to purchase our Enterprise Business for an all-cash purchase price of $4.0 billion, which closed on July 27, 2021.

The following table presents the gain associated with the sale, presented in the results of our discontinued operations below:

(in millions)
Gross purchase price	$	4,000
Net assets sold		(1,283	)
Transaction costs		(83	)
Pre-tax gain on divestiture of Enterprise Business		2,634
Income tax expense on gain on divestiture of Enterprise Business		(383	)
Total gain on divestiture of Enterprise Business	$	2,251

The carrying value of the net assets sold are as follow:

(in millions)
Accounts receivable, net	$	155
Deferred costs		95
Other current assets		16
Property and equipment, net		55
Intangible assets, net		881
Goodwill		1,413
Other long-term assets		159
Accounts payable and other current liabilities		(57	)
Accrued compensation and benefits		(20	)
Accrued marketing		(9	)
Deferred revenue		(1,345	)
Other long-term liabilities		(60	)
Total net assets sold	$	1,283

Transition Services Agreement

In connection with the divestiture of the Enterprise Business, we entered into a Transition Service Agreement (“TSA”) under which we will provide assistance to the Enterprise Business subsequent to the divestiture including, but not limited to, business support services and information technology services as well as a commercial services agreement under which we will provide certain product services and licensed technology for up to 24 months after the closing date. Income for the transition services was $7 million for the three months ended September 25, 2021 and was recorded as part of Other income (expense), net in our condensed consolidated statements of operations. We also received $13 million under the commercial services agreement and earned $2 million revenue for the three months ended September 25, 2021. The revenue is recorded within Net revenue on the condensed consolidated statements of operations and the remaining $11 million is recorded within Deferred revenue on the condensed consolidated balance sheet.

10

Our Receivable from and Payable to Enterprise Business consisted of the following:

(in millions)	September 25, 2021
Receivable from Enterprise Business
Proceeds receivable(1)	$	65
TSA receivables and misdirected payments		51
Total	$	116
Payable to Enterprise Business
Transaction costs		(26	)
Misdirected payments		(24	)
Total	$	(50	)

(1)Amount primarily related to receivable due on delayed closing in certain non-U.S. jurisdictions. In November 2021, $56 million of this amount was received upon closing of certain of these jurisdictions.

Discontinued Operations

The following table presents the aggregate amounts of the classes of assets and liabilities of the Enterprise Business classified as discontinued operations:

(in millions)	December 26, 2020
Assets:
Accounts receivable, net	$	290
Deferred costs		96
Other current assets		16
Total current assets of discontinued operations		402
Property and equipment, net		51
Intangible assets, net		915
Goodwill		1,413
Deferred tax assets		43
Other long-term assets		156
Total assets of discontinued operations	$	2,980
Liabilities:
Accounts payable and other current liabilities	$	56
Accrued compensation and benefits		18
Accrued marketing		6
Deferred revenue		892
Total current liabilities of discontinued operations		972
Deferred tax liabilities		7
Other long-term liabilities		49
Deferred revenue, less current portion		604
Total liabilities of discontinued operations	$	1,632

The following table presents information regarding certain components of income from discontinued operations, net of taxes:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Net revenue	$	104	$	333	$	781	$	997
Operating income	$	26	$	46	$	95	$	100
Pre-tax gain on divestiture of Enterprise Business	$	2,634	$	—	$	2,634	$	—
Income before income taxes	$	2,659	$	46	$	2,724	$	100
Income tax expense(1)	$	239	$	7	$	257	$	25
Income from discontinued operations, net of taxes	$	2,420	$	39	$	2,467	$	75

(1)Income tax expense for the three and nine months ended September 25, 2021 includes $383 million of income tax expense on gain on divestiture of Enterprise Business. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW as it is recognized as result of the divestiture of Enterprise Business.

11

In July 2021, two amendments to the definitive agreement with a consortium led by STG for the purchase of the Enterprise Business were executed. The amendments modified certain provisions for assets and liabilities to be transferred as well as the timing and procedures for transfer of certain assets and employees in foreign jurisdictions in connection with the sale, and clarifying requirements for maintenance of such assets prior to transfer. The amendments also include certain other modifications or clarifications of the purchase agreement. As a result of the amendments, our results of operations for the six months ended June 26, 2021 and June 28, 2020 and our December 26, 2020 condensed consolidated balance sheet reflect changes in the assets and liabilities that were determined to be part of discontinued operations as reported in our previously filed Form 10-Q for the period ended June 26, 2021. These changes resulted in decreases of $4 million and $4 million to income from discontinued operations, net of tax, for the six months ended June 26, 2021 and June 28, 2020, respectively, and total assets from discontinued assets increased $18 million as of December 26, 2020, as compared to the amounts reported in our previously filed Form 10-Q for the period ended June 26, 2021. These changes are reflected in the information presented above and all relevant disclosures.

In connection with the sale of the Enterprise Business, we have incurred costs up to the date of the sale consisting primarily of consulting fees, legal fees, and other costs to facilitate the separation of the Enterprise Business, including incremental costs associated with data disentanglement and acceleration of data migration to the cloud. During the three and nine months ended September 25, 2021, we recorded $16 million and $77 million, respectively, for these costs. These costs are recorded within Income from discontinued operations, net of taxes, on the condensed consolidated statements of operations.

The following table presents significant non-cash items and capital expenditures of discontinued operations:

	Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020
Depreciation and amortization	$	43	$	167
Equity-based compensation expense	$	36	$	4
Additions to property and equipment	$	4	$	6

Sale of Plano Facility

On September 13, 2021, we entered into a Purchase and Sale Agreement with Capital Commercial Investments, Inc. pursuant to which the Company will sell its property (land and office building with approximately 170,000 square feet of space) and certain property and equipment located in Plano, Texas, for a purchase price of $31 million, net of expected costs to sell. Pursuant to the terms of the Agreement, upon closing the Company will enter into a lease agreement for a limited portion of the facility to use for transitional purposes through April 30, 2022. As a result, the assets are classified as Held-for-sale assets as of September 25, 2021.

NOTE 4: REVENUE FROM CONTRACTS WITH CUSTOMERS

Deferred Revenue

During the nine months ended September 25, 2021, we recognized $721 million from our deferred revenue balance as of December 26, 2020. During the nine months ended September 26, 2020, we recognized $630 million in revenue from our deferred revenue balance as of December 28, 2019.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 25, 2021, we have $1,044 million estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied), which includes deferred revenue and amounts that will be billed and recognized as revenue in future periods. We expect to recognize approximately 91% as revenue in the next 12 months and 9% in the next 13 to 36 months.

12

Net Revenue by Geographic Region

Net revenue by geographic region based on the sell-to address of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Americas	$	327		66.6	%	$	260		65.8	%	$	928		66.3	%	$	742		65.5	%
EMEA		113		23.0	%		93		23.5	%		326		23.3	%		268		23.7	%
APJ		51		10.4	%		42		10.6	%		146		10.4	%		122		10.8	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan. See Note 8 for individual countries that accounted for more than 10% of net revenue.

Net Revenue by Channel

Direct to Consumer revenue is from subscribers who transact with us directly through McAfee web properties, including those converted after the trial period of the McAfee product preinstalled on their new PC purchase or converted subsequent to their subscription period purchased from another channel. Indirect revenue is driven by users who purchase directly through a partner inclusive of mobile providers, ISPs, electronics retailers, ecommerce sites, and search providers.

Net revenue by channel of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Direct to Consumer	$	356		72.5	%	$	305		77.2	%	$	1,029		73.5	%	$	879		77.7	%
Indirect		135		27.5	%		90		22.8	%		371		26.5	%		253		22.3	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

NOTE 5: LEASES

As of September 25, 2021, we have operating leases primarily for corporate offices and data centers and no significant finance leases. Information related to our leases, including leases associated with our discontinued operations, was as follows:

	Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities	$	22	$	29
Right-of-use assets obtained in exchange for lease obligations		33		16
Lease expense from continuing operations	$	8	$	11
Lease expense from discontinued operations		7		17
Total lease expense	$	15	$	28

Balance sheet information related to leases, excluding leases associated with our discontinued operations, was as follows:

(in millions)	September 25, 2021			December 26, 2020
Other long-term assets	$	29		$	33
Accounts payable and other current liabilities	$	7		$	8
Other long-term liabilities		35			38
Total lease liabilities	$	42		$	46
Weighted Average Remaining Lease Term (in years)		7			8
Weighted Average Discount Rate (percentage)		6.3	%		6.3	%

Maturities of lease liabilities were as follows:

13

(in millions)	September 25, 2021
Remainder of 2021	$	3
2022		8
2023		6
2024		5
2025		5
Thereafter		26
Total lease payments		53
Less imputed interest		(11	)
Total lease liabilities	$	42

NOTE 6: TRANSACTIONS WITH MEMBERS, SHAREHOLDERS AND RELATED PARTIES

Total tax and excess cash distributions to its members declared by FTW were as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
FTW members excluding McAfee Corp.	$	1,726	$	70	$	1,878	$	201
McAfee Corp.		1,052		—		1,142		—
Total tax and excess cash distributions declared	$	2,778	$	70	$	3,020	$	201

McAfee Corp. used a portion of its share of the cash distributions declared by FTW to declare or pay the dividends noted in the table below during the nine months ended September 25, 2021. Remaining distributions received by McAfee Corp. were used for corporate taxes and general corporate purposes.

Declaration Date	Record Date	Payment Date	Dividend per Share		Amount (in millions)
December 9, 2020	December 24, 2020	January 7, 2021	$	0.087	$	14
March 11, 2021	March 26, 2021	April 9, 2021	$	0.115	$	19
June 10, 2021	June 25, 2021	July 9, 2021	$	0.115	$	19
August 3, 2021	August 13, 2021	August 27, 2021	$	4.500	$	760
September 13, 2021	September 24, 2021	October 8, 2021	$	0.115	$	21

Distributions and dividends of $66 million were recorded primarily within Accounts payable and other current liabilities on the condensed consolidated balance sheet as of September 25, 2021, and $51 million was paid in October 2021.

As a result of the divestiture of the Enterprise Business, in August 2021 the Board of Directors of McAfee Corp. declared a special one-time cash dividend of $4.50 per share of Class A common stock payable to shareholders of record on August 13, 2021 (the “Special Dividend”). In connection with the declaration of the Special Dividend, the Board of Directors of McAfee Corp., as sole managing member of FTW, authorized FTW to declare a special one-time cash distribution to its members in the aggregate of $2.8 billion (the “Special Distribution”). The Special Distribution resulted in the payment of $1.7 billion to Continuing LLC Owners and $1.1 billion to McAfee Corp. McAfee Corp. used $0.8 billion of its share of the Special Distribution to pay the Special Dividend to participating shareholders on August 27, 2021.

We had these additional transactions, inclusive of discontinued operations, with TPG, Intel or other Continuing LLC Owners and companies owned or partially owned by those parties that therefore qualify as related parties. These transactions include sales of our products and purchases of various goods or services.

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	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Sales with related parties:
Intel	$	—	$	1	$	—	$	1
TPG		—		1		—		1
TPG affiliates	$	—	$	1	$	1	$	2
Other		—		—		—		2
Total	$	—	$	3	$	1	$	6
Payments to related parties:
Intel	$	—	$	—	$	1	$	2
TPG		—		1		—		6
TPG affiliates		3		8		21		23
Other		11		—		13		9
Total	$	14	$	9	$	35	$	40

Revenue from the sales transactions are recognized in accordance with our revenue recognition policy.

Our Intel receivable, net consisted of the following:

(in millions)	September 25, 2021			December 26, 2020
Intel receivable(1)
Tax indemnity	$	9		$	8
Total		9			8
Intel payable(1)
Tax indemnity		(3	)		(2	)
Total		(3	)		(2	)
Total, net(2)	$	6		$	6

(1)We have the contractual right of offset of our receivables and payables with Intel.

(2)As of September 25, 2021, $5 million and $1 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet. As of December 26, 2020, $3 million and $3 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet.

In February 2020, we entered into an agreement with our former President and Chief Executive Officer to repurchase equity units for an aggregate repurchase price of $10 million. We also agreed to repurchase his remaining outstanding equity units in April 2021 at fair market value, contingent on the satisfaction of certain terms and conditions. Upon a sale of the company or an IPO prior to the repurchase date, the units were not required to be repurchased. The units were classified as temporary equity within Redeemable units from the time of the agreement until the IPO when they were reclassified to permanent equity. As of September 26, 2020, the estimated value of the April 2021 repurchase was $41 million.

NOTE 7: GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets disposed of as a result of our agreement with STG to sell certain assets of Enterprise Business were included in assets of discontinued operations in our condensed consolidated balance sheets as of December 26, 2020, and accordingly, are excluded from the tables below.

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Intangible Assets, Net

	September 25, 2021							December 26, 2020
(in millions)	Gross Assets		Accumulated Amortization			Net		Gross Assets		Accumulated Amortization			Net
Intangible assets subject to amortization:
Customer relationships and other	$	758	$	(619	)	$	139	$	758	$	(556	)	$	202
Acquired and developed technology		517		(472	)		45		517		(401	)		116
Total intangible assets subject to    amortization		1,275		(1,091	)		184		1,275		(957	)		318
Intangible assets not subject to amortization:
Brand		411		—			411		411		—			411
Total intangible assets not subject to    amortization		411		—			411		411		—			411
Total intangible assets	$	1,686	$	(1,091	)	$	595	$	1,686	$	(957	)	$	729

Amortization expense for purchased and developed intangible assets is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		Statements of Operations Classification
Customer relationships and other	$	13	$	36	$	63	$	108	Amortization of intangibles
Acquired and developed technology		22		26		71		80	Cost of sales
Total	$	35	$	62	$	134	$	188

Based on identified intangible assets that are subject to amortization as of September 25, 2021, we expect future amortization expense to be as follows:

(in millions)	Total
Remainder of 2021	$	36
2022		76
2023		28
2024		20
2025		19
Thereafter		5
Total	$	184

NOTE 8: SEGMENT AND GEOGRAPHIC INFORMATION

Historically, we had two operating segments, which also represented our reportable segments and reporting units. The Consumer segment focused on providing security solutions for consumers, while the Enterprise segment focused on providing security solutions for large enterprise, governments, small and medium-sized businesses. On March 6, 2021, we entered into a definitive agreement to sell certain assets together with certain liabilities of our Enterprise Business to STG, representing substantially all of our Enterprise segment. The divestiture of the Enterprise Business, which was completed on July 27, 2021, allows us to shift our operational focus to our Consumer business and represents a strategic shift in our operations. Therefore, the results of our Enterprise Business until the closing of the sale were classified as discontinued operations in our condensed consolidated statements of operations and thus excluded from both continuing operations and segment results for all periods presented. Accordingly, we now have one reportable segment with the change reflected in all periods presented.

Net revenue by country based on the sell-to address of the end-users is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
U.S.	$	300	$	238	$	852	$	680
Other(1)		191		157		548		452
Total net revenue	$	491	$	395	$	1,400	$	1,132

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(1)No other individual country accounted for more than 10% of net revenue.

NOTE 9: RESTRUCTURING AND TRANSITION CHARGES

Restructuring charges generally include significant actions impacting the way we manage our business. Employee severance and benefit charges are largely based upon substantive severance plans, while some charges result from mandated requirements in certain foreign jurisdictions. These charges include items such as employee severance, ongoing benefits, and excess payroll costs directly attributable to the restructuring plan. Transition charges are costs incurred subsequent to the divestiture of the Enterprise Business in support of the transition services agreement. These costs include legal, advisory, consulting and other costs and are generally paid when incurred.

In connection with divestiture of the Enterprise Business, a portion of our Restructuring and transition charges were classified to discontinued operations for all periods presented. Restructuring and transition charges are as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Employee severance and benefits	$	—	$	—	$	8	$	1
Transition charges		27		—		27		—
Restructuring and transition charges attributable to continuing operations		27		—		35		1
Employee severance and benefits		1		—		25		8
Facility restructuring		—		—		1		—
Restructuring charges attributable to discontinued operations		1		—		26		8
Total restructuring and transition charges	$	28	$	—	$	61	$	9

In January 2020, we commenced the 2020 transformation initiative, in which we realigned our staffing across various departments. As part of the initiative, we incurred employee severance and benefits costs of $1 million recorded in restructuring charges in the condensed consolidated statement of operations for the nine months ended September 26, 2020.

In December 2020, we initiated a workforce reduction and other restructuring activities designed to continue to improve operating margins in connection with the reorientation of our Enterprise Business and realignment of staffing in other departments, which was announced in February 2021 following the notification of affected employees. These activities have been substantially completed. As part of the initiative, in December 2020 we recognized $16 million in connection with the workforce reduction and other restructuring activities. During the three and nine months ended September 25, 2021, we recognized $1 million and $34 million, respectively, of employee severance and benefits and facility restructuring charges in Restructuring and transition charges within the condensed consolidated statement of operations. These charges consist primarily of one-time termination benefits to the impacted employees, including severance payments and healthcare and other accrued benefits. We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the workforce reduction.

The balance of our restructuring and transition activities are as follows:

(in millions)	Total
Employee severance and benefits
As of December 26, 2020	$	16
Additional accruals, inclusive of expenses attributed to discontinued operations		33
Cash payments		(46	)
As of September 25, 2021	$	3

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NOTE 10: EMPLOYEE INCENTIVES

Equity-Based Compensation

Equity-based compensation costs recognized in our condensed consolidated statements of operations were:

	Three Months Ended					Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020		September 25, 2021		September 26, 2020
Cost of sales	$	1		$	—	$	3	$	—
Sales and marketing		2			—		9		1
Research and development		6			1		16		1
General and administrative		8			4		22		19
Total equity-based compensation expense from continuing operations		17			5		50		21
Discontinued operations		(9	)		1		36		4
Total equity-based compensation expense	$	8		$	6	$	86	$	25

As of September 25, 2021, there was $186 million of unrecognized equity-based compensation cost, which is expected to be recognized over a weighted average vesting period of 2.7 years.

During the nine months ended September 25, 2021, we granted 1.8 million Restricted Stock Units (“RSU”s) with a grant date fair value of $42 million as part of the divestiture of the Enterprise Business (“Enterprise RSU grant”). The Enterprise RSU grants are expected to vest over a weighted average service period of less than one year.

During the nine months ended September 25, 2021, we granted an additional 4.9 million RSU's with a grant date fair value of $109 million. These RSUs are generally expected to vest over a four-year period. We also granted 0.6 million Performance Stock Units (“PSU”s) with a fair value of $13 million. PSUs are generally expected to vest over a weighted average three-year period.

In connection with the special dividend (Note 6), the Board authorized two changes to outstanding equity awards. First, on our unvested RSUs and PSUs as of August 13, 2021, the Board authorized an increase to the outstanding number of units of approximately 17% or 2.2 million units. Second, on our unexercised stock options as of August 13, 2021, the Board authorized a reduction of the strike price of $4.50, equal to the per unit amount paid for the special dividend. As these changes were intended to “make-whole” holders of these instruments, changes were not applied where circumstances allowed an individual or award type a contractual right to participate in the special dividend.

Deferred Cash and Equity

As of September 25, 2021, our outstanding deferred cash and equity related to our acquisitions is as follows:

	(in millions)
Outstanding deferred cash and equity balance at December 26, 2020	$	13
Accruals		6
Cash payment		(15	)
Outstanding deferred cash and equity balance at September 25, 2021	$	4

As of September 25, 2021, we have no unrecognized expense relating to deferred cash. Deferred cash is recorded within Accrued compensation and benefits on the condensed consolidated balance sheet.

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NOTE 11: DEBT

Our long-term debt balance consisted of the following:

(in millions)	September 25, 2021			December 26, 2020
Long-term debt, net:
1st Lien USD Term Loan(1)	$	2,355		$	2,701
1st Lien Euro Term Loan(2)		585			1,298
Long-term debt, net of unamortized discounts		2,940			3,999
Unamortized deferred financing costs		(7	)		(12	)
Current installments of long-term debt		(44	)		(44	)
Total	$	2,889		$	3,943

(1)During the nine months ended September 25, 2021, the weighted average interest rate was 3.9%

(2)During the nine months ended September 25, 2021, the weighted average interest rate was 3.5%

Long-Term Debt

As of September 25, 2021, the material terms of our outstanding debt remain unchanged from those described in our consolidated financial statements as of December 26, 2020.

In August 2021, we used a portion of the proceeds of the divestiture of the Enterprise Business (Note 3) to prepay $332 million of 1st Lien USD Term Loan and €563 million of 1st Lien Euro Term Loan. In connection with this prepayment, we incurred a loss on extinguishment of debt of $10 million related to recognition of unamortized discount and deferred financing costs recorded in Interest expense on the condensed consolidated statement of operations.

Revolving Credit Facility

As of September 25, 2021 and December 26, 2020, we had a letter of credit of $4 million issued against the Revolving Credit Facility and $660 million of undrawn capacity under the Revolving Credit Facility, for which our commitment fee on the unused portion was 0.25%.

Debt Covenants and Restrictions

No event of default had occurred under any of our debt obligations as of September 25, 2021. We were not required to make any additional prepayments above the 0.25% per quarter amortization of the 1st Lien Term Loans during the nine months ended September 25, 2021.

NOTE 12: INCOME TAX

McAfee Corp. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from FTW based upon McAfee Corp.’s economic interest in FTW. FTW is a pass through entity for U.S. federal income tax purposes and will not incur any federal income taxes either for itself or its U.S. subsidiaries that are also pass through or disregarded subsidiaries. Taxable income or loss for these entities will flow through to its respective members for U.S. tax purposes. FTW does have certain U.S. and foreign subsidiaries that are corporations and are subject to income tax in their respective jurisdictions.

We consider many factors when evaluating and estimating our tax positions, which may require periodic adjustments and may not accurately anticipate actual outcomes. Tax position recognition is a matter of judgment based on the individual facts and circumstances of our position evaluated in light of all available evidence. As of September 25, 2021 and December 26, 2020, we had uncertain tax positions, including interest and penalties, of $12 million and $16 million, respectively, primarily recorded within Other long-term liabilities and Other long-term assets on the condensed consolidated balance sheets. In the next 12 months, it is reasonably possible to have an audit closure or statute expirations in one of our foreign jurisdictions. We do not believe the amount to have a significant impact to our consolidated financial statements. A portion of income taxes and uncertain tax positions has been indemnified by Intel (Note 6).

Tax Receivable Agreement Liability and Deferred Tax Assets

On July 27, 2021, we completed the divestiture of the Enterprise Business (Note 3). For the nine months ended September 25, 2021, of the $257 million of taxes recognized in discontinued operations, income tax expense related to the divestiture was $383 million. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW that is recorded in discontinued operations as it is recognized as result of the Enterprise sale transaction.

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As a result of the divestiture, we expect to utilize certain deferred tax assets from the domestic portion of the gain on the sale. In addition to objectively verifiable evidence, we have considered subjective evidence, such as our projections for future growth, in evaluating if the realizability of the net deferred tax assets has met the more likely than not recognition criteria. We have concluded that a full valuation allowance against the net deferred tax assets of our domestic entities will no longer be required. During the three months ended September 25, 2021, we have released $200 million of the $213 million of valuation allowance that existed as of December 26, 2020. An additional valuation allowance of $11 million is expected to be released in the fourth quarter as part of the annual effective tax rate calculation. The remaining valuation allowance of $2 million relates to state net operating loss carryforwards that we have determined are not more likely than not going to be utilized. In addition, we recognized a deferred tax asset of $167 million with a corresponding charge to equity for exchanges (the “Exchanges”) in fiscal 2021.

Changes to our deferred tax asset consisted of the following:

			Offset To
(in millions)	Deferred Tax Asset		Additional Paid-in Capital		Provision for Income Tax (Expense) Benefits		Income from Discontinued Operations
Release of valuation allowance on deferred tax assets	$	200	$	—	$	184	$	16
Exchanges and tax attributes in Fiscal 2021		167		167		—		—

As the net deferred tax assets have been recognized as of the date of divestiture, the full liability under the TRA also became probable. Therefore, for the three months ended September 25, 2021, we have recognized an additional long-term TRA liability of $380 million. The remeasurement of the TRA liability as of the date of divestiture, including 2021 exchanges of LLC Units for Class A shares in the Company prior to the remeasurement, resulted in an additional TRA expense of $298 million for the three months ended September 25, 2021. The TRA liability that is a result of the exchanges after the date of divestiture was recorded as a reduction to equity of $82 million.

Our TRA balances and changes to them consisted of the following:

	TRA Liability				Offset To
(in millions)	Current Portion		Noncurrent Portion		Additional Paid-in Capital			Other Income			Income from Discontinued Operations
As of December 26, 2020	$	2	$	—
Exchanges and tax attributes that existed prior to divestiture		—		310	$	—		$	(306	)	$	(4	)
Exchanges and tax attributes that existed on or after divestiture		—		82		(82	)		—			—
As of September 25, 2021	$	2	$	392	$	(82	)	$	(306	)	$	(4	)

See Note 18 to the condensed consolidated financial statements for further information on changes to the TRA subsequent to September 25, 2021.

NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS AND INTEREST RATE SWAPS

Fair Value of Financial Instruments

For assets and liabilities that are measured using quoted prices in active markets (Level 1), total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs, discounts or blockage factors. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities (Level 2), adjusted for contract restrictions and other terms specific to that asset or liability. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques (Level 3) and not based on market exchange, dealer or broker traded transactions. These valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

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The fair value of our financial instruments are as follows:

(in millions)	Level 1		Level 2			Level 3
As of September 25, 2021
Financial instruments not carried at fair value:
Long-term debt, gross of discounts and deferred    issuance costs (Note 11)	$	—	$	(2,970	)	$	—
Financial instruments carried at fair value:
Interest rate swaps	$	—	$	(75	)	$	—
As of December 26, 2020
Financial instruments not carried at fair value:
Long-term debt, gross of discounts and deferred    issuance costs (Note 11)	$	—	$	(4,033	)	$	—
Financial instruments carried at fair value:
Interest rate swaps	$	—	$	(119	)	$	—

The fair value of the debt is based on third party quotations and is therefore classified as Level 2. The fair value of our derivative financial instruments, including interest rate swaps, are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as spot rates, foreign currency exchange rates, and the instrument’s term, notional amount and discount rate.

The fair values of our financial instruments included in Cash and cash equivalents, Accounts receivable, net, Other current assets, Accounts payable and other current liabilities on the condensed consolidated balance sheets approximate their carrying amounts due to their short maturities. We measure the fair value of money market accounts, included in Cash and cash equivalents on the condensed consolidated balance sheets, on a recurring basis and have classified them as Level 1 because the fair value is measured with quoted prices in active markets. These amounts have been excluded from the table.

There were no transfers of assets or liabilities between fair value measurement levels. Transfers between fair value measurement levels are recognized at the end of the reporting period.

Interest Rate Swaps

We have multiple interest rate swaps in order to fix the LIBOR portion of our USD denominated variable rate borrowings (Note 11). As of September 25, 2021, the outstanding effective arrangements were as follows:

Notional Value (in millions)	Effective Date	Expiration Date	Fixed Rate
$100	January 29, 2018	January 29, 2022	2.41%
$275	January 29, 2018	January 29, 2023	2.48%
$275	January 29, 2018	January 29, 2023	2.49%
$475	March 29, 2019	March 29, 2024	2.40%
$750	March 4, 2020	September 29, 2024	2.07%
$250	March 29, 2020	March 29, 2024	0.93%
$225	January 29, 2021	January 29, 2024	0.42%

In August 2021, we terminated $150 million of our $250 million notional interest rate swap that had an expiration date of January 29, 2022 with a $2 million payment.

The gross amounts of our interest rate swaps, which are subject to master netting arrangements, were as follows:

(in millions)	Gross amounts recognized			Gross amount offset in Balance Sheets			Net amounts presented in Balance Sheets
As of September 25, 2021
Other long-term assets	$	1		$	(1	)	$	—
Accounts payable and other current liabilities		(39	)		—			(39	)
Other long-term liabilities		(37	)		1			(36	)
As of December 26, 2020
Accounts payable and other current liabilities	$	(43	)	$	—		$	(43	)
Other long-term liabilities		(76	)		—			(76	)

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NOTE 14: REDEEMABLE NONCONTROLLING INTERESTS

We report a RNCI based on the LLC Units of FTW held by Continuing LLC Owners and vested MIUs held by Management Owners. The Continuing LLC Owners (or certain permitted transferees), subject to certain restrictions, can exchange their LLC Units for shares of Class A common stock on a one-for-one basis (simultaneously cancelling an equal number of shares of Class B common stock of the exchanging member), subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions, or, at the option of the Company, for cash (based on the market price of the shares of our Class A common stock). The holders of MIUs also have the right, from time to time and subject to certain restrictions, to exchange their MIUs for LLC Units, which will then be immediately redeemed for cash or shares of Class A common stock, at the option of the Company, based on the value of such MIUs relative to their applicable distribution threshold.

The Company’s decision of whether to exchange LLC Units for Class A common stock or cash is currently made solely at the discretion of the Continuing LLC Owners through their control of our Board of Directors. Accordingly, the LLC Units owned by the Continuing LLC Owners are treated as RNCI as the holders have the option to exchange their LLC Units for cash or for shares of the Corporation’s Class A common stock. The RNCI is reported at the greater of the redemption value of the units or the carrying value as of the balance sheet date, with a corresponding adjustment to Additional paid-in capital. The redemption value of our redeemable noncontrolling interests was derived from the closing stock price of the Company’s Class A common stock on the last day of the period.

Future redemptions or direct exchanges of LLC Units by the Continuing LLC Owners will result in a change in ownership and reduce or increase the carrying value of the RNCI and increase or decrease Additional paid-in capital when FTW has positive or negative net assets, respectively.

The following table summarizes the ownership and economic interest in FTW LLC:

	September 25, 2021					December 26, 2020
(in millions except percentages)	Units Outstanding		Ownership %			Units Outstanding		Ownership %
Number of LLC Units held by McAfee Corp.		179.9		40.8	%		161.3		37.2	%
Number of LLC Units and vested MIUs held by RNCI		261.2		59.2	%		272.5		62.8	%
Total LLC Units and vested MIUs outstanding		441.1		100.0	%		433.8		100.0	%

NOTE 15: EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to McAfee Corp. for the periods subsequent to the Reorganization Transactions by the weighted average number of shares of Class A common stock outstanding for the same period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period in which the shares were outstanding. Diluted earnings per share has been computed in a manner consistent with that of basic net income per share while giving effect to shares of potentially dilutive common stock that were outstanding during the period.

Prior to the Reorganization Transactions, the FTW capital structure primarily included FTW LLC Units. Certain holders of these units exchanged their FTW LLC units for Class A common stock of the Corporation in the Reorganization Transactions with the remaining FTW LLC Units reflecting RNCI in the Corporation. The completion of the Reorganization Transactions created the Corporation’s current capital structure, which is not reflective of the capital structure of FTW’s business prior to the Reorganization Transactions. Therefore, earnings per share information has not been presented for the three and nine months ended September 26, 2020.

Shares of Class B common stock do not share in the earnings or losses attributable to McAfee Corp. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related FTW LLC Units, are exchangeable into shares of Class A common stock on a one-for-one basis.

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The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and nine months ended September 25, 2021, the periods wherein the Corporation had outstanding Class A common stock.

	Three Months Ended							Nine Months Ended
(in millions except per share data)	September 25, 2021							September 25, 2021
	Continuing Operations			Discontinued Operations		Total		Continuing Operations			Discontinued Operations		Total
Numerator:
Net income (loss) attributable to McAfee Corp., basic and diluted	$	(92	)	$	834	$	742	$	(40	)	$	848	$	808
Denominator:
Weighted average shares of Class A common stock outstanding, basic and diluted		170.3			170.3		170.3		165.9			165.9		165.9
Earnings per share attributable to McAfee Corp., basic and diluted
Earnings per share, basic and diluted(1)	$	(0.54	)	$	4.90	$	4.36	$	(0.24	)	$	5.11	$	4.87

(1)For the three and nine months ended September 25, 2021, 278.4 million and 274.6 million weighted average units were excluded from dilution, respectively. The excluded units consist primarily of RNCI that is excluded from dilution because its effects would have been anti-dilutive. 

NOTE 16: VARIABLE INTEREST ENTITIES

Upon completion of our IPO, McAfee Corp. became the sole managing member of FTW with 100% of the management and voting power in FTW. In its capacity as managing member, McAfee Corp. has the sole authority to make decisions on behalf of FTW and bind FTW to signed agreements. Further, FTW maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that FTW is a limited partnership or similar legal entity as contemplated in ASC 810, Consolidation.

Further, management concluded that McAfee Corp. is FTW’s primary beneficiary based on two conditions. First, McAfee Corp., in its capacity as managing member with sole voting rights, has the power to direct the activities of FTW that most significantly impact its economic performance, including selecting, terminating and setting the compensation of management responsible for FTW’s policies and procedures, as well as establishing the strategic, operating and capital decisions of FTW in the ordinary course of business. Second, McAfee Corp. has an obligation to absorb potential losses of FTW or the right to receive potential benefits from FTW in proportion to its equity interest. As the primary beneficiary, McAfee Corp. consolidates the results of FTW for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

The following table reflects the balance sheet of FTW that is consolidated within the condensed consolidated balance sheets, including Receivable from Parent, net and McAfee Corp.’s interest in the variable interest entity (“VIE”) that are eliminated upon consolidation.

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(in millions)	September 25, 2021			December 26, 2020
Assets
Current assets:
Cash and cash equivalents	$	567		$	231
Accounts receivable, net		124			102
Deferred costs		171			137
Receivable from Enterprise Business		116			—
Other current assets		36			42
Held-for-sale assets		31			—
Current assets of discontinued operations		—			402
Total current assets		1,045			914
Property and equipment, net		55			98
Goodwill		1,018			1,018
Identified intangible assets, net		595			729
Deferred tax assets		44			24
Receivable from Parent, net		—			46
Other long-term assets		92			67
Long-term assets of discontinued operations		—			2,578
Total assets	$	2,849		$	5,474
Liabilities and deficit
Current liabilities:
Accounts payable and other current liabilities	$	276		$	219
Accrued compensation and benefits		66			179
Accrued marketing		101			118
Income taxes payable		44			14
Long-term debt, current portion		44			44
Liability to Parent, net		4			—
Deferred revenue		953			823
Payable to Enterprise Business		50			—
Current liabilities of discontinued operations		—			972
Total current liabilities		1,538			2,369
Long-term debt, net		2,889			3,943
Deferred tax liabilities		17			5
Other long-term liabilities		130			155
Deferred revenue, less current portion		91			80
Long-term liabilities of discontinued operations		—			660
Total liabilities		4,665			7,212
Members’ deficit:
Deficit attributable to Continuing LLC Owners		(1,075	)		(1,092	)
Deficit attributable to McAfee Corp.		(741	)		(646	)
Total deficit		(1,816	)		(1,738	)
Total liabilities and deficit	$	2,849		$	5,474

NOTE 17: COMMITMENTS AND CONTINGENCIES

As of September 25, 2021, we have unconditional purchase obligations, including those related to our discontinued operations in connection with costs to support our obligations under our transition services agreement, of $420 million that expire at various dates through 2026 and guarantees of $10 million that expire at various dates through 2028.

We are a party to various legal proceedings that have arisen in the ordinary course of our business. At present, we do not expect that any ordinary course legal proceedings, individually or in the aggregate, will have a material adverse effect on our business, results of operations, financial condition or cash flows.

In the ordinary course of our business, we are subject to examination by taxing authorities for both direct and indirect taxes in many of the domestic and foreign jurisdictions in which we operate. We are unable to make a reasonably reliable estimate as to when or if settlements with taxing authorities may occur. However, we do not anticipate that the resolution of these tax matters or any events related thereto will have a material adverse effect on our business, results of operations, financial condition or cash flows.

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NOTE 18: SUBSEQUENT EVENTS

On November 5, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Condor BidCo, Inc., a Delaware corporation (“Parent”), and Condor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company whereupon the separate corporate existence of Merger Subsidiary will cease and the Company will be the surviving corporation in the Merger (the “Surviving Corporation”) and will continue as a wholly owned subsidiary of Parent (the “Merger”).

As a result of the Merger, at the effective time of the Merger (the “Effective Time”) (subject to certain exceptions, including for shares of Class A Common Stock of the Company and Class B Common Stock of the Company (collectively, the “Company Stock”) owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware), each share of Company Stock outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive $26.00 in cash, without interest (the per share consideration, the “Per Share Consideration” and the aggregate consideration, the “Merger Consideration”).

Pursuant to the Merger Agreement, immediately prior to the Effective Time, except as provided therein, (i) the Company will require each member of FTW to effect an exchange of all such member’s vested MIUs (if any) for New Class A Units, and, thereafter, will require each member to effect a redemption of all of such member’s Class A LLC Units and Class B Common Stock in exchange for shares of Class A Common Stock (the “Exchange and Redemption”) and (ii) each share of Class B Common Stock will automatically be canceled immediately upon the consummation of the Exchange and Redemption, such that no shares of Class B Common Stock remain outstanding immediately prior to the Effective Time. In addition, the Board shall take all actions so that all MIUs of FTW shall be vested in full as of immediately prior to the Exchange and Redemption.

Pursuant to the Merger Agreement, immediately prior to the Effective Time:

(i) each in-the-money option to purchase shares of Company Stock (a “Company Stock Option”) that is outstanding and vested (including each in-the-money option that accelerates and becomes vested by its terms in connection with the transactions) will be canceled and converted into the right to receive, without interest, an amount in cash determined by multiplying the excess of the Per Share Consideration over the option exercise price by the number of shares of Company Stock subject to such option as of immediately prior to the Effective Time;

(ii) each Company Stock Option that is not an in-the-money Company Stock Option shall be canceled for no consideration;

(iii) each restricted stock unit (“Company RSU”) and performance stock unit (“Company PSU”, and collectively with the Company Stock Options, shares of restricted Company Stock and Company RSUs, “Company Awards”) with respect to Company Stock that is outstanding and vested (including each Company RSU and each Company PSU that accelerates and becomes vested by its terms in connection with the transactions) will be canceled and converted into the right to receive, without interest, an amount in cash equal to the number of shares of Company Stock subject to the vested Company RSU or Company PSU award as of immediately prior to the Effective Time multiplied by the Per Share Consideration; and

(iv) each Company Award that is then outstanding and not vested will be converted into a cash award, which will remain subject to the same time-vesting terms and conditions that apply immediately prior to closing, will be paid out on the next payroll date following the applicable vesting date, so long as the applicable portion becomes vested prior to the holder’s termination of service, and will be subject to vesting, payment and other conditions that are no less favorable to the holder than those that applied to the corresponding award immediately prior to closing.

Each cash award will provide the holder with the opportunity to be paid an amount in cash equal to (1) with respect to each in-the-money Company Stock Option that is not vested, (A) the excess of the Per Share Consideration over the option exercise price of such in-the-money Company Stock Option multiplied by (B) the number of shares of Common Stock subject to such in-the-money Company Stock Option as of immediately prior to the closing and (2) with respect to each restricted stock award, Company RSU, or Company PSU that is not vested, (A) the number of shares of Company Stock subject to such restricted stock award, Company RSU, or Company PSU as of immediately prior to the closing multiplied by (B) the Per Share Consideration; provided, that (x) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends on or ended prior to the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU converted into the Cash Award, such Company PSU shall be deemed earned based on the actual performance during such performance period, and (y) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends after the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU converted into the Cash Award, the number of shares of Company Stock subject to such Company PSU shall be determined as though such performance conditions were satisfied at the applicable target levels. Each award payable in a fixed amount of cash issued in connection with the initial public offering of the Company to employees in certain jurisdictions, and each right to receive previously accrued but not yet paid cash dividends or distributions in respect of Company Awards, Class A LLC Units, or MIUs of FTW will be assumed, honored, or continued in accordance with its terms defined in the Merger Agreement.

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The Company has made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants to use reasonable best efforts to conduct its business in the ordinary course during the period between the date of the Merger Agreement and the Closing. The parties have agreed to use reasonable best efforts to take all actions necessary to consummate the merger, including cooperating to obtain the regulatory approvals necessary to complete the Merger.

Until 11:59 p.m. (New York City time) on the date that is (i) forty five (45) calendar days following the date of the Merger Agreement (the “No Shop Period Start Date”) or (ii) in respect of any Excluded Party (as defined in the Merger Agreement), fifteen (15) days after the No Shop Period Start Date (the “Cut-Off Date”; such time period, the “Go Shop Period”), the Company, its subsidiaries and their respective directors, officers, employees and other representatives have the right to, among other things, directly or indirectly, (1) solicit alternative acquisition proposals and (2) provide information (including nonpublic information) to third parties in connection therewith pursuant to an acceptable confidentiality agreement. From and after the Cut-Off Date or the No Shop Period Start Date (as applicable), the Company, its subsidiaries and its and their respective representatives must comply with customary non-solicitation restrictions. Subject to certain customary “fiduciary out” exceptions, the Board is required to recommend that the Company’s stockholders adopt the Merger Agreement.

In connection with the closing of the Merger, the Company, FTW and certain other parties thereto have entered into a Tax Receivable Agreement and LLC Agreement Amendment (the “Amendment”). The Amendment provides for, among other things, (i) the payment of amounts due under the tax receivable agreement currently in effect (the “TRA”) with respect to U.S. federal income tax year 2020 of the Company in accordance with the terms of the TRA up to an aggregate amount of $2 million, which payments shall be paid no later than 10 business days prior to the Closing Date, (ii) the suspension of all other payments under the TRA from and after November 5, 2021 and (iii) the amendment of the TRA, effective as of immediately prior to and contingent upon the occurrence of the Effective Time of the Merger, which shall result in the TRA (and all of the Company’s obligations thereunder, including the obligation to make any of the foregoing suspended payments) terminating immediately prior to the Effective Time of the Merger.

The obligation of the parties to consummate the Merger is subject to receipt of stockholder approval, the expiration of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, receipt of clearance under other regulatory approvals, clearance by the Committee on Foreign Investment in the United States and other customary conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

As a global leader and trusted brand in cybersecurity for over 30 years, McAfee protects millions of consumers with one of the industry’s most comprehensive cybersecurity portfolios. Our award-winning products offer individuals and families protection for their digital lives. We meet the cyber security needs of consumers wherever they are, with solutions for device security, privacy and safe Wi-Fi, online protection, and identity protection, among others. Our mission is to protect all things that matter through leading-edge cybersecurity products.

Our consumer-focused products protect consumers across the digital spectrum. Our Personal Protection Service provides holistic digital protection of the individual and family wherever they go under our Total Protection and LiveSafe brands. We achieve this by integrating the following solutions and capabilities within our Personal Protection Service:

Device Security, which includes our Anti-Malware Software and Secure Home Platform products, keeps consumer devices, including mobile and home-use, protected from viruses, ransomware, malware, spyware, and phishing.

Online Privacy and Comprehensive Internet Security, which includes our Safe Connect VPN, TunnelBear, and WebAdvisor products, help make Wi-Fi connections safe with our bank-grade AES 256-bit encryption, keeping personal data protected while keeping IP addresses and physical locations private.

Identity Protection, which includes our Identity Theft Protection and Password Manager products, searches over 600,000 online black markets for compromised personally identifiable information, helping consumers take action to prevent fraud.

Our go-to-market digitally-led omnichannel approach reaches the consumer at crucial moments in their purchase lifecycle including direct to consumer online sales, acquisition through trial pre-loads on PC OEM devices, and other indirect modes via additional partners such as mobile providers, ISPs, electronics retailers, ecommerce sites, and search providers. We have longstanding exclusive partnerships with many of the leading PC OEMs and continue to expand our presence with mobile service providers and ISPs as the demand for mobile security protection increases. Through these relationships, our consumer security software is pre-installed on devices on either a trial basis until conversion to a paid subscription, which is enabled by a tailored renewal process that fits the customer’s journey, or through a live version that can be purchased directly through the OEMs’ website. Our consumer go-to-market channel also consists of partners including some of the largest electronics retailers and ISPs globally.

Divestiture of Enterprise Business

On March 6, 2021, we entered into a definitive agreement (the “Purchase Agreement”) with a consortium led by Symphony Technology Group (“STG”) under which STG agreed to purchase certain of our Enterprise assets together with certain of our Enterprise liabilities (“Enterprise Business”), representing substantially all of our Enterprise segment, for an all-cash purchase price of $4.0 billion. The divestiture transaction closed on July 27, 2021. The divestiture of our Enterprise Business, represents a strategic shift in our operations that allows us to focus on our Consumer business. As a result of the divestiture, the results of our Enterprise Business were reclassified as discontinued operations in our condensed consolidated statements of operations and excluded from both continuing operations and segment results for all periods presented. Starting in the first quarter of fiscal 2021, we began to operate as one reportable segment as the Enterprise Business comprised substantially all of our Enterprise segment. Results of discontinued operations includes all revenues and expenses directly derived from our Enterprise Business, with the exception of general corporate overhead costs that were previously allocated to our Enterprise segment but have not been allocated to discontinued operations. The Enterprise Business was reclassified as discontinued operations in our condensed consolidated balance sheets. In connection with the divestiture, we recognized a gain of $2.3 billion, net of estimated taxes and transaction costs. See Note 3 for additional information about the divestiture of our Enterprise Business.

On August 3, 2021, the Board of Directors of McAfee Corp., using a portion of the proceeds received from the divestiture of Enterprise Business, declared a special one-time cash dividend of $4.50 per share of Class A common stock payable to shareholders of record on August 13, 2021 (the “Special Dividend”). In connection with the declaration of the Special Dividend, the Board of Directors of McAfee Corp., as sole managing member of FTW, authorized FTW to declared a special one-time cash distribution to its members in the aggregate of $2.8 billion (the “Special Distribution”). The Special Distribution resulted in the payment of $1.7 billion to Continuing LLC Owners and $1.1 billion to McAfee Corp. McAfee Corp. used $0.8 billion of its share of the Special Distribution to pay the Special Dividend to participating shareholders on August 27, 2021.

We also used a portion of the proceeds from the divestiture to prepay $332 million of 1st Lien USD Term Loan and €563 million of 1st Lien Euro Term Loan in August 2021. In connection with this prepayment, we incurred a loss on extinguishment of debt of $10 million related to recognition of unamortized discount and deferred financing costs. See Note 11 to the condensed consolidated financial statements for further information. We also terminated $150 million of our $250 million notional interest rate swap that had an expiration date of January 29, 2022. See Note 13 to the condensed consolidated financial statements for further information.

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Subsequent to the Enterprise Business divestiture, we concluded that a full valuation allowance against the net deferred tax assets of our domestic entities will no longer be required and released $200 million of the $213 million of valuation allowance that existed as of December 26, 2020. We also expect to realize certain tax benefits subject to our TRA and thus we recognized and recorded an additional long-term TRA liability of $380 million and $392 million for the three and nine months ended September 25, 2021, respectively.

The remeasurement of the TRA liability, including 2021 exchanges prior to the date of the divestiture of the Enterprise Business resulted in a TRA expense of $310 million recorded primarily within Other income (expense), net while the TRA liability of $82 million that is a result of the exchanges of FTW LLC Units for Class A shares in the Company was recorded as a reduction to equity. See Note 12 to the condensed consolidated financial statements for further information and the income tax impact of the Enterprise Business divestiture.

Recent Developments

On November 5, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Condor BidCo, Inc., a Delaware corporation (“Parent”), and Condor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company whereupon the separate corporate existence of Merger Subsidiary will cease and the Company will be the surviving corporation in the Merger and will continue as a wholly owned subsidiary of Parent (the “Merger”). Parent has obtained equity financing and debt financing commitments for the purpose of financing the transactions contemplated by the Merger Agreement. Affiliates of funds advised by each of Advent International Corporation, Permira Advisers LLC, Crosspoint Capital Partners L.P., Abu Dhabi Investment Authority, and Canada Pension Plan Investment Board and GIC Private Ltd. have committed to capitalize Parent at the Closing with an aggregate equity contribution equal to $5.2 billion on the terms and subject to the conditions set forth in signed equity commitment letters. Under the terms of the agreement, the Company’s stockholders will receive $26.00 in cash for each share of Class A common stock they hold on the transaction closing date. The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including, among others, approval by the Company’s stockholders, the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the receipt of other regulatory approvals, and clearance by the Committee on Foreign Investment in the United States.

In connection with the closing of the Merger, the Company, FTW and certain other parties thereto have entered into a Tax Receivable Agreement and LLC Agreement Amendment (the “Amendment”). The Amendment provides for, among other things, (i) the payment of amounts due under the tax receivable agreement currently in effect (the “TRA”) with respect to U.S. federal income tax year 2020 of the Company in accordance with the terms of the TRA up to an aggregate amount of $2 million, which payments shall be paid no later than 10 business days prior to the Closing Date, (ii) the suspension of all other payments under the TRA from and after November 5, 2021 and (iii) the amendment of the TRA, effective as of immediately prior to and contingent upon the occurrence of the Effective Time of the Merger, which shall result in the TRA (and all of the Company’s obligations thereunder, including the obligation to make any of the foregoing suspended payments) terminating immediately prior to the Effective Time of the Merger. For a summary of the transaction, please refer to Note 18 Subsequent Events in our consolidated financial statements of this Quarterly Report and to our Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on November 8, 2021.

Financial Highlights

For the three months ended September 25, 2021 compared to the three months ended September 26, 2020 we delivered the following:

Net revenue increased by 24% to $491 million

Net income increased to $2,390 million inclusive of $2,251 million gain, net of estimated taxes and transaction costs, on the divestiture of the Enterprise Business

Loss from continuing operations decreased by 23% to $30 million

Adjusted EBITDA increased by 43% to $234 million

For the nine months ended September 25, 2021 compared to the nine months ended September 26, 2020 we delivered the following:

Net revenue increased by 24% to $1,400 million

Net income increased to $2,592 million inclusive of $2,251 million gain, net of estimated taxes and transaction costs, on the divestiture of the Enterprise Business

Income from continuing operations increased by 384% to $125 million

Adjusted EBITDA increased by 35% to $653 million

Net cash provided by operating activities increased by 16% to $538 million

Free cash flow increased by 20% to $515 million

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See “Non-GAAP Financial Measures” for a description of adjusted EBITDA, and free cash flow, and a reconciliation of these measures to the nearest financial measure calculated in accordance with GAAP.

COVID-19 Pandemic

The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal, state and foreign governments have implemented measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. To protect the health and well-being of our employees, partners, and third-party service providers, we have implemented work-from-home requirements, made substantial modifications to employee travel policies, and cancelled or shifted marketing and other corporate events to virtual-only formats for the foreseeable future.

The ultimate duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time. These developments include the severity and transmission rate of the disease, the actions of governments, businesses and individuals in response to the pandemic, the extent and effectiveness of containment actions and vaccines, the impact on economic activity and the impact of these and other factors. We have experienced growth and increased demand for our solutions in recent quarters, which may be due in part to greater demand for devices or our solutions in response to the COVID-19 pandemic. We cannot determine what, if any, portion of our growth in net revenue, the number of our Direct to Consumer Subscribers, or any other measures of our performance during the fiscal 2021 compared to the fiscal 2020 was the result of such responses to the COVID-19 pandemic.

Fiscal Calendar

We maintain a 52- or 53-week fiscal year that ends on the last Saturday in December. The year ending December 25, 2021 is a 52-week year starting on December 27, 2020. These condensed consolidated financial statements are presented as of September 25, 2021 and December 26, 2020, and for the three and nine months ended September 25, 2021 and the three and nine months ended September 26, 2020. The three and nine months ended September 25, 2021 consisted of 13 and 39 weeks, respectively, and the three and nine months ended September 26, 2020 consisted of 13 and 39 weeks, respectively.

Key Operating Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, measure our performance, formulate business plans, and make strategic decisions. We believe the following metrics are useful in evaluating our business, but should not be considered in isolation or as a substitute for GAAP. Certain judgments and estimates are inherent in our processes to calculate these metrics.

We define Core Direct to Consumer Subscribers as active subscribers whose transaction for a subscription is directly with McAfee. These subscribers include those who (i) transact with us directly through McAfee web properties, (ii) are converted during or after the trial period of the McAfee product preinstalled on their new PC purchase, or (iii) are channel led subscribers who are converted to Core Direct to Consumer Subscribers after expiration of their subscription of our product initially purchased through our retail, ecommerce or PC OEM partners.

We define Trailing Twelve Months (“TTM”) Dollar Based Retention – Core Direct to Consumer Subscribers as the annual contract value of Core Direct to Consumer Subscriber subscriptions that were renewed in the trailing twelve months divided by the annual contract value for Core Direct to Consumer Subscribers subscriptions that were up for renewal in the same period. We monitor TTM Dollar Based Retention as an important measure of the value we retain of our existing Core Direct to Consumer Subscriber base and as a measure of the effectiveness of the strategies we deploy to improve those rates over time.

We define Monthly Average Revenue Per Customer (“ARPC”) as monthly subscription net revenue from transactions directly between McAfee and Core Direct to Consumer Subscribers, divided by average Core to Direct Consumer Subscribers from the same period. ARPC can be impacted by price, mix of products, and change between periods in Core Direct to Consumer Subscriber count. We believe that ARPC allows us to understand the value of our solutions to the portion of our subscriber base transacting directly with us.

	September 25, 2021			September 26, 2020
Core Direct to Consumer Subscribers (in millions)		20.1			17.3
TTM Dollar Based Retention - Core Direct to Consumer Subscribers		99.3	%		99.7	%

	Three Months Ended
	September 25, 2021		September 26, 2020
Monthly ARPC	$	6.02	$	5.98

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Non-GAAP Financial Measures

We have included both financial measures compiled in accordance with GAAP and certain non-GAAP financial measures in this Quarterly Report on Form 10-Q for our continuing operations, including adjusted operating income, adjusted operating income margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income margin, and free cash flow and ratios based on these financial measures.

Adjusted Operating Income, Adjusted Operating Income Margin, Adjusted EBITDA and Adjusted EBITDA Margin

We regularly monitor adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin to assess our operating performance. We define adjusted operating income as net income (loss), excluding the impact of amortization of intangible assets, equity-based compensation expense, interest expense, foreign exchange (gain) loss, net, provision for income tax expense, Tax Receivable Agreement (“TRA”) adjustment, income from Transition Services Agreement (“TSA”), income (loss) from discontinued operations, net of taxes, and other costs that we do not believe are reflective of our ongoing operations. Adjusted operating income margin is calculated as adjusted operating income divided by net revenue. We define adjusted EBITDA as adjusted operating income, excluding the impact of depreciation expense plus certain other non-operating costs. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net revenue. We believe presenting adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin provides management and investors consistency and comparability with our past financial performance and facilitates period to period comparisons of operations, as it eliminates the effects of certain variations unrelated to our overall performance. Adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin have limitations as analytical tools, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

adjusted operating income and adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

adjusted operating income and adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

adjusted operating income and adjusted EBITDA do not reflect income tax payments that may represent a reduction in cash available to us; and

other companies, including companies in our industry, may calculate adjusted operating income and adjusted EBITDA differently, which reduce their usefulness as comparative measures.

Because of these limitations, you should consider adjusted operating income and adjusted EBITDA alongside other financial performance measures, including operating income (loss), net income (loss) and our other GAAP results. In evaluating adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin should not be construed as an inference that our future results will be unaffected by the types of items excluded from the calculation of adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin. Adjusted operating income, adjusted operating income margin, adjusted EBITDA, and adjusted EBITDA margin are not presentations made in accordance with GAAP and the use of these terms vary from other companies in our industry.

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The following table presents a reconciliation of our adjusted operating income and adjusted EBITDA to our net income for the periods presented:

	Three Months Ended						Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Net income	$	2,390		$	—		$	2,592		$	31
Add: Amortization		35			62			134			188
Add: Equity-based compensation		17			5			50			21
Add: Cash in lieu of equity awards(1)		—			—			—			1
Add: Acquisition and integration costs(2)		—			2			1			5
Add: Restructuring and transition charges(3)		27			—			35			1
Add: Management fees(4)		—			2			—			6
Add: Transformation(5)		5			7			6			16
Add: Executive severance(6)		1			—			1			3
Add: Interest expense		61			72			170			222
Add: Foreign exchange loss (gain), net(7)		(14	)		43			(29	)		49
Add: Provision for income tax expense (benefit)		(166	)		5			(159	)		—
Add: TRA adjustment(8)		298			—			306			—
Less: Income from TSA(9)		(7	)		—			(7	)		—
Add: Other (income) expense, net(10)		1			1			2			—
Less: Income from discontinued operations, net of taxes		(2,420	)		(39	)		(2,467	)		(75	)
Adjusted operating income		228			160			635			468
Add: Depreciation		6			5			18			17
Less: Other expense		—			(1	)		—			(1	)
Adjusted EBITDA	$	234		$	164		$	653		$	484
Net revenue	$	491		$	395		$	1,400		$	1,132
Net income margin		486.8	%		—			185.1	%		2.7	%
Adjusted operating income margin		46.4	%		40.5	%		45.4	%		41.3	%
Adjusted EBITDA margin		47.7	%		41.5	%		46.6	%		42.8	%

See “Description of Non-GAAP Adjustments” section for an explanation of adjustments to non-GAAP measures and other items.

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Adjusted Net Income and Adjusted Net Income Margin

We regularly monitor adjusted net income and adjusted net income margin to assess our operating performance. Adjusted net income assumes all net income (loss) is attributable to McAfee Corp., which assumes the full exchange of all outstanding LLC Units for shares of Class A common stock of McAfee Corp., and is adjusted for the impact of amortization of intangible assets, amortization of debt issuance costs, equity-based compensation expense, foreign exchange loss (gain), net, TRA adjustment, income from TSA, income (loss) from discontinued operations, net of taxes, and other costs that we do not believe are reflective of our ongoing operations. The adjusted provision for income taxes represents the tax effect on net income, adjusted for all of the listed adjustments, assuming that all consolidated net income was subject to corporate taxation for all periods presented. We have assumed an annual effective tax rate of 22%, which represents our long term expected corporate tax rate excluding discrete and non-recurring tax items. This amount has been recast for periods reported previously.

Adjusted net income margin is calculated as adjusted net income divided by net revenue. Adjusted net income and adjusted net income margin have limitations as analytical tools, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

although amortization is a non-cash charge, the assets being amortized may have to be replaced in the future, and adjusted net income does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

adjusted net income does not reflect changes in, or cash requirements for, our working capital needs;

other companies, including companies in our industry, may calculate adjusted net income differently, which reduce its usefulness as comparative measures.

Because of these limitations, you should consider adjusted net income alongside other financial performance measures, including net income (loss) and our other GAAP results. In evaluating adjusted net income and adjusted net income margin, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of adjusted net income and adjusted net income margin should not be construed as an inference that our future results will be unaffected by the types of items excluded from the calculation of adjusted net income and adjusted net income margin. Adjusted net income and adjusted net income margin are not presentations made in accordance with GAAP and the use of these terms vary from other companies in our industry.

The following table presents a reconciliation of our adjusted net income to our net income for the periods presented:

	Three Months Ended						Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Net income	$	2,390		$	—		$	2,592		$	31
Add: Amortization of debt discount and issuance costs		13			4			21			13
Add: Amortization		35			62			134			188
Add: Equity-based compensation		17			5			50			21
Add: Cash in lieu of equity awards(1)		—			—			—			1
Add: Acquisition and integration costs(2)		—			2			1			5
Add: Restructuring and transition charges(3)		27			—			35			1
Add: Management fees(4)		—			2			—			6
Add: Transformation(5)		5			7			6			16
Add: Executive severance(6)		1			—			1			3
Add: Foreign exchange loss (gain), net(7)		(14	)		43			(29	)		49
Add: Provision for income taxes expense (benefit)		(166	)		5			(159	)		—
Add: TRA adjustment(8)		298			—			306			—
Less: Income from TSA(9)		(7	)		—			(7	)		—
Add: Other (income) expense, net(10)		1			1			2			—
Less: Income from discontinued operations, net of taxes		(2,420	)		(39	)		(2,467	)		(75	)
Adjusted income before taxes		180			92			486			259
Adjusted provision for income taxes(11)		40			20			107			57
Adjusted net income	$	140		$	72		$	379		$	202
Net revenue	$	491		$	395		$	1,400		$	1,132
Net income margin		486.8	%		—			185.1	%		2.7	%
Adjusted net income margin		28.5	%		18.2	%		27.1	%		17.8	%

See “Description of Non-GAAP Adjustments” section for an explanation of adjustments to non-GAAP measures and other items.

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Description of Non-GAAP Adjustments

Below are additional information to the adjustments for adjusted operating income, adjusted EBITDA, and adjusted net income:

(1)As a result of the purchase from Intel of a majority interest in Foundation Technology Worldwide LLC (“FTW”) in April 2017, cash awards were provided to certain employees who held Intel equity awards in lieu of equity in FTW. As these rollover awards reflect one-time grants to former employees of Intel in connection with these transactions, we believe this expense is not reflective of our ongoing results.

(2)Represents both direct and incremental costs in connection with business acquisitions, including acquisition consideration structured as cash retention, third party professional fees, and other integration costs.

(3)Represents both direct and incremental costs associated with costs to execute strategic restructuring events, including third-party professional fees and services, severance, and facility restructuring costs. Also inclusive of transition charges including legal, advisory, consulting and other costs directly incurred due to the divestiture of the Enterprise Business, including incremental costs associated with data disentanglement and acceleration of data migration to the cloud, that were incurred subsequent to the sale in support of the transition services agreement.

(4)Represents management fees paid to certain affiliates of TPG, Thoma Bravo, and Intel pursuant to the Management Services Agreement.

(5)Represents costs incurred for our public offerings along with other transformational initiatives including data center and facilities rationalization.

(6)Represents severance for executive terminations not associated with a strategic restructuring event.

(7)Represents Foreign exchange gain (loss), net as shown on the condensed consolidated statements of operations. This amount is attributable to gains or losses on non-U.S. Dollar denominated balances and is primarily due to unrealized gains or losses associated with our 1st Lien Euro Term Loan.

(8)Represents the impact on net income of adjustments to liabilities under our tax receivable agreement.

(9)Represents income earned under the Transition Service Agreement.

(10)Represents other income or expense not associated with our core operations and it is recorded within Other income (expense), net, on the condensed consolidated statements of operations.

(11)Prior to our IPO, our structure was that of a pass-through entity for U.S. federal income tax purposes with certain U.S. and foreign subsidiaries subject to income tax in their respective jurisdictions. Subsequent to the IPO, McAfee Corp. is taxed as a corporation and pays corporate federal, state, and local taxes on income allocated to it from FTW. The adjusted provision for income taxes represents the tax effect on net income, adjusted for all of the listed adjustments, assuming that all consolidated net income was subject to corporate taxation for all periods presented. We have assumed an annual effective tax rate of 22% which represents our long term expected corporate tax rate excluding discrete and non-recurring tax items.

Free Cash Flow

We define free cash flow as net cash provided by operating activities less capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet.

The following table presents a reconciliation of our free cash flow to our net cash provided by operating activities for the periods presented:

	Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020
Net cash provided by operating activities	$	538		$	464
Less: Capital expenditures(1)		(23	)		(35	)
Free cash flow(2)	$	515		$	429

(1)Capital expenditures includes payments for property and equipment and capitalized labor costs incurred in connection with certain software development activities.

(2)Free cash flow includes $148 million and $210 million, in cash interest payments for the nine months ended September 25, 2021 and September 26, 2020, respectively.

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Factors Affecting the Comparability of Our Results of Operations

As a result of a number of factors, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

Payments to Channel Partners

We make various payments to our channel partners, which may include revenue share, product placement fees and marketing development funds. Costs that are incremental to revenue, such as revenue share, are capitalized and amortized over time as cost of sales. This classification is an accounting policy election, which may make comparisons to other companies difficult. Product placement fees and marketing development funds are expensed in sales and marketing expense as the related benefit is received. Many of our channel partner agreements contain a clause whereby we pay the greater of revenue share calculated for the period or product placement fees. This may impact the comparability of our financial results between periods.

Under certain of our channel partner agreements, the partners pay us a royalty on our technology sold to their customers, which we recognize as revenue in accordance with our revenue recognition policy. In certain situations, the payments made to our channel partners are recognized as consideration paid to a customer, and thus are recorded as reductions to revenue up to the amount of cumulative revenue recognized from contracts with the channel partner during the period of measurement. Any payments to channel partners in excess of such cumulative revenue during the period of measurement are recognized as cost of sales or marketing expense as described above. As royalty revenue from individual partners varies, the amount of costs recognized as a reduction of revenue rather than as cost of sales or sales and marketing expense fluctuates and may impact the comparability of our financial statements between periods.

Impact of the Reorganization Transactions

McAfee Corp. is a corporation for U.S. federal and state income tax purposes. Following the Reorganization Transactions as defined in Note 1 to the condensed consolidated financial statements, FTW is the predecessor of McAfee Corp. for accounting purposes. FTW is and remains a partnership for U.S. federal income tax purposes and will therefore generally not be subject to any U.S. federal income taxes at the entity level in respect of income it recognizes directly or through its U.S. and foreign subsidiaries that are also pass-through or disregarded entities for U.S. federal income tax purposes. Instead, taxable income and loss of these entities will flow through to the members of FTW (including McAfee Corp. and certain of its subsidiaries) for U.S. federal income tax purposes. Certain of FTW’s non-U.S. subsidiaries that are treated as pass-through or disregarded entities for U.S. federal income tax purposes are nonetheless treated as taxable entities in their respective jurisdictions and are thus subject to non-U.S. taxes at the entity level. FTW also has certain U.S. and foreign subsidiaries that are treated as corporations for U.S. federal income tax purposes and that therefore are or may be subject to income tax at the entity level. McAfee Corp. pays U.S. federal, state and local income taxes as a corporation on its share of the taxable income of FTW (taking into account the direct and indirect ownership of FTW by McAfee Corp.).

In addition, in connection with the Reorganization Transactions and the IPO, McAfee Corp. entered into the tax receivable agreement as described in Note 1 to the condensed consolidated financial statements. See Note 12 for additional information about the TRA liability impact.

Equity-Based Compensation

Upon consummation of the IPO in October 2020, we modified the terms of our unvested FTW RSUs, outstanding cash-settled restricted equity units (“CRSU”s), and outstanding management equity participation units (“MEPU”s) to permit settlement in the Company’s Class A common stock, par value $0.001 per share (“Class A common stock”) (collectively, “Replacement RSUs”) in lieu of cash settlement, at the Company’s election. No service or performance vesting terms were changed at the time of modification. All of our outstanding equity awards were probable of vesting and the change was accounted for as a Type I modification. In addition, the Company granted stock options with a strike price equal to the IPO price to certain holders of MEPUs with distribution thresholds not fully satisfied at the time of modification and, at the time of the grant, recognized expense for these options immediately. See Note 10 to the condensed consolidated financial statements in Item 1 for discussion of equity-based compensation.

During February 2020, we modified the terms of certain management incentive unit grants to provide for vesting subject to the satisfaction of certain conditions, which resulted in the recognition of $12 million incremental compensation expense for the modified awards at their modification date.

During the three months ended September 25, 2021, forfeitures were recognized in discontinued operations upon the completion of the divestiture of the Enterprise Business.

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The accounting impact resulting from the recognition of this equity-based compensation limits the comparability of our financial statements between periods. The table below shows the impact of all equity-based compensation on our financial statements.

	Three Months Ended					Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020		September 25, 2021		September 26, 2020
Cost of sales	$	1		$	—	$	3	$	—
Sales and marketing		2			—		9		1
Research and development		6			1		16		1
General and administrative		8			4		22		19
Total equity-based compensation expense from continuing operations		17			5		50		21
Discontinued operations		(9	)		1		36		4
Total equity-based compensation expense	$	8		$	6	$	86	$	25

Composition of Revenues, Expenses, and Cash Flows

Net Revenue

We derive our revenue primarily from the sale of software subscriptions or royalty agreements, primarily through our indirect relationships with our partners or direct relationships with end customers through our website. We have various marketing programs with certain business partners who we consider customers and reduce revenue by the cash consideration given to these partners. Revenue is recognized as control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for the promised goods or services.

Cost of Sales

Our total cost of sales include fees paid under revenue share arrangements, amortization of certain intangibles, transaction processing fees, the costs of providing delivery (i.e., hosting), support, which include salaries and benefits for employees and fees related to third parties, and technology licensing fees. We anticipate our total cost of sales to increase in absolute dollars as we grow our net revenue. Cost of sales as a percentage of net revenue may vary from period to period based on our investments in the business, the efficiencies we are able to realize going forward as well as due to the accounting for payments to channel partners discussed in Factors Affecting the Comparability of Our Results of Operations.

We expect the divestiture to lead to costs that were previously allocated to both segments to now be part of continuing operations, which will have a dilutive impact on gross margins.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, general and administrative, amortization of intangibles, and restructuring and transition charges.

We expect the divestiture to lead to costs that were previously allocated to both segments will be part of continuing operations, which will have a dilutive impact on operating margins.

Sales and Marketing. Sales and marketing expenses consist primarily of product placement fees and marketing development funds, advertising and marketing promotions, salaries, commissions, benefits for sales and marketing personnel as well as allocated facilities and IT costs. Sales and marketing as a percentage of net revenue may vary from period to period based due to the accounting for payments to channel partners discussed in Factors Affecting the Comparability of Our Results of Operations.

Research and Development. Research and development expenses consist primarily of salaries and benefits for our development staff and a portion of our technical support staff, contractors’ fees, and other costs associated with the enhancement of existing products and services and development of new products and services, as well as allocated facilities and IT costs.

General and Administrative. General and administrative expenses consist primarily of salaries and benefits and other expenses for our executive, finance, human resources, and legal organizations. In addition, general and administrative expenses include outside legal, accounting, and other professional fees, and an allocated portion of facilities and IT costs.

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Amortization of Intangibles. Amortization of intangibles includes the amortization of customer relationships and other assets associated with our acquisitions, including the Sponsor Acquisition in April 2017.

Restructuring and Transition Charges. Restructuring charges consist primarily of costs associated with employee severance and facility restructuring charges related to realignment of our workforce. Transition charges are costs incurred subsequent to the divestiture of the Enterprise Business in support of the Transition Service Agreement. These costs include legal, advisory, consulting and other costs and are generally paid when incurred. We also expect to pay approximately $300 million in cumulative one-time separation costs and stranded cost optimization.

Interest Expense

Interest expense primarily relates to interest expense on our outstanding indebtedness.

Foreign Exchange Gain (Loss), Net

Foreign exchange gain (loss), net is primarily attributable to realized and unrealized gains or losses on non-U.S. Dollar denominated balances and is primarily due to unrealized gains or losses associated with our 1st Lien Euro Term Loan.

Other Income (expense), Net

Other income (expense), net is primarily attributable to adjustments related to the TRA, as well as the revenue from the transition service agreement we entered into with STG in connection with the divestiture of the Enterprise Business under which we provide assistance to Enterprise Business including, but not limited to, business support services and information technology services.

Provision for Income Tax

McAfee Corp. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from FTW based upon McAfee Corp.’s economic interest in FTW. FTW is a pass through entity for U.S. federal income tax purposes and will not incur any federal income taxes either for itself or its U.S. subsidiaries that are also pass through or disregarded subsidiaries. Taxable income or loss for these entities will flow through to its respective members for U.S. tax purposes. FTW does have certain U.S. and foreign subsidiaries that are corporations and are subject to income tax in their respective jurisdiction.

Income from Discontinued Operations, Net of Taxes

Following the agreement with STG, the results of our Enterprise Business through the date of transaction close were classified as discontinued operations in our condensed consolidated statements of operations and excluded from continuing operations.

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Results of Operations

The following tables set forth the condensed consolidated statements of operations in dollar amounts and as a percentage of our total revenue for the periods indicated. The period-to-period comparison of results is not necessarily indicative of results for future periods.

	Three Months Ended						Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Net revenue	$	491		$	395		$	1,400		$	1,132
Cost of sales		118			112			349			321
Gross profit		373			283			1,051			811
Operating expenses:
Sales and marketing		91			87			264			225
Research and development		48			35			138			109
General and administrative		51			43			143			141
Amortization of intangibles		13			36			63			108
Restructuring and transition charges		27			—			35			1
Total operating expenses		230			201			643			584
Operating income		143			82			408			227
Interest expense		(61	)		(72	)		(170	)		(222	)
Foreign exchange gain (loss), net		14			(43	)		29			(49	)
Other income (expense), net		(292	)		(1	)		(301	)		—
Income (loss) from continuing operations before income taxes		(196	)		(34	)		(34	)		(44	)
Provision for income tax expense (benefit)		(166	)		5			(159	)		—
Income (loss) from continuing operations		(30	)		(39	)		125			(44	)
Income from discontinued operations, net of taxes		2,420			39			2,467			75
Net income	$	2,390		$	—		$	2,592		$	31
Less: Net income attributable to redeemable noncontrolling interests		1,648		N/A				1,784		N/A
Net income attributable to McAfee Corp.	$	742		N/A			$	808		N/A

	Three Months Ended						Nine Months Ended
	September 25, 2021			September 26, 2020			September 25, 2021			September 26, 2020
Net revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		24.0	%		28.4	%		24.9	%		28.4	%
Gross profit		76.0	%		71.6	%		75.1	%		71.6	%
Operating expenses:
Sales and marketing		18.5	%		22.0	%		18.9	%		19.9	%
Research and development		9.8	%		8.9	%		9.9	%		9.6	%
General and administrative		10.4	%		10.9	%		10.2	%		12.5	%
Amortization of intangibles		2.6	%		9.1	%		4.5	%		9.5	%
Restructuring and transition charges		5.5	%		—			2.5	%		0.1	%
Total operating expenses		46.8	%		50.9	%		45.9	%		51.6	%
Operating income		29.1	%		20.8	%		29.1	%		20.1	%
Interest expense		(12.4	)%		(18.2	)%		(12.1	)%		(19.6	)%
Foreign exchange gain (loss), net		2.9	%		(10.9	)%		2.1	%		(4.3	)%
Other income (expense), net		(59.5	)%		(0.3	)%		(21.5	)%		—
Income (loss) from continuing operations before income taxes		(39.9	)%		(8.6	)%		(2.4	)%		(3.9	)%
Provision for income tax expense (benefit)		(33.8	)%		1.3	%		(11.4	)%		—
Income (loss) from continuing operations		(6.1	)%		(9.9	)%		8.9	%		(3.9	)%
Income from discontinued operations, net of taxes		492.9	%		9.9	%		176.2	%		6.6	%
Net income		486.8	%		—			185.1	%		2.7	%
Less: Net income attributable to redeemable noncontrolling interests		335.6	%	N/A				127.4	%	N/A
Net income attributable to McAfee Corp.		151.1	%	N/A				57.7	%	N/A

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Net Revenue

	Three Months Ended				Variance in					Nine Months Ended				Variance in
(in millions, except percentages)	September 25, 2021		September 26, 2020		Dollars		Percent			September 25, 2021		September 26, 2020		Dollars		Percent
Net revenue	$	491	$	395	$	96		24.3	%	$	1,400	$	1,132	$	268		23.7	%

Three months ended September 25, 2021 compared to three months ended September 26, 2020

The net revenue increase was primarily driven by (i) growth in Core Direct to Consumer Subscribers, (ii) increases in secure search revenue, (iii) growth in Mobile and Internet Service Provider business, and (iv) an increase in ARPC.

Nine months ended September 25, 2021 compared to nine months ended September 26, 2020

The net revenue increase was primarily driven by (i) growth in Core Direct to Consumer Subscribers, (ii) increases in secure search revenue, (iii) growth in Mobile and Internet Service Provider business, and (iv) an increase in ARPC.

Net Revenue by Geographical Region

Net revenue by geographic region based on the sell-to address of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Americas	$	327		66.6	%	$	260		65.8	%	$	928		66.3	%	$	742		65.5	%
EMEA		113		23.0	%		93		23.5	%		326		23.3	%		268		23.7	%
APJ		51		10.4	%		42		10.6	%		146		10.4	%		122		10.8	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan.

Net revenue by geographic region in the third quarter and the first nine months of fiscal 2021 showed growth in all geographies when compared to the corresponding periods in the prior year and we expect such percentages to remain relatively consistent in the near term.

Net Revenue by Channel

Direct to Consumer revenue is from subscribers who transact with us directly through McAfee web properties, including those converted after the trial period of the McAfee product preinstalled on their new PC purchase or converted subsequent to their subscription period purchased from another channel. Indirect revenue is driven by users who purchase directly through a partner inclusive of mobile providers, ISPs, electronics retailers, ecommerce sites, and search providers.

Net revenue by channel of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Direct to Consumer	$	356		72.5	%	$	305		77.2	%	$	1,029		73.5	%	$	879		77.7	%
Indirect		135		27.5	%		90		22.8	%		371		26.5	%		253		22.3	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

Cost of Sales

	Three Months Ended						Variance in					Nine Months Ended						Variance in
(in millions, except percentages)	September 25, 2021			September 26, 2020			Dollars		Percent			September 25, 2021			September 26, 2020			Dollars		Percent
Cost of sales	$	118		$	112		$	6		5.4	%	$	349		$	321		$	28		8.7	%
Gross profit margin		76.0	%		71.6	%							75.1	%		71.6	%

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Three months ended September 25, 2021 compared to three months ended September 26, 2020

The increase in cost of sales was primarily attributable to an increase in revenue share expense resulting from increases in Core Direct to Consumer Subscribers.

Nine months ended September 25, 2021 compared to nine months ended September 26, 2020

The increase in cost of sales was primarily attributable to a $27 million increase in revenue share expense and a $5 million increase in transaction processing fees driven by increases in Core Direct to Consumer Subscribers, partially offset by a $9 million decrease in amortization due to assets becoming fully amortized as of March 2021.

Operating Expenses

	Three Months Ended				Variance in						Nine Months Ended				Variance in
(in millions, except percentages)	September 25, 2021		September 26, 2020		Dollars			Percent			September 25, 2021		September 26, 2020		Dollars			Percent
Sales and marketing	$	91	$	87	$	4			4.6	%	$	264	$	225	$	39			17.3	%
Research and development		48		35		13			37.1	%		138		109		29			26.6	%
General and administrative		51		43		8			18.6	%		143		141		2			1.4	%
Amortization of intangibles		13		36		(23	)		(63.9	)%		63		108		(45	)		(41.7	)%
Restructuring and transition charges		27		—		27		NM				35		1		34			3400.0	%
Total	$	230	$	201	$	29			14.4	%	$	643	$	584	$	59			10.1	%

Three months ended September 25, 2021 compared to three months ended September 26, 2020

The increase in sales and marketing expense was primarily attributable to (i) a $7 million increase in marketing spend, and (ii) the increase in equity-based compensation expense. These increases were offset by an $8 million decrease in product placement fees and marketing development funds partially driven by lower PC shipments.

The increase in research and development expense was primarily attributable to the increase in equity-based compensation expense and an increase in employee expenses.

The increase in general and administrative expense was primarily attributable to the increase in equity-based compensation expense.

The decrease in amortization of intangibles was primarily attributable to assets that became fully amortized in March 2021.

The increase in restructuring and transition charges is primarily the result of costs incurred in support of the transition services agreement subsequent to the divestiture of the Enterprise Business.

Nine months ended September 25, 2021 compared to nine months ended September 26, 2020

The increase in sales and marketing expense was primarily attributable to (i) a $20 million increase in marketing spend, (ii) an increase in expenses for consulting services, and (iii) the increase in equity-based compensation expense.

The increase in research and development expense was primarily attributable to the increase in equity-based compensation expense and an increase in employee expenses.

The increase in general and administrative expense was primarily attributable to an increase in costs incurred as a public company, partially offset by a decrease in management fee expense due to the termination of the management agreement at the time of the IPO.

The decrease in amortization of intangibles was primarily attributable to assets that became fully amortized in March 2021.

The increase in restructuring and transition charges is primarily the result of a $27 million incurred in support of the transition services agreement subsequent to the divestiture of the Enterprise Business, and one-time termination benefits to the impacted employees, including severance payments and healthcare and other accrued benefits related to the workforce reduction that was initiated in December 2020.

Operating Income

	Three Months Ended						Variance in					Nine Months Ended						Variance in
(in millions, except percentages)	September 25, 2021			September 26, 2020			Dollars		Percent			September 25, 2021			September 26, 2020			Dollars		Percent
Operating income	$	143		$	82		$	61		74.4	%	$	408		$	227		$	181		79.7	%
Operating income margin		29.1	%		20.8	%							29.1	%		20.1	%

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Three months ended September 25, 2021 compared to three months ended September 26, 2020

The operating income increase was primarily driven by the $96 million increase in net revenue offset by a $29 million increase in operating expenses. The increase in operating expenses was primarily driven by (i) the $27 million increase in restructuring and transition charges and (ii) the increase in equity-based compensation, partially offset by the $23 million decrease in amortization of intangibles expense discussed above.

Nine months ended September 25, 2021 compared to nine months ended September 26, 2020

The operating income increase was primarily driven by (i) the $268 million increase in net revenue and (ii) the $45 million decrease in amortization expense discussed above, partially offset by (i) a $27 million increase in revenue share expense resulting from increases in Core Direct to Consumer Subscribers, (ii) the $27 million increase in restructuring and transition charges, (iii) a $20 million increase in marketing spend, (iv) the increase in equity-based compensation, (v) and a $5 million increase in transaction processing fees.

Interest Expense

	Three Months Ended						Variance in					Nine Months Ended						Variance in
(in millions, except percentages)	September 25, 2021			September 26, 2020			Dollars		Percent			September 25, 2021			September 26, 2020			Dollars		Percent
Interest expense	$	(61	)	$	(72	)	$	11		(15.3	)%	$	(170	)	$	(222	)	$	52		(23.4	)%

Three months and nine months ended September 25, 2021 compared to three months and nine months ended September 26, 2020

The decrease in interest expense was primarily attributable to the payoff of our 2nd Lien Term Loan and prepayment on our 1st Lien USD Term Note in the fourth quarter of 2020 in addition to our third quarter 2021 prepayment of 1st Lien Term Loan with a portion of the proceeds of the divestiture of the Enterprise business as discussed above. This was partially offset by $10 million loss on extinguishment of debt for recognition of unamortized discount and deferred financing for the third quarter of 2021 prepayment.

Other Income (Expense), Net

	Three Months Ended						Variance in						Nine Months Ended					Variance in
(in millions, except percentages)	September 25, 2021			September 26, 2020			Dollars			Percent			September 25, 2021			September 26, 2020		Dollars			Percent
Other income (expense), net	$	(292	)	$	(1	)	$	(291	)		29100.0	%	$	(301	)	$	—	$	(301	)	NM

Three months ended September 25, 2021 compared to three months ended September 26, 2020

The decrease in other income (expense), net was primarily attributable to $298 million in tax receivable agreement liability recorded to expense subsequent to the release of the valuation allowance against the deferred tax assets. This was partially offset by $7 million increase in TSA income.

Nine months ended September 25, 2021 compared to nine months ended September 26, 2020

The decrease in other income (expense), net was primarily attributable to $306 million in tax receivable agreement liability recorded to expense subsequent to the release of the valuation allowance against the deferred tax assets. This was partially offset by $7 million increase in TSA income.

Provision for Income Tax Expense

	Three Months Ended					Variance in						Nine Months Ended					Variance in
(in millions, except percentages)	September 25, 2021			September 26, 2020		Dollars			Percent			September 25, 2021			September 26, 2020		Dollars			Percent
Provision for income tax expense (benefit)	$	(166	)	$	5	$	(171	)		(3420.0	)%	$	(159	)	$	—	$	(159	)	NM

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Three months ended September 25, 2021 compared to three months ended September 26, 2020

The change in the provision for income tax expense was primarily attributable to the release of the valuation allowance on the deferred tax assets in the U.S. due to no longer being in a cumulative pre-tax loss as a result of the gain on the divestiture of the Enterprise Business.

Nine months ended September 25, 2021 compared to nine months ended September 26, 2020

The change in the provision for income tax benefit was primarily attributable to the release of the valuation allowance on the deferred tax assets in the U.S. due to no longer being in a cumulative pre-tax loss as a result of the gain on the divestiture of the Enterprise Business, partially offset by the U.S. deferred tax attributes utilized .

Discontinued Operations

	Three Months Ended				Variance in						Nine Months Ended				Variance in
(in millions, except percentages)	September 25, 2021		September 26, 2020		Dollars			Percent			September 25, 2021		September 26, 2020		Dollars			Percent
Net revenue	$	104	$	333	$	(229	)		(68.8	)%	$	781	$	997	$	(216	)		(21.7	)%
Operating income	$	26	$	46	$	(20	)		(43.5	)%	$	95	$	100	$	(5	)		(5.0	)%
Pre-tax gain on divestiture of Enterprise Business	$	2,634	$	—	$	2,634		NM			$	2,634	$	—	$	2,634		NM
Income from discontinued operations before income taxes	$	2,659	$	46	$	2,613			5680.4	%	$	2,724	$	100	$	2,624			2624.0	%
Income tax expense	$	239	$	7	$	232			3314.3	%	$	257	$	25	$	232			928.0	%
Income from discontinued operations, net of tax	$	2,420	$	39	$	2,381			6105.1	%	$	2,467	$	75	$	2,392			3189.3	%

Three months ended September 25, 2021 compared to three months ended September 26, 2020

The changes in net revenue and operating income were primarily the result of the sale closing July 27, 2021.

The increase in the income from discontinued operations before income taxes was primarily the result of the $2,634 million pre-tax gain on the divestiture of the Enterprise Business recognized in 2021 in addition to the operating income change.

The increase in income tax expense is primarily due to the $383 million tax expense related to the gain on the divestiture of the Enterprise Business, partially offset by tax benefits recognized due to basis differences of McAfee Corp. in FTW.

Nine months ended September 25, 2021 compared to nine months ended September 25, 2020

The changes in net revenue and operating income related to discontinued operations was primarily the result of the sale closing July 27, 2021.

The increase in the income from discontinued operations before income taxes was primarily the result of the $2,634 million pre-tax gain on the divestiture of the Enterprise Business recognized in 2021.

The increase in income tax expense is primarily due to the $383 million tax expense related to the gain on the divestiture of the Enterprise Business, partially offset by tax benefits recognized due to basis differences of McAfee Corp. in FTW.

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Liquidity and Capital Resources

McAfee Corp. is a holding company with no operations and, as such, will depend on its subsidiaries for cash to fund all of its operations and expenses through the payment of distributions by its current and future subsidiaries, including FTW. The terms of the agreements governing our senior secured credit facilities contain certain negative covenants prohibiting certain of our subsidiaries from making cash dividends or distributions to McAfee Corp. or to FTW unless certain financial tests are met. For a discussion of those restrictions, see “—Senior Secured Credit Facilities” below and “Risk Factors—Risks Related to Our Indebtedness—Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in acquisitions or other business activities necessary to achieve growth” in our Annual Report on Form 10-K for the year ended December 26, 2020, filed with the SEC. We currently anticipate that such restrictions will not impact our ability to meet our cash obligations.

Sources of Liquidity

As of September 25, 2021, we had cash and cash equivalents of $848 million. Our primary source of cash for funding operations and growth has been through cash flows generated from operating activities. In addition, we have funded certain acquisitions, distributions to members, and to a lesser extent, capital expenditures and our operations, through borrowings under the Senior Secured Credit Facilities, primarily in the form of long-term debt obligations. As of September 26, 2021, we had $660 million of additional unused borrowing capacity under our Revolving Credit Facility.

We believe that our existing cash on hand, expected future cash flows from operating activities, and additional borrowings available under our credit facilities will provide sufficient resources to fund our operating requirements as well as future capital expenditures, debt service requirements, and investments in future growth for at least the next twelve months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, and the continuing market acceptance of our products. In the event that additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, operating results, and financial condition may be adversely affected.

On July 27, 2021, we completed the sale of our Enterprise Business for an all-cash purchase price of $4.0 billion and received $3.9 billion, net of transaction costs. There is a $65 million proceeds receivable primarily related to amounts due from Enterprise Business upon delayed closing in certain non-U.S. jurisdictions. In November 2021, $56 million of this amount was received upon closing of some of these jurisdictions. Refer to “—Divestiture of Enterprise Business” above.

Senior Secured Credit Facilities

As of September 25, 2021, our Senior Secured Credit Facilities consisted of a U.S. dollar-denominated term loan tranche of $2,377 million (the “First Lien USD Term Loan”), a Euro-denominated term loan tranche of €502 million (the “First Lien EUR Term Loan”, and together with the First Lien USD Term Loan, the “First Lien Term Loans”), and a $664 million Revolving Credit Facility, of which we had $4 million outstanding as letters of credit. The Revolving Credit Facility includes a $50 million sublimit for the issuance of letters of credit.

The commitments under the First Lien Term Loans will mature on September 29, 2024. As of September 25, 2021, our total outstanding indebtedness under the Senior Secured Credit Facilities was $2,965 million. The First Lien Term Loans require equal quarterly repayments equal to 0.25% of the total amount borrowed.

As of September 25, 2021, the material terms of our outstanding debt remain unchanged from those described in our consolidated financial statements as of December 26, 2020.

Our 1st Lien Net Leverage Ratio as defined in the credit facility agreement was 2.1 as of September 25, 2021. For the nine months ended September 25, 2021, the weighted average interest rate was 3.9% under the First Lien USD Term Loan and 3.5% under the First Lien EUR Term Loan. We currently pay a commitment fee of 0.25% on the unused portion of the Revolving Credit Facility.

In August 2021, we prepaid $332 million of 1st Lien USD Term Loan and €563 million of 1st Lien Euro Term Loan. In connection with this prepayment, we incurred a loss on extinguishment of debt in the third quarter of our 2021 fiscal year of $10 million related to recognition of unamortized discount and deferred financing costs. See Note 11 to the condensed consolidated financial statements for more information. We also terminated $150 million of our $250 million notional interest rate swap that had an expiration date of January 29, 2022. See Note 13 to the condensed consolidated financial statements for more information and refer to “—Divestiture of Enterprise Business” above.

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Tax Receivable Agreement

The contribution by the Continuing Owners to the Corporation of certain corporate entities in connection with the IPO (including the Reorganization Transactions) and future exchanges of LLC Units for shares of the Corporation’s Class A common stock are expected to produce or otherwise deliver to the Corporation favorable tax attributes that can reduce its taxable income. Prior to the completion of the IPO, the Corporation entered into a Tax Receivable Agreement (“TRA”), which generally will require it to pay the TRA Beneficiaries, as defined in Note 1 to the condensed consolidated financial statements, 85% of the applicable cash savings, if any, in U.S. federal, state, and local income tax that the Corporation actually realizes or, in certain circumstances, is deemed to realize as a result of (i) all or a portion of the Corporation’s allocable share of existing tax basis in the assets of FTW (and its subsidiaries) acquired in connection with the Reorganization Transactions, (ii) increases in the Corporation’s allocable share of existing tax basis in the assets of FTW (and its subsidiaries) and tax basis adjustments in the assets of FTW (and its subsidiaries) as a result of sales or exchanges of LLC Units after the IPO, (iii) certain tax attributes of the corporations acquired by McAfee Corp. in connection with the Reorganization Transactions (including their allocable share of existing tax basis in the assets of FTW (and its subsidiaries)), and (iv) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. The Corporation generally will retain the benefit of the remaining 15% of the applicable tax savings. The payment obligations under the tax receivable agreement are obligations of McAfee Corp., and we expect that the payments that will be required to make under the tax receivable agreement will be substantial. As of September 25, 2021, we have recorded $2 million current portion and $392 million long-term portion of the TRA liability recorded within Accounts payable and other accrued liabilities and Tax receivable agreement liability, less current portion, respectively, in the condensed consolidated balance sheet.

On July 27, 2021, we completed the sale of our Enterprise Business to STG for an all-cash purchase price of $4.0 billion. Subsequent to the divestiture, the full liability under the TRA is now probable and has been recognized. For the three months and nine months ended September 25, 2021, we have recognized additional long-term TRA liability of $380 million and $392 million, respectively.

The remeasurement of the TRA liability, including 2021 exchanges prior to the date of the divestiture of the Enterprise Business resulted in a TRA expense of $310 million recorded primarily within Other income (expense), net while the TRA liability of $82 million that is a result of the exchanges of FTW LLC Units for Class A shares in the Company was recorded as a reduction to equity. See Note 12 to the condensed consolidated financial statements for further information.

Dividend Policy

FTW paid a cash distribution to its members for each of the three quarters ending September 25, 2021 at an aggregate annual rate of approximately $200 million. The Corporation received a portion of such distributions through the LLC Units it holds directly or indirectly through its wholly-owned subsidiaries on the record date such distributions were declared by FTW. McAfee Corp. used a portion of its share of the cash distributions declared by FTW to declare or pay the dividends noted in the table below during the nine months ended September 25, 2021. Remaining distributions received by McAfee Corp. were used for corporate taxes and general corporate purposes. Pursuant to the terms of the Merger Agreement, the Company has agreed to suspend its dividend during the term of the Merger Agreement.

Declaration Date	Record Date	Payment Date	Dividend per Share		Amount (in millions)
December 9, 2020	December 24, 2020	January 7, 2021	$	0.087	$	14
March 11, 2021	March 26, 2021	April 9, 2021	$	0.115	$	19
June 10, 2021	June 25, 2021	July 9, 2021	$	0.115	$	19
August 3, 2021	August 13, 2021	August 27, 2021	$	4.500	$	760
September 13, 2021	September 24, 2021	October 8, 2021	$	0.115	$	21

On August 3, 2021, we declared a one-time Special Dividend of $4.50 per share of Class A common stock outstanding in connection with the consummation of the sale of our Enterprise Business. See Note 6 to the condensed consolidated financial statements for additional dividend information on the Special Dividend.

Consolidated Statements of Cash Flows

Our cash flows for the nine months ended September 25, 2021 and September 26, 2020 were:

	Nine Months Ended
	September 25, 2021			September 26, 2020
Net cash provided by operating activities	$	538		$	464
Net cash provided by (used in) investing activities		3,857			(40	)
Net cash used in financing activities		(3,770	)		(245	)
Effect of exchange rate fluctuations on cash and cash equivalents		(8	)		2
Change in cash and cash equivalents	$	617		$	181

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See Note 3 to the condensed consolidated financial statements for additional cash flow information associated with our discontinued operations.

Operating Activities

For the nine months ended September 25, 2021, net cash provided by operating activities was $538 million, as a result of net income of $2,592 million, adjusted for non-cash items of $2,203 million and net cash inflow of $149 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $2,634 million of pre-tax gain on divestiture of Enterprise Business, $161 million in deferred taxes primarily from the gain on divestiture of Enterprise Business, and $29 million in foreign exchange gains, partially offset by $310 million in TRA remeasurement, $195 million in depreciation and amortization, $85 million in equity-based compensation, and $31 million in other operating activities primarily consisting of lease asset amortization, and amortization of debt discount and issuance costs. The net cash inflow from changes in operating assets and liabilities was primarily due to (i) a $193 million increase in income taxes payable primarily due to tax obligations from the gain on the divestiture of Enterprise Business, (ii) a $108 million decrease in accounts receivable, net which is primarily caused by collection of accounts receivable outstanding at year end, including those related to the Enterprise Business, and (iii) a $24 million increase in other current liabilities primarily due to timing of payments including increased transition costs in accounts payable and accrued liabilities. These changes were partially offset by (i) a $54 million decrease in other liabilities primarily due to payment of annual bonuses and larger year-end commissions in fiscal 2021, (ii) a $42 million increase in other assets primarily due to increases in long-term deferred revenue share with more long-term subscribers and in right of use assets recorded primarily due to new leases, (iii) a $36 increase in receivable from and payable to the Enterprise Business primarily due to receivable related to TSA receivable and misdirected payments, (iv) a $ 34 million increase in deferred costs primarily due to increased deferred revenue share resulting from an increased subscriber base, and (iv) a $10 million decrease in deferred revenue due to decreases in deferred revenues from discontinued operations, partially offset by increases in Consumer deferred revenue balances resulting from increases in customers.

For the nine months ended September 26, 2020, net cash provided by operating activities was $464 million, as a result of net income of $31 million, adjusted for non-cash charges of $489 million and net cash outflow of $56 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $372 million in depreciation and amortization, $25 million in equity-based compensation, $3 million for deferred taxes, $49 million for foreign exchange loss, and $40 million in other operating activities primarily consisting of lease asset amortization, and amortization of debt discount and issuance costs. The net cash outflow from changes in operating assets and liabilities was primarily due to (i) a $73 million decrease in other liabilities due to the payment of annual bonuses and larger year-end commissions in the first quarter of fiscal 2020 along with the payment of cash in lieu amounts that vested primarily in the second quarter of fiscal 2020 and payment of certain retention compensation relating to our acquisitions, (ii) a $10 million decrease in accounts payable and accrued liabilities due to reduced capital expenditures, reduced operating expenses and timing of vendor payments, (iii) a $26 million decrease in deferred revenue primarily due to decreases resulting from seasonality of discontinued operations deferred revenue billings, partially offset by increases in Consumer deferred revenue balances resulting from increases in customers, (iv) a $29 million increase in deferred costs primarily due to increased deferred revenue share resulting from an increased consumer subscriber base and a new consumer affiliate program, and (v) a $10 million increase in prepaid expenses and other assets primarily due to new leases signed during the period. These changes were partially offset by a $94 million decrease in accounts receivable, net which is primarily caused by seasonality of discontinued operations billings and collections.

Investing Activities

For the nine months ended September 25, 2021, net cash provided by investing activities was $3,857 million, which was primarily $3,880 million of net proceeds received from divestiture of the Enterprise Business, partially offset by $23 million of additions to property and equipment and other investing activities.

For the nine months ended September 26, 2020, net cash used in investing activities was $40 million, which was primarily the result of additions to property and equipment and other investing activities of $35 million and $5 million on acquisition of businesses, net of cash.

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Financing Activities

For the nine months ended September 25, 2021, net cash used in financing activities was $3,770 million, which was primarily the result of (i) distributions to members of FTW of $1,860 million, (ii) payment of long-term debt of $1,027 million including prepayments made using a portion of the proceeds from divestiture of the Enterprise Business, (iii) payment of dividends of $812 million to holders of Class A common stock, and (iv) payment of tax withholding for shares withheld of $79 million.

For the nine months ended September 26, 2020, net cash used in financing activities was $245 million, which was primarily the result of (i) distributions to members of $200 million, (ii) payment of long-term debt of $33 million, and (iii) $10 million in other financing activities primarily relating to equity repurchases, and (iv) $4 million in payment of equity-based compensation tax withholdings.

Contractual Obligations and Commitments

As of September 25, 2021, we have unconditional purchase obligations, including those related to our discontinued operations in connection with costs to support our obligations under our transition services agreement, of $420 million that expire at various dates through 2026 and guarantees of $10 million that expire at various dates through 2028. For further information, see Note 17 to the condensed consolidated financial statements.

Off-balance Sheet Arrangements

As of September 25, 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Critical Accounting Policies and Use of Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

We believe the critical accounting policies and estimates discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 26, 2020 filed with the SEC on March 1, 2021, which were recast to reflect discontinued operations and filed with our Current Report of Form 8-K on August 2, 2021, reflect our more significant judgments and estimates used in the preparation of the condensed consolidated financial statements. There have been no significant changes to our critical accounting policies and estimates as filed in the Annual Report on Form 10-K, except for those related to discontinued operations as a result of changes in reporting that relate to the divestiture of the Enterprise business.

Discontinued Operations

We review the presentation of planned business dispositions in the condensed consolidated financial statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business, and if so, whether it is anticipated that after the disposal the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results. In addition, we evaluate whether the business has met the criteria as a business held for sale. In order for a planned disposition to be classified as a business held for sale, the established criteria must be met as of the reporting date, including an active program to market the business and the expected disposition of the business within one year.

Planned business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that qualify as discontinued operations, all comparative periods presented are reclassified in the condensed consolidated balance sheets. Additionally, the results of operations of a discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the condensed consolidated statements of operations. Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations.

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Recent Accounting Pronouncements

For further information, see Note 2 to the condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to certain risk arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and through the use of derivative financial instruments.

Foreign Currency Exchange Risk

Our sales contracts are primarily denominated in U.S. dollars. A portion of our operating expenses are incurred outside of the United States and are denominated in foreign currencies and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, Argentine Peso, Indian Rupee, British Pound Sterling, Australian Dollar, and Japanese Yen. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statement of operations. The effect of an immediate 10% adverse change in foreign exchange rates on monetary assets and liabilities at September 25, 2021 would not be material to our financial condition or results of operations. To date, foreign currency transaction gains and losses and exchange rate fluctuations have not been material to our consolidated financial statements, and we have not engaged in any foreign currency hedging transactions.

As our international operations continue to grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to reassess our approach to managing this risk, such as using foreign currency forward and option contracts to hedge certain exposures to fluctuations in foreign currency exchange rates. In addition, currency fluctuations or a weakening U.S. dollar can increase the costs of our international expansion, and a strengthening U.S. dollar could slow international demand as products and services priced in the U.S. dollar become more expensive.

Interest Rate Risk

We utilize long-term debt to, among other things, finance our acquisitions and, to a lesser extent, our operations. We are exposed to interest rate risk on our outstanding floating rate debt instruments which bear interest at rates that fluctuate with changes in certain short-term prevailing interest rates. Certain borrowings under the Senior Secured Credit Facilities bear interest at a Euro currency rate determined by reference to LIBOR, plus an applicable margin, subject to established floors of 0.00%. During the fiscal year ended December 26, 2020 and nine months ended September 25, 2021, applicable interest rates have been lower than the designated floors under our 1st Lien Euro Term Loan; therefore, certain interest rates under the Senior Secured Credit Facilities have not been subject to change. Assuming that the rates remain below the applicable floors under the Senior Secured Credit Facilities, a 25 basis point increase or decrease in the applicable interest rates on our variable rate debt, excluding debt outstanding under the Senior Secured Credit Facilities, would result in a minor change in interest expense on an annual basis.

We entered into multiple interest rate swaps in order to fix a substantial amount of the LIBOR portion of our USD denominated variable rate borrowings. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash payments principally related to our variable-rate borrowings.

A hypothetical 10% increase or decrease in interest rates during any of the periods presented would not have had a material impact on our interest expense.

Inflation Rate Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 25, 2021, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)), was carried out by our management and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer).

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Based upon the aforementioned evaluation, our principal executive officer and principal financial officer concluded that these disclosure controls and procedures were effective as of September 25, 2021, at the reasonable assurance level.

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Changes in Internal Control over Financial Reporting

During the quarter ended September 25, 2021, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Act) occurred that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

Item 1A. Risk Factors

Risks Related to the Merger

The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations.

On November 5, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Condor BidCo, Inc., a Delaware corporation (“Parent”), and Condor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company whereupon the separate corporate existence of Merger Subsidiary will cease and the Company will be the surviving corporation in the Merger and will continue as a wholly owned subsidiary of Parent (the “Merger”). Uncertainty about the effect of the proposed Merger on our employees, customers, and other parties may have an adverse effect on our business, financial condition and results of operation regardless of whether the proposed Merger is completed. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the proposed Merger:

the impairment of our ability to attract, retain, and motivate our employees, including key personnel;

the diversion of significant management time and resources towards the completion of the proposed Merger;

difficulties maintaining relationships with customers, suppliers, and other business partners;

delays or deferments of certain business decisions by our customers, suppliers, and other business partners;

the inability to pursue alternative business opportunities or make appropriate changes to our business because the Merger Agreement requires us to use reasonable best efforts to conduct our business in the ordinary course of business and not engage in certain kinds of transactions prior to the completion of the proposed Merger;

litigation relating to the proposed Merger and the costs related thereto; and

the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed Merger

Failure to consummate the proposed Merger within the expected timeframe or at all could have a material adverse impact on our business, financial condition and results of operations.

There can be no assurance that the proposed Merger will be consummated. The consummation of the proposed Merger is subject to customary closing conditions, including, among other things, the approval of the Merger Agreement and the Merger by the Company’s stockholders at a special meeting of stockholders convened for such purpose and the absence of legal restraints and prohibitions against the Merger and the other transactions contemplated by the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct to the extent specified in the Merger Agreement and the other party having performed in all material respects its obligations under the Merger Agreement. There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all.

The Merger Agreement also includes customary termination provision for both the Company and Parent, subject, in certain circumstances, to the payment by the Company of a termination fee of 1.25% or 2.5% of the Company’s equity value. If we are required to make this payment, doing so may materially adversely affect our business, financial condition and results of operations.

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There can be no assurance that a remedy will be available to us in the event of a breach of the Merger Agreement by Parent or its affiliates or that we will wholly or partially recover for any damages incurred by us in connection with the proposed Merger. A failed transaction may result in negative publicity and a negative impression of us among our customers or in the investment community or business community generally. Further, any disruptions to our business resulting from the announcement and pendency of the proposed Merger, including any adverse changes in our relationships with our customers, partners, suppliers and employees, could continue or accelerate in the event of a failed transaction. In addition, if the proposed Merger is not completed, and there are no other parties willing and able to acquire the Company at a price of $26.00 per share or higher, on terms acceptable to us, the share price of our Class A common stock will likely decline to the extent that the current market price of our common stock reflects an assumption that the proposed Merger will be completed. Also, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, for which we will have received little or no benefit if the proposed Merger is not completed. Many of these fees and costs will be payable by us even if the proposed Merger is not completed and may relate to activities that we would not have undertaken other than to complete the proposed Merger.

Risks Related to the COVID-19 Pandemic

The COVID-19 pandemic has affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal, state and foreign governments have implemented measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. At the onset of the COVID-19 pandemic, we implemented work-from-home requirements, made substantial modifications to employee travel policies, and cancelled or shifted marketing and other corporate events to virtual-only formats. While we have begun to adjust our current policies and procedures in accordance with public health guidance that is available, we cannot be certain that similar precautionary measures will not be necessary in the future, and any such precautionary measures could negatively affect our customer success efforts, sales and marketing efforts, delay and lengthen our sales cycles, or create operational or other challenges, any of which could harm our business and results of operations. In addition, the COVID-19 pandemic has disrupted the operations of many of our channel partners, and may continue to disrupt their operations, for an indefinite period of time, including as a result of any future public health precautionary measures, uncertainty in the financial markets, or other harm to their businesses and financial results, resulting in delayed purchasing decisions, extended payment terms, and postponed or cancelled projects, all of which could negatively impact our business and results of operations, including our revenue and cash flows. Further, if the COVID-19 pandemic has a substantial impact on our employees’, partners’, or third-party service providers’ health, attendance, or productivity in the future, our results of operations and overall financial performance may be adversely impacted.

The ultimate duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the efficacy of new vaccines, the efficiency and scope of global inoculation efforts, the severity and transmission rate of the disease and new variants, the actions of governments, businesses and individuals in response to the pandemic, the extent and effectiveness of containment actions, the impact on economic activity, and the impact of these and other factors on our employees, partners, and third-party service providers. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including those related to investments, receivables, retention rates, renewal and pricing. For example, we have experienced growth and increased demand for our solutions in recent quarters, which may be due in part to greater demand for devices or our solutions in response to the COVID-19 pandemic. We cannot determine what, if any, portion of our growth in net revenue, the number of our Direct to Consumer Subscribers, or any other measures of our performance during 2020 and the first half of 2021 was the result of such responses to the COVID-19 pandemic. However, if we are unable to successfully drive renewals of new subscriptions and retention of new customers in future periods, including any such new subscriptions or new customers that may be related to the response to the COVID-19 pandemic, or if global conditions and macroeconomic forces, including those related to the COVID-19 pandemic, reduce demand for solutions in the future, we may be unsuccessful in sustaining our recent growth rates. In addition, the extent to which the COVID-19 pandemic will continue to drive demand for devices is uncertain, and if demand for devices decreases, we may experience slower growth in future periods. These uncertainties may increase variability in our future results of operations and adversely impact our ability to accurately forecast changes in our business performance and financial condition in future periods. If we are not able to respond to and manage the impact of such events effectively or if global economic conditions do not improve, or deteriorate further, our business, financial condition, results of operations, and cash flows could be adversely affected.

Risks Related to the Recent Sale of our Enterprise Business

If we are unsuccessful at executing our business plan and necessary transition activities as a standalone consumer cybersecurity company following the recent sale of our Enterprise Business, our business and results of operations may be adversely affected and our ability to invest in and grow our business could be limited.

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On July 27, 2021, we completed the sale of our Enterprise Business to STG, which divestiture comprised a substantially whole operating segment. This and other operational transitions have involved turnover in management and other key personnel and changes in our strategic direction. Transitions of this type can be disruptive, result in the loss of focus and employee morale and make the execution of business strategies more difficult. We also expect to pay approximately $300 million in additional one-time separation costs and stranded cost optimization, a portion of which will be expenses paid by proceeds from the transaction. We have also entered into a transition service agreement under which we will provide assistance to STG including, but not limited to, business support services and information technology services as well as a commercial services agreement, under which we will provide certain product services and licensed technology, including certain threat intelligence data, that has historically been provided to the enterprise business. We may experience delays in the anticipated timing of activities related to such transitions and higher than expected or unanticipated execution costs. If we do not succeed in executing on these transition activities while achieving our cost optimization goals, or if these efforts are more costly or time-consuming than expected, our business and results of operations may be adversely affected, which could limit our ability to invest in and grow our business.

We may not achieve the intended benefits of the sale of our Enterprise Business.

We may not realize some or all of the anticipated benefits from the sale of our Enterprise Business. The resource constraints as a result of our focus on completing the transaction, which include the loss of employees, could have a continuing impact on the execution of our business strategy and our overall operating results. Further, our remaining employees may become concerned about the future of our remaining operations and lose focus or seek other employment. There can be no guarantee that the divestiture will result in stronger long term financial and operational results for our remaining consumer business.

Additionally, in connection with the divestiture, our Board of Directors returned a portion of the proceeds of the sale of our Enterprise Business in the form of distributions paid to holders of LLC Units of FTW, including McAfee Corp., and to holders of our Class A common stock in the form of a special dividend of $4.50 per share to holders of record of our Class A common stock as of August 13, 2021. The use of proceeds in this manner could impair our future financial growth.

Our future results of operations are dependent solely on the operations of our pure play consumer cyber security business and will differ materially from our previous results.

The Enterprise Business generated approximately 46% of total combined company revenue for fiscal 2020, and approximately 51% of total combined company revenue for fiscal 2019. Accordingly, our future financial results will differ materially from our previous results since our future financial results are dependent solely on our consumer operations. Any downturn in our consumer business could have a material adverse effect on our future operating results and financial condition and could materially and adversely affect the trading price of our outstanding securities.

Risks Related to Competition and Industry Trends

The cybersecurity market is rapidly evolving and becoming increasingly competitive in response to continually evolving cybersecurity threats from a variety of increasingly sophisticated cyberattackers. If we fail to anticipate changing customer requirements or industry and market developments, or we fail to adapt our business model to keep pace with evolving market trends, our financial performance will suffer.

The cybersecurity market is characterized by continual changes in customer preferences and requirements, frequent and rapid technological developments and continually evolving market trends. We must continually address the challenges of dynamic, and accelerating market trends, such as the emergence of new cybersecurity threats, the continued decline in the sale of new personal computers, and the rise of mobility and cloud-based solutions, all of which make satisfying our customers’ diverse and evolving needs more challenging.

The technology underlying our solutions is particularly complex because it must effectively and efficiently identify and respond to new and increasingly sophisticated threats while meeting other stringent technical requirements in areas of performance, usability, and availability. Although our customers expect new solutions and enhancements to be rapidly introduced to respond to new cybersecurity threats, product development requires significant investment, the efficacy of new technologies is inherently uncertain, and the timing for commercial release and availability of new solutions and enhancements is uncertain. We may be unable to develop new technologies to keep pace with evolving threats or experience unanticipated delays in the availability of new solutions, and therefore fail to meet customer expectations. If we fail to anticipate or address the evolving and rigorous needs of our customers, or we do not respond quickly to shifting customer expectations or demands by developing and releasing new solutions or enhancements that can respond effectively and efficiently to new cybersecurity threats on an ongoing and timely basis, our competitive position, business, and financial results will be harmed.

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The introduction of new products or services by competitors, market acceptance of products or services based on emerging or alternative technologies, and the evolution of new standards, whether formalized or otherwise, could each render our existing solutions obsolete or make it easier for other products or services to compete with our solutions. In addition, modern cyberattackers are skilled at adapting to new technologies and developing new methods of breaching customers. We must continuously work to ensure our solutions protect against the increased volume and complexity of the cybersecurity threat landscape. Changes in the nature of advanced cybersecurity threats could result in a shift in cybersecurity spending and preferences away from solutions such as ours. If our solutions are not viewed by our customers as necessary or effective in addressing their cybersecurity needs, then our revenues may not grow as quickly as expected, or may decline, and our business could suffer.

We cannot be sure that we will accurately predict how the cybersecurity markets in which we compete or intend to compete will evolve. Failure on our part to anticipate changes in our markets and to develop solutions and enhancements that meet the demands of those markets will significantly impair our business, financial condition, results of operations, and cash flows.

We operate in a highly competitive environment, and we expect competitive pressures to increase in the future, which could cause us to lose market share.

The markets for our solutions are highly competitive, and we expect both the requirements and pricing competition to increase, particularly given the increasingly sophisticated attacks, changing customer preferences and requirements, current economic pressures, and market consolidation. Competitive pressures in these markets may result in price reductions, reduced margins, loss of market share and inability to gain market share, and a decline in sales, any one of which could seriously impact our business, financial condition, results of operations, and cash flows.

We face competition from players, such as NortonLifelock, Avast/AVG, Kaspersky, Trend Micro, ESET, and Microsoft, which expanded from desktop anti-malware into mobile, security, VPN, and identity protection among others. At the same time we compete with point-tool providers, such as Cujo and Dojo in the home IoT space or AnchorFree, ExpressVPN, and ProtonVPN in the network security space, across our full consumer offering.

In addition to competing with these and other vendors directly for sales to end-users of our products, we compete with several of them for the opportunity to have our products bundled with the product offerings of our strategic partners, including computer hardware OEMs, ISPs, mobile carriers, and other distribution partners. Our competitors could gain market segment share from us if any of these strategic partners replace our solutions with those of our competitors or if these partners more actively promote our competitors’ offerings than ours. In addition, vendors who have bundled our products with theirs may choose to bundle their products with their own or other vendors’ software or may limit our access to standard product interfaces and inhibit our ability to develop products for their platform. We also face competition from many smaller companies that specialize in particular segments of the markets in which we compete, including Crowdstrike, VMware, Netskope, and Zscaler. In the future, further product development by these providers could cause our products and services to become redundant or lose market segment share, which could significantly impact our sales and financial results.

We face growing competition from network equipment, computer hardware manufacturers, large operating system providers, telecommunication companies, and other large or diversified technology companies. Examples of large, diversified competitors include Microsoft, International Business Machines Corporation, and Dell Technologies. Large vendors of hardware or operating system software increasingly incorporate cybersecurity functionality into their products and services, and enhance that functionality either through internal development or through strategic alliances or acquisitions. Similarly, telecommunications providers are increasingly investing in the enhancement of the cybersecurity functionality in the devices and services they offer. Certain of our current and potential competitors may have competitive advantages such as longer operating histories, more extensive international operations, larger product development and strategic acquisition budgets, and greater financial, technical, sales, and marketing resources than we do. Such competitors also may have well-established relationships with our current and potential customers and extensive knowledge of our industry and the markets in which we compete and intend to compete. As a result, such competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, marketing, sale, and support of their products. These competitors have made strategic acquisitions or established cooperative relationships among themselves or with other providers, thereby increasing their ability to provide a broader suite of products, and potentially causing customers to decrease purchases of, or defer purchasing decisions with respect to, our products and services. Additionally, some or all of our solutions may rely upon access to certain hardware or software interfaces. These competitors may limit our access to such interfaces or may provide greater or earlier access available to others. These actions could adversely affect the operations of our products relative to competitors or render our solutions inoperative.

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Cybersecurity protection is also offered by certain of our competitors at prices lower than our prices or, in some cases, free of charge. Other companies bundle their own or our competitors’ lower-priced or free cybersecurity products with their own computer hardware or software product offerings in a manner that discourages users from purchasing our products and subscriptions. Our competitive position could be adversely affected to the extent that our current or potential customers perceive these cybersecurity products as replacing the need for our products or if they render our solutions unmarketable—even if these competitive products are inferior to or more limited than our products and services. The expansion of these competitive trends could have a significant negative impact on our sales and financial results by causing, among other things, price reductions of our products, reduced profitability, and loss of market share.

To compete successfully, we must continue to develop new solutions and enhance existing solutions, effectively adapt to changes in the technology or rights held by our competitors, respond to competitive strategies, and effectively adapt to technological changes within the consumer cybersecurity market. If we are unsuccessful in responding to our competitors, our competitive position and our financial results could be adversely affected.

Our business depends substantially on our ability to retain customers and to expand sales of our solutions to them. If we are unable to retain our customers or to expand our product offerings, our future results of operations will be harmed.

For us to maintain or improve our results of operations in a market that is rapidly evolving and places a premium on market-leading solutions, it is important that we retain existing customers and that our customers expand their use of our solutions. Our customers have no obligation to renew their subscription with us upon their expiration. Retention rates may decline or fluctuate as a result of a number of factors, including but not limited to the level of our customers’ satisfaction or dissatisfaction with our solutions, our prices and the prices of competing products or services, industry consolidation, the effects of global economic conditions, new technologies, changes in our customers’ spending levels, and changes in how our customers perceive the cybersecurity threats. In addition, a significant portion of our renewals come from autorenewal arrangements incorporated within our solutions. Any changes in the laws regarding autorenewal arrangements could adversely affect our ability to retain consumer customers and harm our financial condition and operating performance.

In addition, our ability to generate revenue and maintain or improve our results of operations partly depends on our ability to cross-sell our solutions to our existing customers. We expect our ability to successfully cross-sell our solutions will be one of the most significant factors influencing our growth. We may not be successful in cross-selling our solutions because our customers may find our additional solutions unnecessary or unattractive. Our failure to sell additional solutions to our existing and new customers could adversely affect our ability to grow our business.

We may need to change our pricing models to compete successfully.

The intense competition we face in the cybersecurity market, in addition to general economic and business conditions (including the economic downturn resulting from the COVID-19 pandemic), can result in downward pressure on the prices of our solutions. If our competitors offer significant discounts on competing products or services, or develop products or services that our customers believe are more valuable or cost-effective, we may be required to decrease our prices or offer other incentives in order to compete successfully. Additionally, if we increase prices for our solutions, demand for our solutions could decline as customers adopt less expensive competing products and our market share could suffer. If we do not adapt our pricing models to reflect changes in customer use of our products or changes in customer demand, our revenues could decrease.

Any broad-based change to our pricing strategy could cause our revenues to decline or could delay future sales as our sales force implements and our customers adjust to the new pricing terms. We or our competitors may bundle products for promotional purposes or as a long-term go-to-market or pricing strategy or provide price guarantees to certain customers as part of our overall sales strategy. These practices could, over time, significantly limit our flexibility to change prices for existing solutions and to establish prices for new or enhanced products and services. Any such changes could reduce our margins and adversely affect our results of operations.

If cybersecurity industry analysts publish unfavorable or inaccurate research reports about our business, our financial performance could be harmed.

An increasing number of independent industry analysts and researchers regularly evaluate, compare, and publish reviews regarding the performance, efficiency, and functionality of cybersecurity products and services, including our own solutions. The market’s perception of our solutions may be significantly influenced by these reviews. We do not have any control over the content of these independent industry analysts and research reports, or the methodology they use to evaluate our solutions, which may be flawed or incomplete. Demand for our solutions could be harmed if these industry analysts publish negative reviews of our solutions or do not view us as a market leader. If we are unable to maintain a strong reputation, sales to new and existing customers and renewals could be adversely affected, and our financial performance could be harmed.

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Risks Related to Our Financial and Operating Performance

Our results of operations can be difficult to predict and may fluctuate significantly, which could result in a failure to meet investor expectations.

Our results of operations have in the past varied, and may in the future vary, significantly from period to period due to a number of factors, many of which are outside of our control, including the macroeconomic environment. These factors limit our ability to accurately predict our results of operations and include factors discussed throughout this “Risk Factors” section, including the following:

the level of competition in our markets, including the effect of new entrants, consolidation, and technological innovation;

macroeconomic conditions in our markets, both domestic and international, as well as the level of discretionary technology spending;

fluctuations in demand for our solutions;

disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, pandemics, such as the COVID-19 pandemic, riots, protests or political unrest, or earthquakes, floods, or other natural disasters;

variability and unpredictability in the rate of growth in the markets in which we compete;

technological changes in our markets;

our ability to renew existing customers, acquire new customers, and sell additional solutions;

execution of our business strategy and operating plan, and the effectiveness of our sales and marketing programs;

product announcements, introductions, transitions, and enhancements by us or our competitors, which could result in deferrals of customer orders;

the impact of our recent divesture of our enterprise business, and any stranded or other costs incurred in connection with the transaction and the efficacy of our cost optimization efforts following the transaction;

the impact of future acquisitions or divestitures;

changes in accounting rules and policies that impact our future results of operations compared to prior periods; and

the need to recognize certain revenue ratably over a defined period or to defer recognition of revenue to a later period, which may impact the comparability of our results of operations across those periods.

Furthermore, a high percentage of our expenses, including those related to overhead, research and development, sales and marketing, and general and administrative functions are generally fixed in nature in the short term. As a result, if our net revenue is less than forecasted, we may not be able to effectively reduce such expenses to compensate for the revenue shortfall and our results of operations will be adversely affected. We also expect the recent sale of our enterprise business to lead to increased costs that were previously allocated to both segments to now be part of continuing operations, which will have a dilutive impact on operating margins. We also expect to pay approximately $300 million in additional one-time separation costs and stranded cost optimization, a portion of which will be expenses paid by proceeds from the transaction. In addition, our ability to maintain or expand our operating margins may be limited given economic and competitive conditions, and we therefore could be reliant upon our ability to continually identify and implement operational improvements in order to maintain or reduce expense levels. There can be no assurance that we will be able to maintain or expand our current operating margins in the future.

We derive revenue from the sale of security products and subscriptions or a combination of these items, which may decline.

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Our sales may decline and fluctuate as a result of a number of factors, including our customers’ level of satisfaction with our products and services, the prices of our products and services, the prices of products and services offered by our competitors, reductions in our customers’ spending levels, and other factors beyond our control. We also derive part of our revenue through indirect agreements with third parties including mobile providers, ISPs, electronics retailers, ecommerce sites, and search providers. Any change in these agreements, in indirect party’s demand with end consumers in mobile, ISP, and retail, in user search behavior, advertising market for search or ecosystem changes could adversely affect our revenue. If our sales decline, our revenue and revenue growth may decline, and our business will suffer. We recognize a majority of revenue as control of the goods and services is transferred to our customer. As a result, a majority of revenue we report each quarter is the recognition of deferred revenue from subscriptions entered into during previous quarters. Consequently, a decline in sales in any single quarter will not be fully or immediately reflected in revenue in that quarter but will continue to negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales is not reflected in full in our results of operations until future periods. Furthermore, it is difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from subscriptions must be recognized over the applicable future time period. Finally, any increase in the average term of a subscription would result in revenue for such subscriptions being recognized over longer periods of time.

The sudden and significant economic downturn or volatility in the economy in the United States and our other major markets could have a material adverse impact on our business, financial condition, results of operations, or cash flows.

We operate globally and as a result our business and revenues are impacted by global macroeconomic conditions. In recent periods, investor and customer concerns about the global economic outlook, which significantly increased in 2020 and early 2021 due to the COVID-19 pandemic, have adversely affected market and business conditions in general. In addition, a weakening of economic conditions could lead to reductions in demand for our solutions. Weakened economic conditions or a recession could reduce the amounts that customers are willing or able to spend on our products and solutions, and could make it more difficult for us to compete against less expensive and free products for new customers. Furthermore, a high percentage of our expenses, including those related to overhead, research and development, sales and marketing, and general and administrative functions are generally fixed in nature in the short term. If we are not able to timely and appropriately adapt to changes resulting from a weak economic environment, it could have an adverse impact on our business, financial condition, results of operations, and cash flows.

We have experienced net losses in recent periods and may not maintain profitability in the future.

We experienced net losses of $236 million and $289 million for fiscal 2019 and 2020, respectively. While we have experienced revenue growth over these same periods, we may not be able to sustain or increase our growth or maintain profitability in the future or on a consistent basis. In recent years, we have changed our portfolio of products and invested in research and development to develop new products and enhance current solutions.

We also expect to continue to invest for future growth. We expect that to achieve profitability we will be required to increase revenues, manage our cost structure, and avoid significant liabilities. Revenue growth may slow, revenue may decline, or we may incur significant losses in the future for a number of possible reasons, increasing competition, a decrease in the growth of the markets in which we operate, or if we fail for any reason to continue to capitalize on growth opportunities. We also expect the recent sale of our enterprise business to lead to increased costs that were previously allocated to both segments to now be part of continuing operations, which will have a dilutive impact on operating margins. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our financial performance may be harmed.

Changes in tax laws or in their implementation may adversely affect our business and financial condition.

Changes in tax law may adversely affect our business or financial condition. As part of Congress’s response to the COVID-19 pandemic, the Families First Coronavirus Response Act, commonly referred to as the FFCR Act, was enacted on March 18, 2020, the Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the CARES Act, was enacted on March 27, 2020, the act commonly known as the Consolidated Appropriations Act, 2021 was enacted on December 27, 2020, and the act commonly known as the American Rescue Plan Act was enacted on March 11, 2021. Each contains numerous tax provisions. In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspended application of the 80%-of-taxable-income limitation on the use of NOLs, which was enacted as part of the TCJA. It also provided that NOLs arising in any taxable year beginning after December 31, 2017 and before January 1, 2021 are generally eligible to be carried back up to five years. The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxed the limitation of the tax deductibility for net interest expense by increasing the limitation from 30% to 50% of adjusted taxable income.

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Regulatory guidance under the Tax Cuts and Job Act (“TCJA”), the FFCR Act, the CARES Act, the Consolidated Appropriations Act, 2021, and the American Rescue Plan Act is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition. It is also likely that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our Company. In addition, it is uncertain if and to what extent various states will conform to the TCJA, the FFCR Act, the CARES Act, the Consolidated Appropriations Act, 2021, or the American Rescue Plan Act. The Biden Administration has also proposed a significant number of changes to U.S. tax laws, including an increase in the maximum tax rate applicable to U.S. corporations and certain individuals, which could potentially have retroactive effect and may significantly affect McAfee Corp. or FTW. Any such rate increases or future changes to U.S. tax laws could also require McAfee Corp. to increase its payments to the Continuing Owners and Management Owners pursuant to its tax receivable agreement.

As a multinational corporation, forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between our forecasted and actual tax rates.

Forecasts of our income tax position and effective tax rate are complex and subject to uncertainty because our income tax position for each year combines the effects of a mix of profits and losses earned by us and our subsidiaries in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules and tax laws, such as the U.S. federal income tax laws, including impacts of the TCJA, FFCR Act, CARES Act, Consolidated Appropriations Act, 2021, and American Rescue Plan Act arising from future interpretations of such legislation, the results of examinations by various tax authorities and the impact of any acquisition, business combination, or other reorganization or financing transaction. To forecast our global tax rate, we estimate our pre-tax profits and losses by jurisdiction and forecast our tax expense by jurisdiction. If our mix of profits and losses, our ability to use tax credits, or effective tax rates by jurisdiction is different than those estimated, our actual tax rate could be different than forecasted, which could have a material impact on our financial condition and results of operations.

As a multinational corporation, we conduct our business in many countries and are subject to taxation in many jurisdictions. The taxation of our business is subject to the application of multiple and conflicting tax laws and regulations as well as multinational tax conventions. Our effective tax rate is highly dependent upon the geographic distribution of our worldwide earnings or losses, the tax regulations in each geographic region, the availability of tax credits and carryforwards, changes in accounting principles (including accounting for uncertain tax positions), and changes in the valuation of our deferred tax assets, and the effectiveness of our tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment, and uncertainty, and significant judgment is required to determine the recognition and measurement attributes prescribed in certain accounting guidance. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against us that could materially impact our tax liability and/or our effective income tax rate.

Our provision for income taxes is subject to volatility and can be adversely affected by a variety of factors, including but not limited to: unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, changes in tax laws and the related regulations and interpretations (including various proposals currently under consideration), changes in accounting principles (including accounting for uncertain tax positions), and changes in the valuation of our deferred tax assets. Significant judgment is required to determine the recognition and measurement attributes prescribed in certain accounting guidance. This guidance applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes.

In addition, we are subject to examination of our income tax returns by the Internal Revenue Service (“IRS”) and other tax authorities. If tax authorities challenge the relative mix of our U.S. and international income, our future effective income tax rates could be adversely affected, including for future periods and retroactively. While we regularly assess the likelihood of adverse outcomes from such examinations and the adequacy of our provision for income taxes, there can be no assurance that such provision is sufficient and that a determination by a tax authority will not have an adverse effect on our business, financial condition, results of operations, and cash flows.

Our ability to use certain net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in ownership of the relevant corporation by “5% shareholders” (as defined under U.S. income tax laws) that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. If our corporate subsidiaries experience one or more ownership changes in connection with transactions in our stock, then we may be limited in our ability to use our corporate subsidiaries’ net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that such subsidiaries earn. Any such limitations on the ability to use net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, results of operations, and cash flows.

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We face risks associated with past and future investments, acquisitions, and other strategic transactions.

We may buy or make investments in complementary or competitive companies, products, and technologies, sell strategic businesses or other assets, or engage in other strategic transactions. For example, in fiscal 2018 we bolstered our consumer VPN offering through our acquisition of TunnelBear. The consideration exchanged for an acquisition may be greater than the value we realize from the transaction. In addition, we and our TPG, Thomas Bravo and Intel periodically evaluate our capital structure and strategic alternatives with advisors and other third parties in an effort to maximize value for our stockholders. We cannot be certain when or if any of the discussions we have will lead to a proposal that we may find attractive, including with respect to the refinancing or repricing of some or all of our indebtedness, the sale of some or a significant portion of our assets, or other similar significant transactions. Whether in connection with such events or otherwise, we may also take other actions that impact our balance sheet and capital structure, including the payment of special dividends, the increase or decrease of regular dividends, repayment of debt, repurchases of our equity through privately negotiated transactions, as part of a tender offer, in the open market and/or through a share repurchase plan, including an accelerated share repurchase plan, or any other means permitted by law. In some cases these transactions could be with, or disproportionately benefit, one or more of our significant stockholders.

Future transactions could result in significant transactions-related charges, acceleration of some or all payments under our tax receivable agreement, disparate tax treatment for our stockholders, distraction for our management team, and potential dilution to our equity holders. In addition, we face a number of risks relating to such transactions, including the following, any of which could harm our ability to achieve the anticipated benefits of our past or future strategic transactions.

Technology and market risk. Cybersecurity technology is particularly complex because it must effectively and efficiently identify and respond to new and increasingly sophisticated threats while meeting other stringent technical requirements in areas of performance, usability, availability, and others. Our investments and acquisitions carry inherent uncertainty as to the efficacy of our technology roadmap. The decisions we make regarding customer requirements, market trends, market segments, and technologies may not be correct and we may not achieve the anticipated benefits of these transactions.

Integration or separation. Integration of an acquired company or technology is a complex, time consuming, and expensive process. The successful integration of an acquisition requires, among other things, that we integrate and retain key management, sales, research and development, and other personnel; integrate or separate the acquired products into or from our product offerings from both an engineering and sales and marketing perspective; integrate and support, or separate from, existing suppliers, distribution, and partner relationships; coordinate research and development efforts; and potentially consolidate, or prepare standalone, facilities and functions and back-office accounting, order processing, and other functions. If we do not successfully integrate an acquired company or technology, we may not achieve the anticipated benefits.

The geographic distance between sites, the complexity of the technologies and operations being integrated or separated, and disparate corporate cultures, may increase the difficulties of such integration or separation. Management’s focus on such operations may distract attention from our day-to-day business and may disrupt key research and development, marketing, or sales efforts. In addition, it is common in the technology industry for aggressive competitors to attract customers and recruit key employees away from companies during the integration phase of an acquisition.

Internal controls, policies, and procedures. Acquired companies or businesses are likely to have different standards, controls, contracts, procedures, and policies, making it more difficult to implement and harmonize company-wide financial, accounting, billing, information, and other systems. Acquisitions of privately held and/or non-U.S. companies are particularly challenging because their prior practices in these areas may not meet the requirements of GAAP and U.S. export regulations. Furthermore, we may assume liabilities associated with past practices and the Company’s compliance with legal and regulatory requirements in the jurisdictions in which they or we operate. Any acquisitions may require that we spend significant management time and attention establishing these standards, controls, contracts, procedures, and policies.

Key employees may be difficult to retain and assimilate. The success of many strategic transactions depends to a great extent on our ability to retain and motivate key employees. This can be challenging, particularly in the highly competitive market for technical personnel. Retaining key executives for the long term can also be difficult due to other opportunities available to them. Disputes that may arise out of earn-outs, escrows, and other arrangements related to an acquisition of a company in which a key employee was a principal may negatively affect the morale of the employee and make retaining the employee more difficult.

Risks Related to Our Solutions and Sales to Our Customers

Over the last several years, we have pursued a variety of strategic initiatives designed to optimize and reinforce our cybersecurity platform. If the benefits of these initiatives are less than we anticipate, or if the realization of such benefits is delayed, our business and results of operations may be harmed.

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Over the last several years, we have pursued a variety of strategic initiatives designed to optimize and reinforce our cybersecurity platform, including investing in new routes to market and partnerships, refining our go-to-market strategies, adding new capabilities and products through strategic acquisitions, and divesting our enterprise business to focus on a standalone consumer-focused strategy. The anticipated benefits of these initiatives may not be fully realized, if at all, until future periods. However, if we do not achieve the anticipated benefits from these and our other strategic initiatives, or if the achievement of such anticipated benefits is delayed, our financial condition, results of operations, and cash flows may be adversely affected.

Our investments in new or enhanced solutions may not yield the benefits we anticipate.

The success of our business depends on our ability to develop new technologies and solutions, to anticipate future customer requirements and applicable industry standards, and to respond to the changing needs of our customers, competitive technological developments, and industry changes. Within our consumer business, we are presently investing in cybersecurity solutions to protect consumers’ PC and mobile devices, identity, privacy, family safety, web browsing, IoT, and smart home devices. We intend to continue to invest in these cybersecurity solutions by adding personnel and other resources to our business. We will likely recognize costs associated with these investments earlier than the anticipated benefits. If we do not achieve the anticipated benefits from these investments, or if the achievement of these benefits is delayed, our business, financial condition, results of operations, and cash flows may be adversely affected.

The process of developing new technologies is time consuming, complex, and uncertain, and requires the commitment of significant resources well in advance of being able to fully determine market requirements and industry standards. Furthermore, we may not be able to timely execute new technical product or solution initiatives for a variety of reasons such as errors in planning or timing, technical difficulties that we cannot timely resolve, or a lack of appropriate resources. Complex solutions like ours may contain undetected errors or compatibility problems, particularly when first released, which could delay or adversely impact market acceptance. We may also experience delays or unforeseen costs related to integrating products we acquire with products we develop, because we may be unfamiliar with errors or compatibility issues of products we did not develop ourselves. Any of these development challenges, or the failure to appropriately adjust our go-to-market strategy to accommodate new offerings, may result in delays in the commercial release of new solutions or may cause us to terminate development of new solutions prior to commercial release. Any such challenges could result in competitors bringing products or services to market before we do and a related decrease in our market segment share and net revenue. Our inability to introduce new solutions and enhancements in a timely and cost-effective manner, or the failure of these new solutions or enhancements to achieve market acceptance and comply with industry standards and governmental regulation, could seriously harm our business, financial condition, results of operations, and cash flows.

If our solutions have or are perceived to have defects, errors, or vulnerabilities, or if our solutions fail or are perceived to fail to detect, prevent, or block cyberattacks, including in circumstances where customers may fail to take action on attacks identified by our solutions, our reputation and our brand could suffer, which would adversely impact our business, financial condition, results of operations, and cash flows.

Many of our solutions are complex and may contain design defects, vulnerabilities, or errors that are not detected before their commercial release. Our solutions also provide our customers with the ability to customize a multitude of settings, and it is possible that a customer could misconfigure our solutions or otherwise fail to configure our solutions in an optimal manner. Such defects, errors, and misconfigurations of our solutions could cause our solutions to be vulnerable to cybersecurity attacks, cause them to fail to perform the intended operation, or temporarily interrupt the operations of our customers. In addition, since the techniques used by adversaries change frequently and generally are not recognized until widely applied, there is a risk that our solutions would not be able to address certain attacks. Moreover, our solutions could be targeted by bad actors and attacks specifically designed to disrupt our business and undermine the perception that our solutions are capable of providing their intended benefits, which, in turn, could have a serious impact on our reputation. The risk of a cybersecurity attack increased during the recent COVID-19 pandemic as more individuals are working from home and utilizing home networks for the transmission of sensitive information. Any cybersecurity vulnerability or perceived cybersecurity vulnerability of our solutions or systems could adversely affect our business, financial condition, results of operations, and cash flows.

Changing, updating, enhancing, and creating new versions of our solutions may cause errors or performance problems in our products and solutions, despite testing and quality control. We cannot be certain that defects, errors, or vulnerabilities will not be found in any such changes, updates, enhancements, or new versions, especially when first introduced. In addition, changes in our technology may not provide the additional functionality or other benefits that were expected. Implementation of changes in our technology also may cost more or take longer than originally expected and may require more testing than initially anticipated. While new solutions are generally tested before they are used in production, we cannot be sure that the testing will uncover all problems that may occur in actual use.

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If any of our customers are affected by a cybersecurity attack (such as suffering a ransomware attack or otherwise becoming infected with malware) while using our solutions, such customers could be disappointed with our solutions or perceive that our solutions failed to perform their intended purpose, regardless of whether our solutions operated correctly, blocked, or detected the attack or would have blocked or detected the attack if configured properly. If our customers experience security breaches or incidents, such customers and the general public may believe that our solutions failed. Real or perceived security breaches or incidents impacting our customers could cause disruption or damage or other negative consequences and could result in negative publicity about us, reduced sales, damage to our reputation and competitive position, increased expenses, and customer retention challenges.

Furthermore, our solutions may fail to detect or prevent malware, viruses, worms, or similar threats for any number of reasons, including our failure to enhance and expand our solutions to reflect market trends and new attack methods, new technologies and new operating environments, the complexity of our customers’ environment and the sophistication and coordination of threat actors launching malware, ransomware, viruses, intrusion devices, and other threats. Failure to keep pace with technological changes in the cybersecurity industry and changes in the threat landscape could also adversely affect our ability to protect against security breaches and incidents and could cause us to lose customers.

If we are unable to increase sales of our solutions to new customers, our future results of operations may be harmed.

An important part of our growth strategy involves continued investment in direct marketing efforts, channel partner relationships, our sales force, and infrastructure to add new customers. The number and rate at which new customers may purchase our products and services depends on a number of factors, including those outside of our control, such as customers’ perceived need for our solutions, competition, general economic conditions, market transitions, product obsolescence, technological change, public awareness of security threats to IT systems, macroeconomic conditions, and other factors. These new customers, if any, may renew their subscriptions at lower rates than we have experienced in the past, which could affect our financial results.

We rely on large amounts of data from a variety of sources to support our solutions and the loss of access to or the rights to use such data could reduce the efficacy of our solutions and harm our business.

Like many of our industry peers, we leverage large amounts of data related to threats, vulnerabilities, cyberattacks, and other cybersecurity intelligence to develop and maintain a number of our products and services. We collect, develop, store, and otherwise process portions of this data using third parties and our own technology. We cannot be assured that such third parties or our technology that support the collection, development, storage or other processing of such data, and the sources of such data itself, will continue to be effective or available and the loss or reduction in quality of such data may adversely impact the efficacy of our solutions. Changes in laws or regulations in the United States or foreign jurisdictions, or their interpretation or application, or the actions of governmental or quasi-governmental entities may increase the costs to collect, develop, store, or otherwise process such data, partially or completely prohibit use of such, impose burdensome obligations in connection with such, or could result in disclosure of such data to the public or other third parties, which may reduce its value to us or as part of our solutions and thereby harm our business.

Risks Related to Our Brand and Intellectual Property

If the protection of our proprietary technology is inadequate, we may not be able to adequately protect our innovations and brand.

Our success is dependent on our ability to create proprietary technology and to protect and enforce our intellectual property rights in that technology, as well as our ability to defend against adverse claims of third parties with respect to our technology and intellectual property rights. To protect our proprietary technology, we rely primarily on a combination of patent, copyright, trademark, and trade secret laws, as well as contractual provisions and operational and procedural confidentiality protections. The agreements that we enter into with our employees, contractors, partners, vendors, and end-users may not prevent unauthorized use or disclosure of our proprietary technology or infringement of our intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or infringement of our intellectual property rights, which may substantially harm our business. Furthermore, we cannot be assured that such agreements will be fully enforceable, or that they will not be breached by the counterparties, or that we will be able to detect, deter, or adequately address any such breach or threatened breach. As a provider of cybersecurity solutions, we may be an attractive target for computer hackers or other bad actors and may have a greater risk of unauthorized access to, and misappropriation of, our systems, technology, and proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. Policing unauthorized use of our products and infringement of our rights is difficult. In addition, the laws of some foreign countries, including countries where we sell solutions or have operations, do not protect proprietary rights to as great an extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and third parties, including current and future competitors, may independently develop similar or superior technology, duplicate or reverse engineer aspects of our products, or design around our patented technology or otherwise infringe or circumvent our intellectual property rights.

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As of September 25, 2021, after giving effect to the consummation of the sale of our Enterprise Business, we had approximately 1,225 issued U.S. patents, in addition to approximately 725 issued foreign patents. There can be no assurance that any of our pending patent applications will issue or that the patent examination process will not result in our narrowing the claims applied for in our patent applications or that any current or future issued patents will not be later challenged, limited, or invalidated. Furthermore, there can be no assurance that we will be able to detect any infringement of our existing or future intellectual property rights or, if infringement is detected, that we will be successful in asserting claims or counterclaims, that our intellectual property rights will be enforceable, that any damages awarded to us will be sufficient to adequately compensate us for the infringement, that we will be able to obtain injunctive relief to prevent ongoing infringement, or that the costs of seeking enforcement will not outweigh any benefits.

There can be no assurance or guarantee that any products, services, or technologies that we are presently developing, or will develop in the future, will result in intellectual property that is subject to legal protection under the laws of the United States or a foreign jurisdiction or that produces a competitive advantage for us.

We may be sued by third parties for alleged infringement, misappropriation, or other violation of their proprietary rights, and it may be necessary for us to sue third parties to enforce and protect our proprietary rights, resulting in potential lengthy and expensive litigation.

From time to time, third parties may claim that we have infringed, misappropriated, or otherwise violated their intellectual property rights, including claims regarding patents, copyrights, trademarks, and trade secrets. Because of constant technological change in the segments in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, we expect the trend of third-party claims to continue and that we will be required to defend against actual or threatened litigation of this type. The litigation process is subject to inherent uncertainties, so we may not prevail in litigation matters regardless of the merits of our position. Our participation in any litigation could cause us to incur substantial costs and could distract our management from the day-to-day operations of our business. In addition to the expense and distraction associated with litigation, adverse determinations could cause us to lose our proprietary rights, prevent us from manufacturing or selling our products, require us to obtain licenses to patents or other intellectual property rights that our products are alleged to infringe, misappropriate, or otherwise violate (which licenses may not be available on commercially reasonable terms or at all), or re-design or re-engineer our products to address actual or claimed infringement, misappropriation, or other violation and subject us to significant liabilities.

If we acquire technology to include in our products from third parties, our exposure to actions alleging infringement, misappropriation, or other violation may increase because we must rely upon these third parties to verify the origin and ownership of such technology. Our agreements with such third parties may not provide adequate protections or remedies, and we may not be able to compel such third parties to provide any available remedies in the case of such actions. Similarly, we face exposure to actions alleging infringement, misappropriation, or other violation if we hire or engage software engineers or other personnel who were previously engaged by competitors or other third parties and those personnel inadvertently or deliberately incorporate proprietary technology of third parties into our products despite efforts to prevent such infringement, misappropriation, or other violation.

From time to time, the U.S. Supreme Court, other U.S. federal courts and the U.S. Patent and Trademark Appeals Board, and their foreign counterparts, have made and may continue to make changes to the interpretation of patent, copyright, trademark, or other intellectual property laws in their respective jurisdictions. We cannot predict future changes to the interpretation of such existing laws or whether U.S. or foreign legislative bodies will amend such laws in the future. Any such changes may lead to uncertainties or increased costs and risks surrounding the prosecution, validity, ownership, enforcement, and defense of our issued patents and patent applications and other intellectual property, the outcome of third-party claims of infringement, misappropriation, or other violation of intellectual property brought against us and the actual or enhanced damages (including treble damages) that may be awarded in connection with any such current or future claims, and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We rely on certain technology that we license from third parties, including software that is integrated with internally developed software and used with our products. Any loss of those licenses or any quality issues with third-party technology integrated with our products could have an adverse impact on our reputation and business.

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We rely on certain technology that we license from third parties, including third-party commercial software and open source software, which is integrated into or used with many of our solutions. This third-party technology may currently or could, in the future, infringe the intellectual property rights of third parties or the licensors may not have sufficient rights to the technology they license us in all jurisdictions in which we may sell our solutions. The licensors of the third-party technology we use may discontinue their offerings or change the prices for and other terms under which their technology is licensed. If we are unable to continue to license any of this technology on terms we find acceptable, or if there are quality, security, or other substantive issues with any of this technology, we may face delays in releases of our solutions or we may be required to find alternative vendors or remove functionality from our solutions. In addition, our inability to obtain certain licenses or other rights might require us to engage in potentially costly and time-consuming dispute resolution or litigation regarding these matters. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our use of open source software could negatively affect our ability to sell our solutions and subject us to possible litigation.

We use open source software in our solutions and our development and operating environments and expect to continue to use open source software in the future. Open source software is typically provided without assurances of any kind and could contain errors, bugs, or vulnerabilities or infringe the intellectual property rights of third parties. Because the source code of open source software components included in our solutions is publicly available, in instances where our usage is publicly disclosed or known, it may be easier to identify exploits or vulnerabilities in such open source software components, making our solutions using such open source software components more vulnerable to third parties seeking to compromise, undermine, or circumvent our solutions. If open source software programmers do not continue to develop and enhance open source technologies, our development expenses could increase and our schedules could be delayed. In addition, we may face claims from others seeking to enforce the terms of open source licenses, including by demanding release of derivative works or our proprietary source code that was developed using or otherwise used in connection with such open source software. The terms of many open source licenses have not been interpreted by U.S. or foreign courts, and these licenses could be construed in a way that could impose other unanticipated costs, conditions, or restrictions on our ability to commercialize our products. These claims could also result in litigation, require us to purchase a costly license, require us to devote additional research and development resources to change our solutions, or stop or delay shipment of such solutions, any of which could have a negative effect on our business, financial condition, results of operations, and cash flows. In addition, if the license terms for the open source software that we utilize change, we may be forced to reengineer our solutions or incur additional costs. Although we have policies designed to manage the use, incorporation, and updating of open source software into our products, we cannot be certain that we have in all cases incorporated open source software in our products in a manner that is consistent with the applicable open source license terms and inclusive of all available updates or security patches, and as a result we may be subject to claims for breach of contract or infringement by the applicable licensor, claims for breach of contract or indemnity by our partners or customers, or other third parties, or we or our partners or customers could be required to release our proprietary source code, pay damages, royalties, or license fees or other amounts, seek licenses, or experience quality control or security risks, any of which could require us to re-engineer our solutions, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business.

If we fail to successfully promote or protect our brand, our business, and competitive position may be harmed.

Due to the intensely competitive nature of our markets, we believe that building and maintaining our brand and reputation is critical to our success, and that the importance of positive brand recognition will increase as competition in our market further intensifies. Over our 30-year history, we have invested and expect to continue to invest substantial resources to promote and maintain our brand as a trusted cybersecurity provider, but there is no guarantee that our brand development strategies will enhance the recognition of our brand or lead to increased sales of our solutions.

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In recent years, there has been a marked increase in the use of social media platforms, including blogs, chat platforms, social media websites, and other forms of internet-based communications that allow individuals access to a broad audience of consumers and other persons. The rising popularity of social media and other consumer-oriented technologies has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts. Negative publicity, whether or not justified, can spread rapidly through social media. The dissemination of information via social media could harm our brand or our business, regardless of the information’s accuracy. To the extent that we are unable to respond timely and appropriately to negative publicity, our reputation and brand could be harmed. This could include negative publicity related to our products or services or negative publicity related to actions by our executives, team members or other unaffiliated individuals or entities that may be perceived as being associated with us. Moreover, even if we are able to respond in a timely and appropriate manner, we cannot predict how negative publicity may affect our reputation and business. In addition, we and our employees use social media and other internet-based communications methods to communicate with our end-users, customers, partners, and the public in general. There is risk that the social media communications of us or our employees could be received negatively. Failure to use social media or other internet-based communication methods effectively could lead to a decline in our reputation. Further, laws and regulations, including associated enforcement priorities, rapidly evolve to govern social media platforms and other internet-based communications, any failure by us or third parties acting at our direction to abide by applicable laws and regulations in the use of social media or internet-based communications could adversely impact our reputation, financial performance or subject us to fines or other penalties. Other risks associated with the use of social media and internet based-communication include improper disclosure of proprietary information, negative comments about our brand, products, or services, exposure of personally identifiable information, fraud, hoaxes, or malicious dissemination of false information.

Risks Related to Third Party Relationships

We rely significantly on third-party channel partners to facilitate the sale of our products and solutions. If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.

We sell a significant portion of our solutions through third-party intermediaries such as affiliates, retailers, ecommerce, PC OEMs, and other distribution channel partners (we refer to them collectively as “channel partners”). In fiscal 2018, fiscal 2019, and fiscal 2020, our largest customer accounted for 13%, 13%, and 13%, respectively, of our net revenue with its parent company contributing an additional 1%, 2%, and 5%, respectively. Our reliance on these channel partners is subject to a number of risks, including:

our channel partners are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers;

many channel partner agreements are nonexclusive and may be terminated at any time without cause and or renegotiated with us on new terms that may be less favorable due to competitive conditions in our markets and other factors;

our channel partners may encounter issues or have violations of applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions;

certain of our channel partners market and distribute competing solutions and may, from time to time, place greater emphasis on the sale of these competing solutions due to pricing, promotions, and other terms offered by our competitors;

any consolidation of electronics retailers can increase their negotiating power with respect to software providers such as us and any decline in the number of physical retailers could decrease the channels of distribution for us;

the continued consolidation of online sales through a small number of larger channels has been increasing, which could reduce the channels available for online distribution of our solutions; and

sales through our partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in a reduction of sales, or cause our partners to suffer financial difficulty which could delay payments to us, affecting our operating results.

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From an anti-bribery and anti-corruption perspective, our business activities are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations, and rules of the countries that we operate in. These laws generally prohibit companies and their employees and third party business partners, representatives, and agents from engaging in corruption and bribery, including offering, promising, giving, or authorizing the provision of anything of value, either directly or indirectly, to a government official or commercial party to influence any official action, direct business to any person, gain any improper advantage, or obtain or retain business. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly. We and our third-party partners may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for inaccurate or incomplete accounting records, internal accounting controls deemed inadequate by applicable regulatory authorities, and corrupt or other illegal activities of our employees, affiliates, third parties, representatives, and agents even if we did not explicitly authorize those activities. This risk is even greater in the countries where we operate that are known to present a heightened risk for corruption.

A significant portion of our revenue is derived from sales through our PC OEM partners that bundle our products with their products. Our reliance on this sales channel is significantly affected by our partners’ sales of new products into which our products or services are bundled. Our revenue from sales through our PC OEM partners is affected primarily by the number of personal computers on which our products are bundled, the geographic mix of their sales, and the rate at which consumers purchase or subscribe to the bundled products. Our PC OEM partners are also in a position to exert competitive pricing pressure. The rate at which consumers purchase or subscribe to the bundled products is affected by other factors, including other terms with the OEM. The continued decline in the PC market as the market shifts towards mobility has increased competition for PC OEMs’ business and gives PC OEMs leverage to demand financial concessions from us in order to secure their business. These agreements require a significant commitment of resources and capital. There is no guarantee we will have sufficient resources to maintain these agreements or secure new PC OEM partners. Even if we negotiate what we believe are favorable terms when we first establish a relationship with a PC OEM, at the time of the renewal of the agreement, we may be required to renegotiate our agreement with them on less favorable terms. Lower net prices for our products or other financial concessions would adversely impact our financial results. Further, acquiring high numbers of customers through our PC OEM partner channel may adversely impact our profitability, as we may see lower average prices from higher mix of new customers and under the PC OEM agreements we may see higher partner related spending during the period of high PC demand and high customer acquisition, until such customers renew with us upon subscription expiration. Any adverse changes in our relationship with our channel partners could have an adverse effect on our business and financial results.

We rely on third-parties to replicate and package certain of our software products, which subjects us to risks of product delivery delays and other supply risks.

We rely on a limited number of third parties to replicate and package our boxed software products. Our reliance on these third-parties reduces our control over our supply chain and exposes us to risks, including reduced control over quality assurance, product costs, product supply, timing, and transportation risk. From time to time, we may be required to add new partners to accommodate growth in orders or the addition of new products. It is time consuming and costly to qualify and implement new supply chain partner relationships, and such additions increase the complexity of our supply chain management. If we lose, terminate, or fail to effectively manage our supply chain partner relationships, or if any of our partners experience production interruptions or shut-downs, including those caused by a natural disaster, epidemic, pandemic (such as the COVID-19 pandemic), capacity shortage, or quality-control problem, it would negatively affect sales and adversely affect our business and results of operations.

We rely on third parties to support our information technology infrastructure and any service interruptions or other failures of our third-party providers or of our information technology infrastructure could result in disruption to our operations or adversely impact our business.

We engage third parties to provide variety of information technology products and services to support our information technology infrastructure. Any failure on the part of our third-party providers or of our information technology infrastructure to operate effectively, stemming from maintenance problems, upgrading or transitioning to new platforms, a breach in security or other unanticipated problems could result in interruptions to or delays in our operations or our products or services. Our third-party providers may also discontinue providing the information technology products or services we use and we may be required to replace such products or services, which could result in unanticipated expenses and disruptions to our information technology infrastructure.

In addition, we make significant investments in new information technology infrastructure, but the implementation of such investments could exceed estimated budgets and we may experience challenges that prevent new strategies or technologies from being realized according to anticipated schedules. If we are unable to effectively maintain our current information technology and processes or encounter delays, or fail to exploit new technologies, then the execution of our business plans may be disrupted. Our employees and other personnel require effective tools and techniques supported by our information technology infrastructure to perform functions integral to our business. Any failure to successfully provide such tools and systems, or ensure that our personnel have properly adopted them, could materially and adversely impact our ability to achieve positive business outcomes.

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Some of our systems or data that we may maintain or process may not be adequately backed up, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, intentional sabotage, or other unanticipated problems could result in significant interruptions to our operations or the permanent loss of valuable data, which could harm our reputation and reduce the efficacy and value of products and services. In addition, the implementation of changes and upgrades to our information technology infrastructure and any errors, vulnerabilities, damage, or failure of our information technology infrastructure, could result in interruptions to our operations or products or services and non-compliance with certain laws or regulations, which may lead us to face fines or penalties, give rise to indemnification or other contractual claims against us by our customers or other third parties, and otherwise adversely impact our business.

Our third-party strategic alliances expose us to a range of business risks and uncertainties that are outside of our control and that could have a material adverse impact on our business and financial results.

We have entered, and intend to continue to enter, into strategic alliances with third parties to support our future growth plans. These relationships involve technology licensing, product integration, and co-marketing and co-promotion activities. For example, we have arrangements with operating system vendors that provide us with sufficient technological access to new and updated versions of their operating systems to enable us to develop and deploy interoperable products that are deeply integrated with their operating systems on our customers’ networks and devices. We also partner with certain Internet search providers to promote their offerings to our customers. We invest significant time, money, and resources to establish and maintain these strategic relationships, but we have no assurance that any particular relationship will continue for any specific period of time.

Furthermore, certain of these strategic partners currently offer, and may in the future offer, products, and services that compete with our own solutions in certain markets, and in the future these partners may impose limitations on, or terminate, our partnerships in order to improve their own competitive position. Generally, our agreements with these partners are terminable without cause with no or minimal notice or penalties. Any adverse change in our relationships with a significant strategic partner could limit or delay our ability to offer certain new or competitive solutions, increase our development costs, and reduce our revenue, any of which could have an adverse impact on our competitive position and our financial performance. In addition, we could be required to incur significant expenses to develop a new strategic partnership or to develop and implement an alternative plan to pursue the opportunity that we targeted with the former partner, which could adversely affect our business, financial condition, results of operations, and cash flows.

Risks Related to our Technology Systems and Privacy

If our security measures are breached or unauthorized access to our data is otherwise obtained, or if we suffer other cybersecurity incidents, our brand, reputation, and business could be harmed, and we may incur significant liabilities.

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As a cybersecurity leader, we are a high-profile target for data breaches, cyberattacks, and other intentional disruptions of our systems and our solutions. Our networks and solutions may have bugs, defects, or vulnerabilities that may be targeted by hackers and could be targeted by attacks specifically designed to disrupt our business, access our network, source code or other data (including by causing data to be lost, corrupted or unavailable), and harm our reputation. Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, criminal networks, and insider threats including actions by employees and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites, and misappropriate proprietary information or cause interruptions of our solutions, including the operation of the global civilian cyber intelligence threat network. This risk has increased during the current COVID-19 pandemic as more individuals are working from home and utilizing home networks for the transmission of sensitive information. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target, and may originate from less regulated or remote areas around the world. As a result, we may be unable to proactively prevent these techniques, implement adequate preventative or reactionary measures, react to or address any attack or incident in a timely manner or enforce the laws and regulations that govern such activities. Such attacks may go undetected for a period of time complicating our ability to respond effectively. In addition, it is possible that hardware failures, human errors (including being subject to phishing attacks, social engineering techniques, or similar methods) or errors in our systems could result in data loss, unavailability, or corruption, or cause the information that we collect to be incomplete or contain inaccuracies. We may not be able to correct any security flaws or vulnerabilities promptly, or at all. A breach of our network security and systems or other cybersecurity incidents or events, including attacks involving ransomware or other malware, that cause the loss or public disclosure of, or access by third parties to, our systems or any unauthorized access to, or loss, corruption, unavailability, or unauthorized use of data that we maintain or process, or the perception that any of these have occurred, could have serious negative consequences for our business, including possible fines, penalties and damages, reduced demand for our solutions, an unwillingness of our customers to use our solutions, harm to our brand and reputation, and time consuming and expensive litigation. In addition, such a security breach or incident could impair our ability to operate our business, including our ability to provide subscription and support services to our customers. Additionally, our service providers may suffer or be perceived to suffer, data security breaches or other incidents, or may have exploitable defects or bugs in their systems, software, or networks, that may compromise data stored or processed for us that may give rise to any of the foregoing. Additionally, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our solutions, systems, or networks or the systems and networks of third parties that support us and our services. Any of these negative outcomes could adversely impact our business and results of operations.

We incur significant costs in an effort to detect and prevent security breaches and other security-related incidents and we expect our costs will increase as we make improvements to our systems and processes to prevent further breaches and incidents. In the event of a future breach or incident, we could be required to expend additional significant capital and other resources in an effort to prevent further breaches or incidents, which may require us to divert substantial resources. Moreover, we could be required or otherwise find it appropriate to expend significant capital and other resources to respond to, notify third parties of, and otherwise address the incident or breach and its root cause. Each of these could require us to divert substantial resources.

Furthermore, while our errors and omissions insurance policies include liability coverage for certain of these matters, if we experience a widespread security breach or other incident, we could be subject to indemnity claims or other damages that exceed our insurance coverage. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, results of operations, and reputation.

We rely on payment cards to receive payments and are subject to payment-related risks.

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We accept a variety of payment methods, including credit cards and debit cards, as payment for certain of our consumer solutions. Accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements relating to payment card processing. This includes laws governing the collection, processing and storage of sensitive consumer information, as well as industry requirements such as the Payment Card Industry Data Security Standard (“PCI-DSS”). These laws and obligations may require us to implement enhanced authentication and payment processes that could result in increased costs and liability, and reduce the ease of use of certain payment methods. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time. We are also subject to payment card association operating rules and agreements, including PCI-DSS, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or consumers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our consumers, or process electronic fund transfers or facilitate other types of payments. Any failure to comply with these requirements could significantly harm our brand, reputation, business, and results of operations.

Our failure to adequately maintain and protect personal information of our customers or our employees in compliance with evolving legal requirements could have a material adverse effect on our business.

We collect, use, store, disclose, or transfer (collectively, “process”) personal information, including from employees and customers, in connection with the operation of our business. A wide variety of local and international laws and regulations apply to the processing of personal information. Data protection and privacy laws and regulations are evolving and being tested in courts and may result in increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. For example, the E.U. has adopted the General Data Protection Regulation (“GDPR”), which took effect on May 25, 2018. The GDPR imposes requirements that may limit how we are permitted to process data on behalf of ourselves and our clients, and we may be required to incur significant additional costs to comply with these requirements. Applicable laws, regulations and court decisions in the E.U. relating to privacy and data protection could also impact our ability to transfer personal data internationally. The GDPR specifies substantial maximum fines for failure to comply of up to 20 million Euros or 4% of a company’s worldwide turnover, whichever is higher. Continued compliance with the GDPR and national laws in the E.U. may require significant changes to our products and practices to ensure compliance with applicable law.

A variety of data protection legislation also apply in the United States at both the federal and state level, including new laws that may impact our operations. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (“CCPA”), which went into effect on January 1, 2020, with enforcement by the state attorney general beginning July 1, 2020. The CCPA defines “personal information” in a broad manner and generally requires companies that process personal information of California residents to make new disclosures about their data collection, use, and sharing practices, allows consumers to opt-out of certain data sharing with third parties or sale of personal information, and provides a new cause of action for data breaches. Moreover, California voters approved the California Privacy Rights Act (“CPRA”), in November 2020. The CPRA significantly modifies the CCPA, creating obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023. On March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act, or CDPA, which becomes effective on January 1, 2023, and on June 8, 2021, Colorado enacted the Colorado Privacy Act, or CPA, which takes effect on July 1, 2023. The CPA and CDPA share similarities with the CCPA, CPRA, and legislation proposed in other states. Aspects of these state privacy statutes remain unclear resulting in uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply. Additionally, the Federal Trade Commission, and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. The burdens imposed by the CCPA and other similar laws that have been or may be enacted at the federal and state level may require us to modify our data processing practices and policies and to incur substantial expenditures in order to comply.

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Global privacy and data protection legislation, enforcement, and policy activity are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction. On July 16 2020, the Court of Justice of the European Union (“CJEW”), Europe’s highest court, held in the Schrems II case that the E.U.-U.S. Privacy Shield, a mechanism for the transfer of personal data from the E.U. to the U.S., was invalid, and imposed additional obligations in connection with the use of standard contractual clauses approved by the European Commission. The impact of this decision on the ability to lawfully transfer personal data from the E.U. to the U.S. remains uncertain. The European Commission released a draft of revised standard contractual clauses addressing the CJEU concerns in November 2020, and on June 4, 2021, published new standard contractual clauses. We may, in addition to other impacts, experience additional costs associated with increased compliance burdens relating to the Schrems II case, regulatory guidance, and other developments relating to cross-border data transfers, and we and our customers face the potential for regulators in the European Economic Area (“EEA”) to apply different standards to the transfer of personal data from the EEA to the U.S., and to block, or require ad hoc verification of measures taken with respect to, certain data flows from the EEA to the U.S. We may experience reluctance or refusal by current or prospective European customers to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA residents. The regulatory environment applicable to the handling of EEA residents’ personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs and could result in our business, operating results and financial condition being harmed. We and our customers may face a risk of enforcement actions by data protection authorities in the EEA relating to personal data transfers to us and by us from the EEA. Any such enforcement actions could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results and financial condition. Additionally, we may be or become subject to data localization laws mandating that data collected in a foreign country be processed only within that country. If any country in which we have customers were to adopt a data localization law, we could be required to expand our data storage facilities there or build new ones in order to comply. The expenditure this would require, as well as costs of compliance generally, could harm our financial condition.

In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life. The proposed legislation, known as the Regulation of Privacy and Electronic Communications, or ePrivacy Regulation, would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation is still being negotiated. Most recently, on February 10, 2021, the Council of the E.U. agreed on its version of the draft ePrivacy Regulation. If adopted, the earliest date for entry into force is in 2023, with broad potential impacts on the use of internet-based services and tracking technologies, such as cookies. Aspects of the ePrivacy Regulation remain for negotiation between the European Commission and the Council.

Further, in June 2016, the U.K. voted to leave the E.U., which resulted in the U.K. exiting the E.U. on January 31, 2020, subject to a transition period that ended on December 31, 2020. Brexit could lead to further legislative and regulatory changes. The U.K. has implemented legislation similar to the GDPR, including the U.K. Data Protection Act and legislation similar to the GDPR referred to as the U.K. GDPR, and which provides for substantial penalties of up to the greater of 17.5 million British Pounds or 4% of a company’s worldwide turnover, whichever is higher. Further, it remains to be seen whether the U.K.’s withdrawal from the E.U. pursuant to Brexit will substantially impact the manner in which U.K. data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the U.K. will be regulated. On June 28, 2021, the European Commission announced a decision of “adequacy” concluding that the UK ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the EEA to the U.K. Some uncertainty remains, however, as this adequacy determination must be renewed after four years and may be modified or revoked in the interim.

Our actual or alleged failure to comply with any applicable laws and regulations or contractual obligations relating to privacy, data protection, or information security, or to protect such data that we process, could result in litigation, regulatory investigations, and enforcement actions against us, including fines, orders, public censure, claims for damages by employees, customers, and other affected individuals, public statements against us by consumer advocacy groups, damage to our reputation and competitive position, and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Evolving and changing definitions of personal information, personal data, and similar concepts within the E.U., the United States, and elsewhere, especially relating to classification of IP addresses, device identifiers, location data, household data, and other information we may collect, may limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. Additionally, if third parties that we work with, such as vendors or developers, violate applicable laws or our policies, such violations may also place personal information at risk and have an adverse effect on our business. Even the perception of privacy concerns, whether or not valid, may harm our reputation, subject us to regulatory scrutiny and investigations, and inhibit adoption of our products by existing and potential customers.

Risks Related to Our International Operations

We operate globally and are subject to significant business, economic, regulatory, social, political, and other risks in many jurisdictions.

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Global or regional conditions may harm our financial results. We have operations in many countries and our business activities are concentrated in certain geographic areas including without limitation the Asia Pacific (“APAC”), Europe, Middle-East, and Africa (“EMEA”), and Latin American Region (“LAR”) regions. We derived 40% of our net revenue from international customers for fiscal 2020. As a result, our domestic and international operations and our financial results may be adversely affected by a number of factors outside of our control, including:

global and local economic conditions;

differing employment practices and labor issues;

formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions, taxes, and tariffs, which could be changed without notice;

regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications;

compliance with evolving foreign laws, regulations, and other government controls addressing privacy, data protection, data localization, and data security;

ineffective legal protection of our intellectual property rights in certain countries;

increased uncertainties regarding social, political, immigration, and trade policies in the United States and abroad, such as those caused by recent U.S. legislation and the withdrawal of the United Kingdom (the “U.K.”) from the European Union (the “E.U.”), which is commonly referred to as “Brexit;”

geopolitical and security issues, such as armed conflict and civil or military unrest, crime, political instability, human rights concerns, and terrorist activity;

natural disasters, public health issues, pandemics (such as the COVID-19 pandemic), and other catastrophic events;

inefficient infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers;

other government restrictions on, or nationalization of, our operations in any country, or restrictions on our ability to repatriate earnings from a particular country;

seasonal reductions in business activity in the summer months in Europe and in other periods in other countries;

costs and delays associated with developing software and providing support in multiple languages;

greater difficulty in identifying, attracting, and retaining local qualified personnel, and the costs and expenses associated with such activities;

longer payment cycles and greater difficulties in collecting accounts receivable; and

local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”) and other anti-corruption laws and regulations.

Research and development risks. We employ engineers in a number of jurisdictions outside the United States. In many of these jurisdictions the laws relating to the protection of rights in technology and intellectual property are less strict than the laws in the United States or not enforced to the same extent as they are enforced in the United States. As a result, in some foreign jurisdictions we may be subject to heightened attempts to gain unauthorized access to our information technology systems or surreptitiously introduce software into our products. These attempts may be the result of hackers or others seeking to harm us, our products, or our customers. We have implemented various measures to manage our risks related to these disruptions, but these measures may be insufficient, and a system failure or security breach or incident could negatively impact our business, financial condition, results of operations, and cash flows. The theft or unauthorized use or publication of our trade secrets and other confidential or proprietary business information as a result of such an incident could negatively impact our competitive position. In addition, we may incur additional costs to remedy the damages caused by these disruptions or security breaches or incidents.

Other operating risks. Additional risks of international business operations include the increased costs of establishing, managing, and coordinating the activities of geographically dispersed and culturally diverse operations (particularly sales and support and shared service centers) located on multiple continents in a wide range of time zones.

Risks Related to Regulation

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We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

Our solutions are subject to U.S. export and import controls, specifically the Export Administration Regulations and economic sanctions enforced by the Office of Foreign Assets Control. We incorporate standard encryption algorithms into certain of our solutions, which, along with the underlying technology, may be exported outside of the United States only with the required export authorizations, including by license, license exception, or other appropriate government authorizations, which may require the filing of a classification request or report. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. Even though we take precautions to ensure that we and our channel partners comply with all relevant regulations, any failure by us or our channel partners to comply with U.S. export requirements, U.S. customs regulations, U.S. economic sanctions, or other laws could have negative consequences, including reputational harm, government investigations, and substantial civil and criminal penalties (e.g., fines, incarceration for responsible employees and managers, and the possible loss of export or import privileges).

In addition, changes in our solutions or changes in export and import regulations may create delays in the introduction of our solutions into international markets, including as a consequence of new licensing requirements, prevent certain personnel from developing or maintaining our products, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or import of our solutions to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, entities, persons, or technologies targeted by such regulations, could result in decreased use of our solutions by, or in our decreased ability to develop, export to, import into, or sell our solutions to, existing or potential end-customers with international operations. Any decreased use of our solutions or limitation on our ability to develop, export to, import into, or sell our solutions in international markets would likely adversely affect our business, financial condition, results of operations, and cash flows.

There is also significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, government regulations, and tariffs. The current United States presidential administration is continuing to pursue substantial changes to United States foreign trade policy imposed by the previous administration with respect to China, Mexico, and other countries, including the possibility of imposing greater restrictions on international trade, restrictions on sales and technology transfers to certain Chinese corporations, and continued increased tariffs on goods imported into the United States. Given the relatively fluid regulatory environment in China and the United States and uncertainty regarding how the United States or foreign governments will act with respect to tariffs, international trade agreements and policies, a trade war, further governmental action related to tariffs or international trade policies, or additional tax or other regulatory changes in the future could occur and could directly and adversely impact our financial results and results of operations.

Failure to comply with the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable anti-money-laundering laws could subject us to penalties and other adverse consequences.

We currently conduct a substantial portion of our operations and sell our products and services in numerous countries outside of the United States, including in the APAC, EMEA, and LAR regions. Our global operations are subject to the FCPA, the U.K. Bribery Act 2010, and other anti-corruption, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities. In addition, other applicable anti-corruption laws prohibit bribery of domestic government officials as well as commercial bribery, which involves the giving or receiving improper payments to or from non-government parties.

While we have implemented policies, internal controls, and other measures reasonably designed to promote compliance with applicable anti-corruption, anti-bribery, and anti-money-laundering laws and regulations, our employees, agents, and strategic partners may engage in improper conduct for which we might be held responsible. Any violations of these anti-corruption, anti-bribery laws and anti-money laundering laws and regulations, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. If we, or our employees, agents, or strategic partners acting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business, and other consequences that may have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, our brand and reputation, our sales activities, or the value of our business could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery, or anti-money-laundering laws and regulations.

If we fail to comply with environmental requirements, our business, financial condition, results of operations, cash flows, and reputation could be adversely affected.

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Our operations and the sale of our solutions are subject to various federal, state, local, and foreign environmental and safety regulations, including laws adopted by the E.U., such as the Waste Electrical and Electronic Equipment Directive (“WEEE Directive”), and the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (“E.U. RoHS Directive”), of certain metals from global hot spots. The WEEE Directive requires electronic goods producers to be responsible for marking, collection, recycling, and treatment of such products. Changes in the WEEE Directive of the interpretation thereof may cause us to incur additional costs or meet additional regulatory requirements, which could be material. Similar laws and regulations have been passed or are pending in China, South Korea, Norway, and Japan and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations.

The E.U. RoHS Directive and similar laws of other jurisdictions limit the content of certain hazardous materials such as lead, mercury, and cadmium in the manufacture of electrical equipment, including our products. Currently, our products comply with the E.U. RoHS Directive requirements. However, if there are changes to this or other laws, or to their interpretation, or if new similar laws are passed in other jurisdictions, we may be required to reengineer our products or to use different components to comply with these regulations. This reengineering or component substitution could result in substantial costs to us or disrupt our operations or logistics.

We are also subject to environmental laws and regulations governing the management of hazardous materials, which we use in small quantities in our engineering labs. Our failure to comply with past, present, and future environmental and safety laws could result in increased costs, reduced sales of our products, substantial product inventory write-offs, reputational damage, penalties, third-party property damage, remediation costs, and other sanctions, any of which could harm our business, financial condition, results of operations, and cash flows. To date, our expenditures for environmental compliance have not had a material impact on our results of operations or cash flows, and although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our products or how they are manufactured, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. We also expect that our business will be affected by new environmental laws and regulations on an ongoing basis, which may be more stringent, imposing greater compliance costs and increasing risks and penalties associated with violations which could harm our business.

General Business Risks

If we are unable to attract, train, motivate, and retain senior management and other qualified personnel, our business could suffer.

Our success depends in large part on our ability to attract and retain senior management personnel, as well as technically qualified and highly skilled sales, consulting, technical, finance, and marketing personnel. It could be difficult, time consuming, and expensive to identify, recruit, and onboard any key management member or other critical personnel. Competition for highly skilled personnel is often intense, particularly in the markets in which we operate including Silicon Valley. If we are unable to attract and retain qualified individuals, our ability to compete in the markets for our products could be adversely affected, which would have a negative impact on our business and financial results. Our competitors may be successful in recruiting and hiring members of our management team or other key employees, including key employees obtained through our acquisitions, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms or at all.

Changes in management or other critical personnel may be disruptive to our business and might also result in our loss of unique skills, loss of knowledge about our business, and may result in the departure of other existing employees, customers or partners. We have experienced recent turnover in our senior management team, and further turnover in the future could adversely affect our business.

We operate in an industry with an overall shortage of skilled and experienced talent that generally experiences high employee attrition. We have experienced significant turnover over the last few years and expect that may continue. The loss of one or more of our key employees could seriously harm our business. If we are unable to attract, integrate, or retain the qualified and highly skilled personnel required to fulfill our current or future needs, our business, financial condition, results of operations, and cash flows could be harmed.

Effective succession planning is also important to the long-term success of our business. If we fail to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. The loss of senior management or any ineffective transitions in management, especially in our sales organization, could significantly delay or prevent the achievement of our development and strategic objectives, which could adversely affect our business, financial condition, results of operations, and cash flows.

We may become involved in litigation, investigations, and regulatory inquiries and proceedings that could negatively affect us and our reputation.

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From time to time, we are involved in various legal, administrative, and regulatory proceedings, claims, demands, and investigations relating to our business, which may include claims with respect to commercial, product liability, intellectual property, data privacy, consumer protection, breach of contract, employment, class action, whistleblower, and other matters. In the ordinary course of business, we also receive inquiries from and have discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations. Such matters can be costly and time consuming and divert the attention of our management and key personnel from our business operations. We have been and are currently, and expect to continue to be, subject to third-party intellectual property infringement claims by entities that do not have operating businesses of their own and therefore limit our ability to seek counterclaims for damages and injunctive relief. Plaintiffs may seek, and we may become subject to, preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages (including, for example, treble damages if we are found to have willfully infringed patents and increased statutory damages if we are found to have willfully infringed copyrights), pay ongoing royalty payments, delay or prevent us from offering our products or services, or require that we comply with other unfavorable terms. In addition, we might be required to seek a license for the use of such intellectual property, which may not be available on commercially reasonable terms or at all. We may also decide to settle such matters on terms that are unfavorable to us.

Our business is subject to the risks of product defects, warranty claims, product returns, and product liability.

Our solutions are highly complex and may contain design defects or errors that are not detected before their commercial release, particularly when first introduced or as new versions or upgrades are released. Despite testing by us and by current and potential customers, design defects or errors may not be found until after commencement of commercial shipments, resulting in customer dissatisfaction and loss of or delay in market acceptance and sales opportunities. These errors and quality problems could also cause us to incur significant repair or replacement costs, divert the attention of our engineering personnel from our product development efforts, and cause significant customer relations problems. We may also incur significant costs in connection with a product recall and any related indemnification obligations. We have experienced errors or quality problems in the past in connection with solutions and enhancements and expect that errors or quality problems will be found from time to time in the future. Any of these errors or other quality problems could adversely affect our results of operations.

Historically, the amount of warranty claims we have received has not been significant, but there is no guarantee that claims will not be significant in the future. Any errors, defects, or other problems with our products could negatively impact our customers and result in financial or other losses. While we typically seek by contract to limit our exposure to damages, liability limitation provisions in our standard terms and conditions of sale, and those of our channel partners, may not be enforceable under some circumstances or may not fully or effectively protect us from customer claims and related liabilities and costs, including indemnification obligations under our agreements with channel partners or customers. The sale and support of our solutions also entail the risk of product liability claims. In addition, even claims that ultimately are unsuccessful could require us to incur costs in connection with litigation and divert management’s time and other resources, and could seriously harm the reputation of our business and solutions.

We may be unable to raise additional capital on acceptable terms, or at all.

We believe that our available cash and cash equivalents generated from our operating activities and unused availability under our Revolving Credit Facility, will be sufficient to meet our near term working and other capital requirements. However, if cash is required for unanticipated needs, including in connection with a proposed acquisition of a company or technology, we may need additional capital. The development and marketing of new solutions and our investment in sales and marketing efforts require a significant commitment of resources. If the markets for our solutions develop at a slower pace than anticipated, we could be required to raise additional capital. We cannot guarantee that, should it be required, sufficient debt or equity capital will be available to us under acceptable terms, if at all. If we were unable to raise additional capital when required, our business, financial condition, results of operations, and cash flows could be seriously harmed.

Our business, financial condition, results of operations, or cash flows could be significantly hindered by the occurrence of a natural disaster, terrorist attack, pandemic, or other catastrophic event.

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Our business operations are susceptible to outages due to fire, floods, unusual weather conditions, power loss, telecommunications failures, terrorist attacks, pandemics, such as the COVID-19 pandemic, and other events beyond our control, and our sales opportunities may also be affected by such events. Natural disasters including tornados, hurricanes, floods and earthquakes may damage the facilities of our customers or those of their suppliers or retailers or their other operations, which could lead to reduced revenue for our customers and thus reduced sales. In addition, a substantial portion of our facilities, including our headquarters, are located in Northern California, an area susceptible to earthquakes. We do not carry earthquake insurance for earthquake-related losses. Despite our implementation of network security measures, our servers are vulnerable to computer viruses, break-ins, and similar disruptions from unauthorized tampering with our computer systems. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any of these events.

Additionally, our customers may face a number of potential business interruption risks that are beyond our respective control. For example, our customers depend on the continuous availability of our cloud-based offerings. Our cloud-based offerings are vulnerable to damage or interruption from a variety of sources, including damage or interruption caused by telecommunications or computer systems failure, fire, earthquake, power loss, cyberattack, human error, terrorist acts, and war. We use a variety of third-party data centers and do not control their operation. These facilities and networks may experience technical failures and downtime, may fail to distribute appropriate updates, or may fail to meet the increased requirements of a growing customer base, any of which could temporarily or permanently expose our customers’ networks, leaving their networks unprotected against the latest security threats, or, in the case of technical failures and downtime of a customer’s security operation center, all security threats. Depending upon how customers have configured their use of our products and services, network downtime within our data centers may also prevent certain customers from being able to access the Internet during the period of such network downtime.

To the extent that such events disrupt our business or the business of our current or prospective customers, or adversely impact our reputation, such events could adversely affect our business, financial condition, results of operations, and cash flows.

Risks Related to Our Indebtedness

Our substantial leverage could adversely affect our financial condition.

As of September 25, 2021, our total debt outstanding under our Senior Secured Credit Facilities was approximately $2,965 million and additional unused borrowing capacity under our Revolving Credit Facility was approximately $660 million.

Our high degree of leverage could have important consequences, including:

making it more difficult for us to make payments on the Senior Secured Credit Facilities and our other obligations;

increasing our vulnerability to general economic and market conditions and to changes in the industries in which we compete;

requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, future working capital, capital expenditures, investments or acquisitions, future strategic business opportunities, or other general corporate requirements;

restricting us from making acquisitions or causing us to make divestitures or similar transactions;

limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, investments, acquisitions, and general corporate or other purposes;

limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged; and

increasing our cost of borrowing.

Borrowings under our Senior Secured Credit Facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations may increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to take certain actions.

The terms of our outstanding indebtedness restrict us from engaging in specified types of transactions. These covenants restrict our ability to:

incur additional indebtedness;

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create or incur liens;

engage in consolidations, amalgamations, mergers, liquidations, dissolutions, or dispositions;

pay dividends and distributions on, or purchase, redeem, defease, or otherwise acquire or retire for value, our capital stock;

make acquisitions, investments, loans (including guarantees), advances, or capital contributions;

create negative pledges or restrictions on the payment of dividends or payment of other amounts owed from subsidiaries;

sell, transfer, or otherwise dispose of assets, including capital stock of subsidiaries;

make prepayments or repurchases of debt that is contractually subordinated with respect to right of payment or security;

engage in certain transactions with affiliates;

modify certain documents governing debt that is subordinated with respect to right of payment;

change our fiscal year; and

change our material lines of business.

In addition, our First Lien Credit Agreement includes a financial covenant which requires that, at the end of each fiscal quarter, for so long as the aggregate principal amount of borrowings under the Revolving Credit Facility exceeds 35% of the aggregate commitments under the Revolving Credit Facility, our first lien net leverage ratio cannot exceed 6.30 to 1.00. Our ability to comply with this financial covenant can be affected by events beyond our control, and we may not be able to satisfy it. As a result of these restrictions, we may be:

limited in how we conduct our business;

unable to raise additional debt or equity financing to operate during general economic or business downturns;

unable to compete effectively or to take advantage of new business opportunities; and/or

limited in our ability to grow in accordance with, or otherwise pursue, our business strategy.

Our Senior Secured Credit Facilities also contain numerous affirmative covenants that will remain in effect as long as our Senior Secured Credit Facilities remain outstanding. We are also required to make mandatory prepayments of the obligations under our Senior Secured Credit Facilities in certain circumstances, including upon certain asset sales or receipt of certain insurance proceeds or condemnation awards, upon certain issuances of debt, and, annually, with a portion of our excess cash flow.

We cannot guarantee that we will be able to maintain compliance with these covenants or, if we fail to do so, that we will be able to obtain waivers from the lenders or investors and/or amend the covenants.

A breach of any of the covenants in the credit agreements governing our Senior Secured Credit Facilities could result in an event of default, which, if not cured or waived, could trigger acceleration of our indebtedness and an increase in the interest rates applicable to such indebtedness, and may result in the acceleration of or default under any other debt we may incur in the future to which a cross-acceleration or cross-default provision applies. The acceleration of the indebtedness under our Senior Secured Credit Facilities or under any other indebtedness could have a material adverse effect on our business, results of operations, and financial condition. In the event of any default under our existing or future credit facilities, the applicable lenders could elect to terminate borrowing commitments and declare all borrowings and loans outstanding, together with accrued and unpaid interest and any fees and other obligations, to be due and payable. In addition, we have granted a security interest in a significant portion of our assets to secure our obligations under our Senior Secured Credit Facilities. During the existence of an event of default under our Senior Secured Credit Facilities, the applicable lenders could exercise their rights and remedies thereunder, including by way of initiating foreclosure proceedings against any assets constituting collateral for our obligations under the Senior Secured Credit Facilities.

Despite our level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt, including off-balance sheet financing, contractual obligations, and general and commercial liabilities. This could further exacerbate the risks to our financial condition described above.

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We and our subsidiaries may be able to incur significant additional indebtedness in the future, including additional tranches of term loans and/or term loan increases, increases to our revolving commitments and/or additional revolving credit facilities as well as off-balance sheet financings, contractual obligations, and general and commercial liabilities. Although the terms of Senior Secured Credit Facilities contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of significant exceptions and qualifications and any additional indebtedness incurred in compliance with such restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. If we and our subsidiaries incur significant additional indebtedness or other obligations, the related risks that we face could increase.

We may be adversely affected by the phase-out of, or changes in the method of determining, the London Interbank Offered Rate (“LIBOR”) or the Euro Interbank Offered Rate (“EURIBOR”), or the replacement of LIBOR and/or EURIBOR with different reference rates.

LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on U.S. dollar-denominated loans globally. EURIBOR is a basic rate of interest used in lending between Eurozone banks and is widely used as a reference for setting the interest rate on Euro-denominated loans globally. Our Senior Secured Credit Facilities use LIBOR and EURIBOR as reference rates such that the interest due to our creditors under those facilities is calculated using LIBOR or EURIBOR, as applicable.

On July 27, 2017, the U.K.’s Financial Conduct Authority (the authority that administers LIBOR) announced that it intends to phase out LIBOR by the end of 2021, and subsequently extended the phase-out period until June 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2023, or if alternative rates or benchmarks will be adopted. Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows, and liquidity. We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative rates or benchmarks. We may need to renegotiate our Senior Secured Credit Facilities or incur other indebtedness, and changes in the method of calculating LIBOR, or the use of an alternative rate or benchmark, may negatively impact the terms of such renegotiated Senior Secured Credit Facilities or such other indebtedness. If changes are made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated. This may result in an increase to our interest expense.

The European Money Markets Institute (the authority that administers EURIBOR) has undertaken a number of reforms in response to the EU Benchmark Regulation, which was first published in June 2016 and requires only benchmarks published by “authorized administrators” to be used in new financial contracts beginning on January 1, 2022. It is unclear whether new methods of calculating EURIBOR will be established such that it continues to exist after 2021, or if alternative rates or benchmarks will be adopted. Changes in the method of calculating EURIBOR, or the replacement of EURIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs. This could materially and adversely affect our results of operations, cash flows, and liquidity. We cannot predict the effect of the potential changes to EURIBOR or the establishment and use of alternative rates or benchmarks. We may need to renegotiate our First Lien Credit Agreement or incur other indebtedness, and changes in the method of calculating EURIBOR, or the use of an alternative rate or benchmark, may negatively impact the terms of such renegotiated First Lien Credit Agreement or such other indebtedness. If changes are made to the method of calculating EURIBOR or EURIBOR ceases to exist, we may need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated. This may result in an increase to our interest expense.

We utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness, including our Senior Secured Credit Facilities, and we will be exposed to risks related to counterparty credit worthiness or non-performance of these instruments.

We have entered into interest rate swap instruments to limit our exposure to changes in variable interest rates. While our hedging strategy is designed to minimize the impact of increases in interest rates applicable to our variable rate debt, including our Senior Secured Credit Facilities, there can be no guarantee that our hedging strategy will be effective, and we may experience credit-related losses in some circumstances. See Note 15 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 26, 2020, which were recast to reflect discontinued operations and filed with our Current Report on Form 8-K on August 2, 2021.

Risks Related to Our Organizational Structure

Our principal asset is our interest in Foundation Technology Worldwide LLC, and we are dependent upon Foundation Technology Worldwide LLC and its consolidated subsidiaries for our results of operations, cash flows, and distributions.

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We are a holding company and have no material assets other than our direct and indirect ownership of the LLC Units. As such, we have no independent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses, including to satisfy our obligations under the tax receivable agreement, or declare and pay dividends in the future, if any, depend upon the results of operations and cash flows of Foundation Technology Worldwide LLC and its consolidated subsidiaries and distributions we receive from Foundation Technology Worldwide LLC. There can be no assurance that our subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions will permit such distributions.

We anticipate that Foundation Technology Worldwide LLC will continue to be treated as a partnership (and not as a “publicly traded partnership,” within the meaning of Section 7704(b) of the Code, subject to tax as a corporation) for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to holders of Foundation Technology Worldwide LLC Units. Accordingly, we and our subsidiaries will be required to pay income taxes on our allocable share of any net taxable income of Foundation Technology Worldwide LLC. Further, Foundation Technology Worldwide LLC and its subsidiaries may, absent an election to the contrary, be subject to material liabilities pursuant to partnership audit rules enacted pursuant to the Bipartisan Budget Act of 2015 and related guidance if, for example, its calculations of taxable income are incorrect. Further, we are responsible for the unpaid tax liabilities of the corporate entities we acquired as part of the Reorganization Transactions (as defined herein), including for the taxable year (or portion thereof) of such entities ending on the date of our initial public offering (the “IPO”). To the extent that we need funds and Foundation Technology Worldwide LLC and its subsidiaries are restricted from making such distributions, under applicable law or regulation, or as a result of covenants in the credit agreements of Foundation Technology Worldwide LLC and its subsidiaries, we may not be able to obtain such funds on terms acceptable to us or at all and as a result could suffer an adverse effect on our liquidity and financial condition.

We are required to pay certain Continuing Owners and certain Management Owners for certain tax benefits we may realize or are deemed to realize in accordance with the tax receivable agreement between us and such Continuing Owners and Management Owners, and we expect that the payments we will be required to make will be substantial.

The contribution by certain Continuing Owners and certain Management Owners to McAfee Corp. of certain corporate entities in connection with the Reorganization Transactions and future exchanges of LLC Units for cash or, at our option, for shares of our Class A common stock have produced and are expected to produce or otherwise deliver to us favorable tax attributes that can reduce our taxable income. We are a party to a tax receivable agreement, under which generally we are required to pay to certain of our Continuing Owners and certain Management Owners (collectively, the “TRA Beneficiaries”) 85% of the applicable cash savings, if any, in U.S. federal, state, and local income tax that we actually realize or, in certain circumstances, are deemed to realize as a result of (i) all or a portion of McAfee Corp.’s allocable share of existing tax basis in the assets of Foundation Technology Worldwide LLC (and its subsidiaries) acquired in connection with the Reorganization Transactions, (ii) increases in McAfee Corp.’s allocable share of existing tax basis in the assets of Foundation Technology Worldwide LLC (and its subsidiaries) and tax basis adjustments in the assets of Foundation Technology Worldwide LLC (and its subsidiaries) as a result of sales or exchanges of LLC Units, (iii) certain tax attributes of the corporations McAfee Corp. acquired in connection with the Reorganization Transactions (including their allocable share of existing tax basis in the assets of Foundation Technology Worldwide LLC (and its subsidiaries)), and (iv) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. We generally will retain the benefit of the remaining 15% of the applicable tax savings.

The payment obligations under the tax receivable agreement are obligations of McAfee Corp., and we expect that the payments we will be required to make under the tax receivable agreement will be substantial. Potential future reductions in tax payments for us and tax receivable agreement payments by us will be determined in part by reference to the market value of our Class A common stock at the time of the sale and the prevailing tax rates applicable to us over the life of the tax receivable agreement and will be dependent on us generating sufficient future taxable income to realize the benefit. Payments under the tax receivable agreement are not conditioned on the TRA Beneficiaries’ ownership of our shares.

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The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of sales by the Continuing Owners and participating Management Owners, the price of our Class A common stock at the time of the sales, whether such sales are taxable, the amount and timing of the taxable income we generate in the future, the tax rates then applicable to us, and the portions of our payments under the tax receivable agreement constituting imputed interest. Payments under the tax receivable agreement are expected to give rise to certain additional tax benefits attributable to either further increases in basis or in the form of deductions for imputed interest. Any such benefits that we are deemed to realize under the terms of the tax receivable agreement are covered by the tax receivable agreement and will increase the amounts due thereunder. The tax receivable agreement provides that interest, at a rate equal to one-year LIBOR (or if LIBOR ceases to be published, a replacement rate with similar characteristics) plus 1%, will accrue from the due date (without extensions) of the tax return to which the applicable tax benefits relate to the date of payment specified by the tax receivable agreement. In addition, where we fail to make payment by the date so specified, the tax receivable agreement generally provides for interest to accrue on the unpaid amount from the date so specified until the date of actual payment, at a rate equal to one-year LIBOR (or if LIBOR ceases to be published, a replacement rate with similar characteristics) plus 5%, except under certain circumstances specified in the tax receivable agreement where we are unable to make payment by such date, in which case interest will accrue at a rate equal to one-year LIBOR (or if LIBOR ceases to be published, a replacement rate with similar characteristics) plus 1%.

Payments under the tax receivable agreement will be based in part on our tax reporting positions. We will not be reimbursed for any payments previously made under the tax receivable agreement if such basis increases or other attributes or benefits are subsequently disallowed by a taxing authority. As a result, in certain circumstances, the payments we are required to make under the tax receivable agreement could exceed the benefits that we actually realize in respect of the attributes in respect of which the tax receivable agreement required us to make payment.

In addition, the tax receivable agreement provides that in the case of a change of control of McAfee Corp. (as defined therein) or a material breach of our obligations (that is not timely cured) under the tax receivable agreement, or if, at any time, we elect an early termination of the tax receivable agreement, our payment obligations under the tax receivable agreement will accelerate and may significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement. We will be required to make a payment to the TRA Beneficiaries covered by such termination in an amount equal to the present value of future payments (calculated using a discount rate equal to the lesser of (i) 6.5% per annum and (ii) one-year LIBOR (or if LIBOR ceases to be published, a replacement rate with similar characteristics) plus 1%, which may differ from our, or a potential acquirer’s, then-current cost of capital) under the tax receivable agreement, which payment would be based on certain assumptions, including those relating to our future taxable income. In certain cases, a sale or other disposition of a substantial portion of assets of Foundation Technology Worldwide LLC will be treated as a change of control transaction. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying, or preventing certain mergers, asset sales, other forms of business combinations, or other changes of control. These provisions of the tax receivable agreement may result in situations where the TRA Beneficiaries have interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the tax receivable agreement that are substantial, significantly in advance of any potential actual realization of such further tax benefits, and in excess of our, or a potential acquirer’s, actual cash savings in income tax.

Finally, because we are a holding company with no operations of our own, our ability to make payments under the tax receivable agreement is dependent on the ability of our subsidiaries to make distributions to us. The First Lien Credit Agreement restricts the ability of our subsidiaries to make distributions to us, which could affect our ability to make payments under the tax receivable agreement. To the extent that we are unable to make payments under the tax receivable agreement as a result of restrictions in the First Lien Credit Agreement, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

In certain circumstances, under its limited liability company agreement, Foundation Technology Worldwide LLC will be required to make tax distributions to us, the Continuing Owners and certain Management Owners and the distributions that Foundation Technology Worldwide LLC will be required to make may be substantial.

Funds used by Foundation Technology Worldwide LLC to satisfy its tax distribution obligations to the Continuing Owners and certain Management Owners will not be available for reinvestment in our business. Moreover, the tax distributions that Foundation Technology Worldwide LLC will be required to make may be substantial, and will likely exceed (as a percentage of Foundation Technology Worldwide LLC’s net income) the overall effective tax rate applicable to a similarly situated corporate taxpayer.

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As a result of potential differences in the amount of net taxable income allocable to us and to the Continuing Owners and certain Management Owners, as well as the use of an assumed tax rate in calculating Foundation Technology Worldwide LLC’s tax distribution obligations to the Continuing Owners and the Management Owners, we may receive distributions significantly in excess of our tax liabilities and obligations to make payments under the tax receivable agreement. To the extent, as currently expected, we do not distribute such cash balances as dividends on shares of our Class A common stock and instead, for example, hold such cash balances or lend them to Foundation Technology Worldwide LLC, the Continuing Owners would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A common stock following an exchange of their LLC Units for such Class A common stock. Our board of directors, in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, to acquire additional newly issued LLC Units from Foundation Technology Worldwide LLC at a per unit price determined by reference to the market value of the Class A common stock; to pay dividends, which may include special dividends, on its Class A common stock; to fund repurchases of its Class A common stock; to make payments under the tax receivable agreement; or any combination of the foregoing. We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders.

Our organizational structure, including the tax receivable agreement, confers certain benefits upon certain Continuing Owners and certain Management Owners, which benefits are not conferred on Class A common stockholders generally.

Our organizational structure, including the tax receivable agreement, confers certain benefits upon certain Continuing Owners and certain Management Owners, which benefits are not conferred on the holders of shares of our Class A common stock generally. In particular, we entered into the tax receivable agreement with Foundation Technology Worldwide LLC and the TRA Beneficiaries, which provides for the payment by us to the TRA Beneficiaries of 85% of the amount of tax benefits, if any, that we actually realize, or in some circumstances are deemed to realize, as a result of (i) all or a portion of McAfee Corp.’s allocable share of existing tax basis in the assets of Foundation Technology Worldwide LLC (and its subsidiaries) acquired in connection with the Reorganization Transactions, (ii) increases in McAfee Corp.’s allocable share of existing tax basis in the assets of Foundation Technology Worldwide LLC (and its subsidiaries) and tax basis adjustments in the assets of Foundation Technology Worldwide LLC (and its subsidiaries) as a result of sales or exchanges of LLC Units, (iii) certain tax attributes of the corporations McAfee Corp. acquired in connection with the Reorganization Transactions (including their allocable share of existing tax basis in the assets of Foundation Technology Worldwide LLC (and its subsidiaries)), and (iv) certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. Although we will generally retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the future trading market for the Class A common stock.

We will not be reimbursed for any payments made to the TRA Beneficiaries under the tax receivable agreement in the event that any purported tax benefits are subsequently disallowed by the IRS.

If the IRS or a state or local taxing authority challenges the tax basis adjustments and/or deductions that give rise to payments under the tax receivable agreement and the tax basis adjustments and/or deductions are subsequently disallowed, the recipients of payments under the agreements will not reimburse us for any payments we previously made to them. Any such disallowance would be taken into account in determining future payments under the tax receivable agreement and may, therefore, reduce the amount of any such future payments. Nevertheless, if the claimed tax benefits from the tax basis adjustments and/or deductions are disallowed, our payments under the tax receivable agreement could exceed our actual tax savings, and we may not be able to recoup payments under the tax receivable agreement that were calculated on the assumption that the disallowed tax savings were available.

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States, and our domestic and foreign tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation of our deferred tax assets and liabilities;

expected timing and amount of the release of any tax valuation allowances;

tax effects of equity-based compensation;

costs related to intercompany restructurings;

changes in tax laws, regulations, or interpretations thereof; or

lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.

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In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, and local and foreign authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

Risks Related to Our Class A Common Stock

TPG, Thoma Bravo and Intel will continue to have significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote.

We are currently controlled by our TPG, Thoma Bravo and Intel. As long as TPG, Thoma Bravo and Intel collectively own or control at least a majority of our outstanding voting power, they will have the ability to exercise substantial control and significant influence over our management and affairs and all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including the election and removal of directors and the size of our board of directors, any amendment of our certificate of incorporation or bylaws, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. The concentration of voting power limits your ability to influence corporate matters and, as a result, we may take actions that you do not view as beneficial. As a result, the market price of our Class A common stock could be adversely affected. Even if their collective ownership falls below 50%, TPG, Thoma Bravo and Intel will continue to be able to strongly influence or effectively control our decisions.

Additionally, the interests of TPG, Thoma Bravo and Intel may not align with the interests of our other stockholders. TPG, Thoma Bravo and Intel may, in the ordinary course of their respective businesses, acquire and hold interests in businesses that compete directly or indirectly with us. TPG, Thoma Bravo and Intel each may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Certain of our directors have relationships with TPG, Thoma Bravo and Intel, which may cause conflicts of interest with respect to our business.

Three of our seven directors are affiliated with TPG, Thoma Bravo and Intel. Our directors who are affiliated with TPG, Thoma Bravo or Intel have fiduciary duties to us and, in addition, have duties to TPG, Thoma Bravo and Intel. As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and TPG, Thoma Bravo and Intel, whose interests may be adverse to ours in some circumstances.

We previously identified a material weakness in our internal control over financial reporting in recent periods, which we concluded as of the end of the first quarter of fiscal 2020 had been fully remediated, and if we fail to maintain proper and effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act in the future, our ability to produce accurate and timely consolidated financial statements could be impaired, which could harm our results of operations, our ability to operate our business, and investor confidence.

In connection with the audit of our consolidated financial statements for fiscal 2018 and fiscal 2019, we and our independent registered public accounting firm identified a number of errors in our revenue recognition process that were immaterial to our consolidated financial statements, which led us to conclude we had a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. We did not maintain effective controls specifically over the accuracy of our revenue accounting and reporting, due to the lack of effective review necessary to ensure accurate reporting of revenue and deferred revenue. Additionally, this material weakness could have resulted in a misstatement of the aforementioned account balances or disclosures for the periods during which the material weakness was ongoing that would have resulted in a material misstatement to the annual or interim consolidated financial statements for such periods that would not have been prevented or detected.

We have taken numerous steps designed to address the underlying causes of the material weakness, primarily through the hiring of additional accounting and finance personnel with responsibility for revenue accounting and reporting with relevant accounting and financial reporting experience, reorganizing reporting and supervisory roles among our finance and accounting personnel, enhancing our training programs within our accounting and finance department, and enhancing our internal review procedures. As of the end of the first quarter of fiscal 2020, we concluded that the aforementioned material weakness had been fully remediated. However, our current efforts to maintain an effective control environment may not be sufficient to prevent future material weaknesses or significant deficiencies from occurring or to promptly remediate any such future material weaknesses or significant deficiencies.

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We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which requires management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our controls over financial reporting. Although we are required to disclose material changes made in our internal controls and procedures on at least a quarterly basis, we are not required to make our first annual assessment of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act (including an auditor attestation on management’s internal controls report) until our annual report on Form 10-K for the fiscal year ending December 25, 2021.

To comply with the internal controls requirements of being a public company, we may need to undertake various actions as our business or applicable rules and regulations evolve, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff that have the requisite knowledge of U.S. GAAP. Testing and maintaining internal controls can be costly, challenging, and potentially divert our management’s attention from other matters that are important to the operation of our business.

If we identify future material weaknesses in our internal control over financial reporting, or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our consolidated financial results, or report them within the timeframes required by the SEC. We also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and our stock price may be adversely affected.

Moreover, no matter how well designed, internal control over financial reporting has inherent limitations. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be incorrect, and that breakdowns can occur because of error or mistake. Further, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the internal controls. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As such, we could lose investor confidence in the accuracy and completeness of our financial reports, which may have a material adverse effect on our reputation and stock price.

We are a “controlled company” under the Exchange’s rules and, as a result, qualify for certain exemptions from certain corporate governance requirements; you will therefore not have the same protections afforded to stockholders of companies that are subject to these governance requirements.

Because TPG, Thoma Bravo and Intel collectively control a majority of the voting power of our outstanding Class A common stock and Class B common stock on a combined basis, we are a “controlled company” within the meaning of the Exchange’s corporate governance standards. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of our Class A common stock, we have:

a board of directors that is composed of a majority of “independent directors,” as defined under rules;

a compensation committee that is composed entirely of independent directors; and

a nominating and corporate governance committee that is composed entirely of independent directors.

Our board of directors is composed of a majority of independent directors. However, we may utilize some or all of the other exemptions applicable to “controlled companies.” Accordingly, for so long as we are a “controlled company,” you will not have the same protections afforded to stockholders of companies that are subject to all of the Exchange’s corporate governance requirements. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Our results of operations and the market price of our Class A Common Stock may be volatile.

Our quarterly results of operations are likely to fluctuate in the future. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance. Our results of operations and the trading price of our shares may fluctuate in response to various factors, including:

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actual or anticipated changes or fluctuations in our results of operations and whether our results of operations meet the expectations of securities analysts or investors;

actual or anticipated changes in securities analysts’ estimates and expectations of our financial performance;

announcements of new solutions, commercial relationships, acquisitions, or other events by us or our competitors;

general market conditions, including volatility in the market price and trading volume of technology companies in general and of companies in the IT security industry in particular;

changes in how current and potential customers perceive the effectiveness of our platform in protecting against advanced cyberattacks or other reputational harm;

network outages or disruptions of our solutions or their availability, or actual or perceived privacy, data protection, or network information breaches;

investors’ perceptions of our prospects and the prospects of the businesses in which we participate;

sales of large blocks of our Class A common stock, including sales by our executive officers, directors, and significant stockholders;

announced departures of any of our key personnel;

lawsuits threatened or filed against us or involving our industry, or both;

changing legal or regulatory developments in the United States and other countries;

any default or anticipated default under agreements governing our indebtedness;

adverse publicity about us, our products and solutions, or our industry;

effects of public health crises, such as the COVID-19 pandemic;

general economic conditions and trends; and

other events or factors, including those resulting from major catastrophic events, war, acts of terrorism, or responses to these events.

These and other factors, many of which are beyond our control, may cause our results of operations and the market price and demand for our shares to fluctuate substantially. While we believe that results of operations for any particular quarter are not necessarily a meaningful indication of future results, fluctuations in our quarterly results of operations could limit or prevent investors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

The Continuing Owners have the right to have their LLC Units exchanged for cash or (at our option) shares of Class A common stock and any disclosure of such exchange or the subsequent sale (or any disclosure of an intent to enter into such an exchange or subsequent sale) of such shares of Class A common stock may cause volatility in our stock price.

As of September 25, 2021, 261.2 million shares of Class A common stock are issuable upon exchange of LLC Units and MIUs that are held by the Continuing Owners. Under the amended and restated limited liability company agreement of Foundation Technology Worldwide LLC (the “LLC Agreement”), subject to certain restrictions set forth therein, the Continuing Owners are entitled to have their LLC Units exchanged for cash or (at our option) shares of our Class A common stock. The holders of MIUs also have the right, from time to time and subject to certain restrictions, to exchange their MIUs for LLC Units, which will then be immediately redeemed for cash or shares of Class A Common Stock, at the option of the Company, based on the value of such MIUs relative to their applicable distribution threshold.

We cannot predict the timing, size, or disclosure of any future issuances of our Class A common stock resulting from the exchange of LLC Units or the effect, if any, that future issuances, disclosure, if any, or sales of shares of our Class A common stock may have on the market price of our Class A common stock. Sales or distributions of substantial amounts of our Class A common stock, or the perception that such sales or distributions could occur, may cause the market price of our Class A common stock to decline.

We cannot guarantee the timing, amount, or payment of dividends on our Class A common stock.

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We intend to fund any future dividends from distributions made by Foundation Technology Worldwide LLC from its available cash generated from operations. If McAfee Corp. decides to pay any other dividend on shares of our Class A common stock in the future, it would likely need to cause Foundation Technology Worldwide LLC to make distributions to McAfee Corp. and its wholly-owned subsidiaries in an amount sufficient to cover such dividend. If Foundation Technology Worldwide LLC makes such distributions to McAfee Corp. and its wholly-owned subsidiaries, the other holders of LLC Units will be entitled to receive pro rata distributions, as well as, in certain cases, the holders of MIUs. The timing, declaration, amount of, and payment of any such dividends will be made at the discretion of McAfee Corp.’s board of directors, subject to applicable laws, and will depend upon many factors, including the amount of the distribution received by McAfee Corp. from Foundation Technology Worldwide LLC, our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that McAfee Corp.’s board of directors may deem relevant. Currently, the provisions of our Senior Secured Credit Facilities place certain limitations on the amount of cash dividends we can pay. Moreover, if as expected McAfee Corp. determines to initially pay a dividend following any quarterly distributions from Foundation Technology Worldwide LLC, there can be no assurance that McAfee Corp. will continue to pay dividends in the same amounts or at all thereafter. As a result, we cannot guarantee the timing, amount or payment of dividends on our Class A common stock.

A credit ratings downgrade or other negative action by a credit rating organization could adversely affect the trading price of the shares of our Class A common stock.

Credit rating agencies continually revise their ratings for companies they follow. The condition of the financial and credit markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. In addition, developments in our business and operations could lead to a ratings downgrade for us or our subsidiaries. Any such fluctuation in the rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt which could have a material adverse effect on our operations, and financial condition, which in return may adversely affect the trading price of shares of our Class A common stock.

Provisions of our corporate governance documents could make an acquisition of our Company more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

In addition to TPG’s, Thoma Bravo’s and Intel’s beneficial ownership of a controlling percentage of our common stock, our certificate of incorporation and bylaws, and the Delaware General Corporation Law (the “DGCL”) contain provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. These provisions include a classified board of directors and the ability of our board of directors to issue preferred stock without stockholder approval that could be used to dilute a potential acquiror. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace current members of our management team. As a result, you may lose your ability to sell your stock for a price in excess of the prevailing market price due to these protective measures, and efforts by stockholders to change the direction or management of the Company may be unsuccessful.

Our certificate of incorporation designates courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and also provides that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, stockholders, or employees.

Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for:

any derivative action or proceeding brought on our behalf;

any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;

any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware, our certificate of incorporation or our bylaws;

any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; and

any other action asserting a claim against us that is governed by the internal affairs doctrine (each, a “Covered Proceeding”).

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Our certificate of incorporation also provides that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. However, Section 22 of the Securities Act provides that federal and state courts have concurrent jurisdiction over lawsuits brought the Securities Act or the rules and regulations thereunder. To the extent the exclusive forum provision restricts the courts in which claims arising under the Securities Act may be brought, there is uncertainty as to whether a court would enforce such a provision. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. This provision does not apply to claims brought under the Exchange Act.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to these provisions. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities, which could adversely impact our business.

Each of TPG, Intel and its affiliates, and Thoma Bravo, and the members of our board of directors who are affiliated with them, by the terms of our certificate of incorporation, will not be required to offer us any corporate opportunity of which they become aware and can take any such corporate opportunity for themselves or offer it to other companies in which they have an investment. We, by the terms of our certificate of incorporation, have expressly renounced any interest or expectancy in any such corporate opportunity to the extent permitted under applicable law, even if the opportunity is one that we or our subsidiaries might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. Our certificate of incorporation is not able to be amended to eliminate our renunciation of any such corporate opportunity arising prior to the date of any such amendment.

TPG and Thoma Bravo are in the business of making investments in companies and any of TPG, Intel and Thoma Bravo may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if TPG, Intel and its affiliates, or Thoma Bravo allocate attractive corporate opportunities to themselves or their affiliates instead of to us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Disclosure Pursuant to Section 13(r) of the Exchange Act

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which amended the Exchange Act to add Section 13(r) thereof, an issuer is required to disclose in its annual or quarterly reports, as applicable, whether, during the relevant reporting period, it or any entity acting on its behalf knowingly engaged in certain activities, transactions or dealings relating to parties subject to sanctions administered by the Office of Foreign Assets Control (“OFAC”) within the U.S. Department of the Treasury, even if those transactions are authorized by law.

In March 2021, the Russian Federal Security Service (the “FSB”) was designated pursuant to Executive Order 13382, and is now subject to this requirement. Notwithstanding such designation, OFAC has issued General License No. 1B, authorizing certain transactions involving the FSB, including all transactions ordinarily incident and necessary to requesting, receiving, utilizing, paying for, or dealing in licenses, permits, certifications, or notifications issued or registered by the FSB for the importation, distribution, or use of information technology products in the Russian Federation, subject to certain limitations. Section 13(r) of the Exchange Act now requires disclosure of dealings with FSB, even where the activities were conducted in compliance with applicable laws and regulations, and where such activities, transactions, or dealings did not have a material financial or other impact on the issuer.

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During the quarter ended September 25, 2021, one of our European distributors filed, on our behalf, one notification with the FSB that is required to enable the importation and sale of certain McAfee cybersecurity products in the Russian Federation, in each case in compliance with General License No. 1B. However, no sales of any such products actually occurred in the Russian Federation during the quarter, and accordingly, these activities did not result in any revenue or otherwise contribute to our net income for the quarter.

Item 6. Exhibits

Exhibit		Incorporated by Reference
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
10.1*	Purchase and Sale Agreement between McAfee, LLC, as Seller and Capital Commercial Investments, Inc., as Purchaser
10.2*+	Gagan Singh Offer Letter
10.3*+	Terry Hicks Separation Agreement
10.4*+	McAfee Employee Stock Purchase Plan
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	The cover page for the Company's Quarterly Report on Form 10-Q for the three months ended September 25, 2021, has been formatted in Inline XBRL and included in Exhibit 101

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+ Indicates management contract or compensatory plan or arrangement.

* Filed herewith.

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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: November 9, 2021	By:	/s/ Peter Leav
		Peter Leav
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
Date: November 9, 2021	By:	/s/Venkat Bhamidipati
		Venkat Bhamidipati
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EX-10.1

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

BETWEEN

McAFEE, LLC,
AS SELLER

AND

CAPITAL COMMERCIAL INVESTMENTS, INC.,
AS PURCHASER

Purchase and Sale Agreement – 5000 Headquarters Drive

US 8254809v.5 MCA313/32000

TABLE OF CONTENTS

Page No.

Article 1 BASIC INFORMATION
1.1	Certain Basic Terms	9
1.2	Closing Costs	10
1.3	Notice Addresses	10
Article 2 PROPERTY
2.1	Property	10
Article 3 EARNEST MONEY
3.1	Deposit and Investment of Earnest Money	11
3.2	Independent Consideration; Non-Refundable Earnest Money	11
3.3	Form; Failure to Deposit	12
3.4	Disposition of Earnest Money	12
Article 4 DUE DILIGENCE
4.1	Due Diligence Materials	12
4.2	Physical Due Diligence	12
4.3	Due Diligence Termination Right	13
4.4	Return of Documents and Reports	13
4.5	Service Contracts	14
4.6	Proprietary Information; Confidentiality	14
4.7	No Representation or Warranty by Seller	14
4.8	Purchaser’s Responsibilities	15
4.9	Purchaser’s Agreement to Indemnify	15
4.10	Environmental Reports; Seller’s Right to Terminate	15
Article 5 TITLE AND SURVEY
5.1	Title Commitment	15
5.2	Survey	16
5.3	Title Review	16
5.4	Delivery of Title Policy at Closing	16
Article 6 OPERATIONS AND RISK OF LOSS
6.1	Ongoing Operations	16
6.2	Damage	17
6.3	Condemnation	17
6.4	Uniform Vendor and Purchaser Risk Act Not Applicable	17

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Article 7 CLOSING
7.1	Closing	17
7.2	Extension Option	18
7.3	Conditions to Parties’ Obligation to Close	18
7.4	Seller’s Deliveries in Escrow	19
7.5	Purchaser’s Deliveries in Escrow	19
7.6	Closing Statements	20
7.7	Purchase Price	20
7.8	Possession	20
7.9	Delivery of Books and Records	20
Article 8 PRORATIONS, DEPOSITS, COMMISSIONS
8.1	Prorations	20
8.2	Survey and Report Costs	21
8.3	Closing Costs	21
8.4	Final Adjustment After Closing	21
8.5	Commissions	21
Article 9 REPRESENTATIONS AND WARRANTIES
9.1	Seller’s Representations and Warranties	21
9.2	Purchaser’s Representations and Warranties	22
9.3	Representations and Warranties Generally	22
Article 10 DEFAULT AND REMEDIES
10.1	Seller’s Remedies	23
10.2	Purchaser’s Remedies	23
10.3	Attorneys’ Fees	24
10.4	Other Expenses	24
Article 11 DISCLAIMERS, RELEASE AND INDEMNITY
11.1	Disclaimers By Seller	24
11.2	Sale “As Is, Where Is”	25
11.3	Seller Released from Liability	25
11.4	“Hazardous Materials” Defined	26
11.5	Indemnity	26
11.6	Survival	26
Article 12 MISCELLANEOUS
12.1	Parties Bound; Assignment	26
12.2	Headings	26
12.3	Invalidity and Waiver	26
12.4	Governing Law	26

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12.5	Survival	26
12.6	Entirety and Amendments	27
12.7	Time	27
12.8	Confidentiality; Press Releases	27
12.9	Electronic Transactions	27
12.10	Notices	27
12.11	Construction	27
12.12	Calculation of Time Periods; Business Day	28
12.13	Execution in Counterparts	28
12.14	No Recordation.	28
12.15	Further Assurances	28
12.16	Discharge of Obligations	28
12.17	No Third-Party Beneficiary	28
12.18	Reporting Person	28
12.19	Mandatory Arbitration	28
12.20	Independent Responsibility/No Alter Ego	28
12.21	Reliance on Title Policy	29
12.22	WAIVER OF JURY TRIAL	29
12.23	Like-Kind Exchange	29

Purchase and Sale Agreement – 5000 Headquarters Drive

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LIST OF DEFINED TERMS

	Page No.
Agreement	8
Assignment	19
Broker	9
Business Day	28
Cap	23
Casualty Notice	17
CERCLA	25
Closing	17
Closing Condition	19
Closing Date	9
Deed	19
Derivative Claims	29
Due Diligence Termination Notice	13
Earnest Money	9
Effective Date	9
Environmental Reports	14
Environmental Termination Notice	13
Escrow Agent	9
Exchange	29
Extension Fee	18
Extension Option	18
Hazardous Materials	26
Improvements	11
Independent Consideration	11
Inspection Period	9
Intangible Personal Property	11
Land	10
Lease	19
material	17
Material Adverse Effect	18
Material Damage	17
Material Environmental Defect	13
Materially Damaged	17
Non-Refundable Earnest Money	11
OFAC	22
Permitted Exceptions	16
Permitted Outside Parties	14
Property	10
Property Documents	13
Property Information	12
Purchase Price	9
Purchaser	9
Purchaser Parties	27
Real Property	11
Refundable Termination	12
Reports	13
Seller	9
Seller Parties	15
Seller’s Representative	22
Service Contracts	11
Survey	16
Survival Period	22

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Tangible Personal Property	11
Taxes	20
Title and Survey Review Period	9
Title Commitment	15
Title Commitment Delivery Date	9
Title Company	9
Title Policy	16
to Seller’s knowledge	22
to the best of Seller’s knowledge	22

Purchase and Sale Agreement – 5000 Headquarters Drive

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LIST OF EXHIBITS

Exhibit A	-	Legal Description of Land
Exhibit B	-	Special Warranty Deed
Exhibit C	-	Bill of Sale, Assignment and Assumption of Contracts
Exhibit D	-	FIRPTA Certificate
Exhibit E	-	Mandatory Arbitration
Exhibit F	-	Lease Agreement
Schedule 2.1.2	-	Excluded Personal Property

Purchase and Sale Agreement – 5000 Headquarters Drive

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PURCHASE AND SALE AGREEMENT5000 Headquarters Drive, Plano, Texas

This Purchase and Sale Agreement (this “Agreement”) is made and entered into by and between Purchaser and Seller.

RECITALS

A. Defined terms are indicated by initial capital letters. Defined terms shall have the meaning set forth herein, whether or not such terms are used before or after the definitions are set forth.

B. Purchaser desires to purchase the Property and Seller desires to sell the Property, all upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual terms, provisions, covenants and agreements set forth herein, as well as the sums to be paid by Purchaser to Seller, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Purchaser and Seller agree as follows:

Purchase and Sale Agreement – 5000 Headquarters Drive

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Article 1

BASIC INFORMATION

1.1 Certain Basic Terms. The following defined terms shall have the meanings set forth below:

1.1.1	Seller:	McAFEE, LLC, a Delaware limited liability company
1.1.2	Purchaser:	CAPITAL COMMERCIAL INVESTMENTS, INC., a Texas corporation
1.1.3	Purchase Price:	$31,650,000.00
1.1.4	Earnest Money:	$1,000,000.00, including interest thereon, to be deposited in accordance with Section 3.1 below.
1.1.5	Title Company and Escrow Agent:	Chicago Title Insurance Company 3100 Monticello Avenue, Suite 800 Dallas, TX 75205 Attention: Kristi Covey Telephone: 972.764.1456 E-mail: kristi.covey@ctt.com
1.1.6	Broker:	Cushman & Wakefield U.S., Inc.
1.1.7	Effective Date:	The date on which this Agreement is executed by the latter to sign of Purchaser or Seller, as indicated on the signature page of this Agreement. If the execution date is left blank by either Purchaser or Seller, the Effective Date shall be the execution date inserted by the other party.
1.1.8	Title Commitment Delivery Date:	The date which is ten days after the Effective Date.
1.1.9	Title and Survey Review Period:	The period ending 20 days after the initial Title Commitment is delivered to Purchaser under Section 5.1, but in any event not later than the expiration of the Inspection Period.
1.1.10	Inspection Period:	The period ending on October 5, 2021.
1.1.11	Closing Date:	The date which is 15 days after the expiration of the Inspection Period, as may be extended by Purchaser pursuant to Section 7.2, or such earlier date as Purchaser and Seller may agree in writing; but in no event later than November 19, 2021.

Purchase and Sale Agreement – 5000 Headquarters Drive

9

1.2 Closing Costs. Closing costs shall be allocated and paid as follows:

COST	RESPONSIBLE PARTY
Title Commitment required to be delivered pursuant to Section 5.1	Seller
Premium for standard form Title Policy required to be delivered pursuant to Section 5.4	Seller
Premium for any upgrade of Title Policy for extended or additional coverage and any deletions or endorsements to the Title Policy desired by Purchaser, any inspection fee charged by the Title Company, tax certificates, municipal and utility lien certificates, and any other Title Company charges	Purchaser
Costs of any updates, revisions, modifications or recertifications to the existing Survey	Purchaser
Costs of any survey and zoning reports for the Property performed in the six months prior to the Effective Date and provided to Purchaser	Purchaser
Costs for UCC searches	Purchaser
Recording fees	Purchaser
Any deed taxes, documentary stamps, transfer taxes, intangible taxes, mortgage taxes or other similar taxes, fees or assessments	Purchaser
Any escrow fee charged by Escrow Agent for holding the Earnest Money or conducting the Closing	Purchaser ½ Seller ½
Real Estate Sales Commission to Broker	Seller
All other closing costs, expenses, charges and fees	Purchaser

1.3 Notice Addresses:

Purchaser:	Capital Commercial Investments, Inc. 500 N. Capital of Texas Hwy, Suite 200 Austin, TX 78746 Attention: Doug Agarwal Telephone: 512.472.6990 E-mail: dagarwal@capitalcommercial.com	Copy to:	Sneed, Vine & Perry, P.C. 2705 Bee Caves Road, Suite 160 Austin, TX 78746 Attention: William D. Brown Telephone: 512.494.3127 E-mail: bbrown@sneedvine.com
Seller:	McAfee, LLC 5000 Headquarters Drive Plano, TX 75024 Attention: Benni Bueckert Telephone: 469.642.5108 E-mail: benni_bueckert@mcafee.com	Copy to:	Vinson & Elkins L.L.P. 2001 Ross Avenue, Suite 3900 Dallas, TX 75201 Attention: Paul A. Martin Telephone: 214.220.7875 E-mail: pmartin@velaw.com Reference: MCA313/32000
Copy to:	McAfee, LLC 5000 Headquarters Drive Plano, TX 75024 Attention: Kim Davis Telephone: 972.835.7386 E-mail: kimberly_davis@mcafee.com

Article 2
PROPERTY

2.1 Property. Subject to the terms and conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, the following property (collectively, the “Property”):

2.1.1 Real Property. The land described in Exhibit A hereto (the “Land”), together with (a) all improvements located thereon, but expressly excluding improvements and structures owned by any third party

Purchase and Sale Agreement – 5000 Headquarters Drive

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pursuant to the Permitted Exceptions (“Improvements”), (b) all right, title and interest of Seller, if any, in and to the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anywise appertaining thereto, and (c) all right, title, and interest of Seller, if any, in and to all strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining the Land (collectively, the “Real Property”).

2.1.2 Tangible Personal Property. All of Seller’s right, title and interest in the equipment, machinery, furniture, furnishings, supplies and other tangible personal property, if any, owned by Seller and now or hereafter located in and used in connection with the operation, ownership or management of the Real Property, specifically including the furniture owned by Seller located on the first and third floors of the Improvements, as well as the furniture, fixtures and equipment owned by Seller in the existing gym and work out facility and the café located within the Improvements, but specifically excluding the property described in Schedule 2.1.2 and any items of personal property owned by third parties or leased to Seller (collectively, the “Tangible Personal Property”).

2.1.3 Intangible Personal Property. All of Seller’s right, title and interest, if any, in all intangible personal property used or useful solely in connection with the Real Property and the Improvements, including, without limitation: all trade names and trademarks associated with the Real Property and the Improvements, including Seller’s rights and interests, if any, in the name of the Real Property; the plans and specifications and other architectural and engineering drawings for the Improvements, if any (to the extent assignable without cost to Seller); contract rights related to the operation, ownership or management of the Real Property, including maintenance, service, construction, supply and equipment rental contracts, if any (collectively, the “Service Contracts”) (but only to the extent assignable without cost to Seller and Seller’s obligations thereunder are expressly assumed by Purchaser pursuant to this Agreement); warranties (to the extent assignable without cost to Seller); and governmental permits, approvals and licenses, if any (to the extent assignable without cost to Seller) (all of the items described in this Section 2.1.3 collectively referred to as the “Intangible Personal Property”); provided, however, the foregoing Intangible Personal Property shall be expressly limited to such property used or useful solely in connection with the Real Property and the Improvements and shall in no event include any property otherwise related to any other business operations conducted by any of Seller’s affiliates. Tangible Personal Property and Intangible Personal Property shall not include (a) all cash on hand or on deposit in any bank, operating account or other account maintained in connection with the ownership, operation or management of the Property, cash equivalents (including certificates of deposit), deposits held by third parties (e.g., utility companies) and bank accounts, (b) all insurance policies maintained in connection with the ownership, operation or management of the Property, (c) any appraisals or other economic evaluations of, or projections with respect to, all or any portion of the Property, including, without limitation, budgets prepared by or on behalf of Seller or any affiliate of Seller, (d) any documents, materials or information which are subject to attorney/client, work product or similar privilege, which constitute attorney communications with respect to the Property and/or Seller, or which are subject to a confidentiality agreement, (e) any documents pertaining solely to the marketing of the Property and any direct or indirect interest therein for sale to prospective purchasers, and (f) any trade name, mark or other identifying material that includes the name “Network Associates” or the name “McAfee” or any derivative thereof.

Article 3
EARNEST MONEY

3.1 Deposit and Investment of Earnest Money. Within three Business Days after the Effective Date, Purchaser shall deposit the Earnest Money with Escrow Agent and deliver a completed, executed Form W-9 to Escrow Agent and Seller. Escrow Agent shall invest the Earnest Money in government insured interest-bearing accounts satisfactory to Seller and Purchaser, shall not commingle the Earnest Money with any funds of Escrow Agent or others, and shall promptly provide Purchaser and Seller with confirmation of the investments made. Such account shall have no penalty for early withdrawal, and Purchaser accepts all risks with regard to such account.

3.2 Independent Consideration; Non-Refundable Earnest Money. If Purchaser elects to terminate this Agreement pursuant to a Refundable Termination (defined below) and is entitled to receive a return of the Earnest Money pursuant to the terms of this Agreement, the Escrow Agent shall first disburse to Seller $100.00 as independent consideration for Seller’s performance under this Agreement (“Independent Consideration”), which shall be retained by Seller in all instances. If Purchaser elects to terminate this Agreement other than pursuant to a Refundable Termination and is entitled to receive a return of Earnest Money pursuant to the terms of this Agreement, notwithstanding anything herein to the contrary, the Escrow Agent shall first disburse to Seller $500,000.00 (the “

Purchase and Sale Agreement – 5000 Headquarters Drive

11

Non-Refundable Earnest Money”), which shall be retained by Seller in all instances. As used herein, a “Refundable Termination” means a termination of this Agreement by Purchaser (i) pursuant to an Environmental Termination Notice (defined below) delivered in accordance with Section 4.3 below, or (ii) pursuant to Purchaser’s rights under Section 10.2 below.

3.3 Form; Failure to Deposit. The Earnest Money shall be in the form of a certified or cashier’s check or a wire transfer to Escrow Agent of immediately available U.S. federal funds. If Purchaser fails to timely deposit any portion of the Earnest Money within the time periods required, Seller may terminate this Agreement by written notice to Purchaser, in which event any Earnest Money that has previously been deposited by Purchaser with Escrow Agent shall be immediately delivered to Seller and thereafter the parties hereto shall have no further rights or obligations hereunder, except for rights and obligations which, by their terms, survive the termination of this Agreement.

3.4 Disposition of Earnest Money. The Earnest Money shall be applied as a credit to the Purchase Price at Closing. However, if Purchaser timely elects to terminate this Agreement prior to the expiration of the Inspection Period pursuant to a Refundable Termination, Escrow Agent shall pay the entire Earnest Money (less the Independent Consideration [which shall be paid to Seller] and any escrow cancellation charges[which shall be paid by Purchaser]) to Purchaser one Business Day following Escrow Agent’s receipt of the Environmental Termination Notice from Purchaser (as long as the current investment can be liquidated and disbursed in one Business Day and, if not, as promptly as possible). If Purchaser elects to terminate this Agreement other than pursuant to a Refundable Termination, Escrow Agent shall pay the Earnest Money (less the Non-Refundable Earnest Money [which shall be paid to Seller] and any escrow cancellation charges [which shall be paid by Purchaser]) to Purchaser one Business Day following Escrow Agent’s receipt of the Environmental Termination Notice from Purchaser (as long as the current investment can be liquidated and disbursed in one Business Day and, if not, as promptly as possible). In the event of a termination of this Agreement by either Seller or Purchaser for any reason other than pursuant to a Refundable Termination, Escrow Agent is authorized to deliver the Non-Refundable Earnest Money to Seller and other Earnest Money to the party hereto entitled to same pursuant to the terms hereof on or before the fifth Business Day following receipt by Escrow Agent and the non-terminating party of written notice of such termination from the terminating party, unless a party hereto notifies Escrow Agent that it disputes the right of the other party to receive such other Earnest Money. In such event, Escrow Agent may interplead such other Earnest Money into a court of competent jurisdiction in the county in which the Earnest Money has been deposited. All attorneys’ fees and costs and Escrow Agent’s costs and expenses incurred in connection with such interpleader shall be assessed against the party that is not awarded the disputed Earnest Money, or if the disputed Earnest Money is distributed in part to both parties, then in the inverse proportion of such distribution.

Article 4
DUE DILIGENCE

4.1 Due Diligence Materials . Seller has delivered, caused to be delivered, or made available to Purchaser those items regarding the Property listed or contained in Broker’s electronic data room (the “Property Information”).

4.2 Physical Due Diligence. Commencing on the Effective Date and continuing until the Closing or earlier termination of this Agreement, Purchaser shall have reasonable access to the Property at all reasonable times during normal business hours, for the purpose of conducting reasonably necessary tests, including surveys and architectural, engineering and geotechnical inspections and tests and an ASTM standard Phase I environmental site assessment, provided that (a) Purchaser must give Seller two full Business Days’ written notice of any such inspection or test, and with respect to any intrusive inspection or test (including, without limitation, collection of air, soil, groundwater, or building material samples or soil cores or any test designed to identify the presence of Hazardous Materials) must obtain Seller’s prior written consent (which consent may be given, withheld or conditioned in Seller’s sole discretion, including, without limitation, on Seller’s right to take split or duplicate samples from any such intrusive inspection or test for purposes of conducting, at Seller’s sole cost, its own inspection or test thereof), (b) prior to performing any inspection or test, Purchaser must deliver a certificate of insurance to Seller evidencing that Purchaser and its contractors, agents and representatives have in place (and Purchaser and its contractors, agents and representatives shall maintain during the pendency of this Agreement) (1) commercial general liability insurance with limits of at least $2,000,000 for bodily or personal injury or death, (2) property damage insurance in the amount of at least $2,000,000, including coverage for contractual liability and personal and advertising injury with respect to Purchaser’s obligations hereunder, and (3) workers’ compensation and employers’ liability insurance in accordance with

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applicable law, but in all cases with limits of at least $100,000 each accident, $100,000 each employee and $500,000 policy limit, all covering any accident arising in connection with the presence of Purchaser, its contractors, agents and representatives on the Property, which insurance, except for workers’ compensation and employers’ liability, shall (A) name as additional insureds thereunder Seller and such other parties holding insurable interests as Seller may designate and (B) be written by a reputable insurance company having a rating of at least “A:VIII” by Best’s Rating Guide (or a comparable rating by a successor rating service), and (C) otherwise be subject to Seller’s prior approval, and (c) all such tests shall be conducted by Purchaser in compliance with Purchaser’s responsibilities set forth in Section 4.8 below. Seller shall have the right to be present, or have one or more of its own consultants present, during any interview or inspection of the Property by Purchaser or its agents. Purchaser shall bear the cost of all such inspections or tests and shall be responsible for and act as the generator with respect to any wastes generated by those tests, which obligation shall survive the termination of this Agreement. Subject to the provisions of Section 4.6 hereof, Purchaser or Purchaser’s representatives may communicate with any governmental authority for the sole purpose of gathering information regarding then-current zoning compliance of the Real Property and the then-current entitlements with respect to the Real Property in connection with the transaction contemplated by this Agreement and searching publicly available databases regarding the Property. However, with respect to any other communications with governmental authorities, Purchaser must notify Seller at least five full Business Days in advance to inform Seller of Purchaser’s intended communication with any governmental authority and to obtain Seller’s consent with respect thereto, and if Seller so consents, to allow Seller the opportunity to participate in such communication if Seller desires. As used in this Section, “communicate” and “communication” shall include the initiation of, response to, or sharing or exchange of information, knowledge or messages, whether by oral, written or electronic methods or media, or by any other means for the purpose of knowingly subverting the provisions of this Section regarding Purchaser’s obligations to provide Seller with prior notice of such communication and Seller’s ability to participate in such communication. All policies of insurance required under this Agreement shall contain a waiver of subrogation endorsement, shall provide that the coverage is primary and is not in excess of or contributing with any insurance or self-insurance maintained by Seller or any of its affiliates, investors, lenders or consultants, and shall be kept and maintained in force during the term of this Agreement and so long thereafter as necessary to cover any claims of damages suffered by persons or property resulting from any acts or omissions of Purchaser, its employees, agents, contractors, suppliers, consultants or other related parties.

4.3 Due Diligence Termination Right. Purchaser shall have through the last day of the Inspection Period in which to (a) examine, inspect, and investigate the Property Information and any other information provided by Seller in connection with the transactions contemplated by this Agreement (including any notes, memoranda, summaries, analyses, compilations, and other writings relating to the Property Information or based on the Property Information prepared by or on behalf of Purchaser, collectively, the “Property Documents”) and the Property and, in Purchaser’s sole and absolute judgment and discretion, determine whether the Property is acceptable to Purchaser, (b) obtain all necessary internal approvals, and (c) satisfy all other contingencies of Purchaser. Notwithstanding anything to the contrary in this Agreement, Purchaser may terminate this Agreement (1) for any reason or no reason by giving written notice of such termination to Seller and Escrow Agent (the “Due Diligence Termination Notice”) on or before the last day of the Inspection Period, or (2) due to a Material Environmental Defect by giving written notice of such termination to Seller and Escrow Agent (the “Environmental Termination Notice”) on or before the last day of the Inspection Period. If Purchaser does not give a Due Diligence Termination Notice or an Environmental Termination Notice, this Agreement shall continue in full force and effect, Purchaser shall be deemed to have waived its right to terminate this Agreement pursuant to this Section 4.3, Purchaser shall be deemed to have knowledge of all information contained in the Property Documents and in any report or other diligence prepared by or on behalf of Purchaser and Purchaser shall be deemed to have acknowledged that it has received or had access to all Property Documents and conducted all inspections and tests of the Property that it considers important. As used herein, a “Material Environmental Defect” means the documented existence of any environmental condition upon the Property which is substantiated in a final phase one environmental assessment report obtained by Purchaser and prepared by a licensed environmental consultant that is not disclosed in the Property Documents and the cost of remediation therefor exceeds $250,000.00 and for which Seller is unwilling or unable to give Purchaser a credit in cash at Closing.

4.4 Return of Documents and Reports. As additional consideration for the transaction contemplated herein, Purchaser shall provide copies of all Reports, except Environmental Reports, to Seller (which may be delivered electronically in PDF format), within two Business Days following Purchaser’s receipt of such Reports. “Reports” mean third-party reports, tests, test results, investigations and studies regarding the physical condition or state of the

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Property. “Environmental Reports” means any third party reports, tests, test results, investigations, and studies that pertain to contamination or other environmental condition of the Property. If Purchaser terminates this Agreement or fails to close the purchase of the Property for any reason, then Purchaser agrees to cause all Reports, except Environmental Reports, to be addressed to Seller at no cost to Seller. Additionally, if Purchaser terminates this Agreement, within two Business Days following receipt of a written request for the same by Seller if such request is made within six months after such termination, Purchaser shall return all Property Documents and copies thereof to Seller within three Business Days after such request. Purchaser’s obligation to deliver the Property Documents and the Reports to Seller shall survive the termination of this Agreement. Seller acknowledges that Purchaser does not make any warranty or representation regarding the truth, accuracy or completeness of the Reports or the source(s) thereof. Seller further acknowledges the Reports will be prepared by third parties other than Purchaser. Purchaser expressly disclaims any and all liability for representations or warranties, express or implied, statements of fact and other matters contained in the Reports, or for omissions from the Reports, or in any other written or oral communications transmitted or made available to Seller by third parties regarding the Reports. Notwithstanding anything herein to the contrary, (a) Purchaser covenants, represents and warrants to Seller that any information contained in an Environmental Termination Notice shall be true and correct, and (b) Purchaser shall deliver any Environmental Reports referenced or described in an Environmental Termination Notice to Seller’s counsel within two business days following request therefor.

4.5 Service Contracts. On or prior to the last day of the Inspection Period, Purchaser will advise Seller in writing of which Service Contracts it will assume and for which Service Contracts Purchaser requests that Seller deliver written termination at or prior to Closing, provided Seller shall have no obligation to terminate, and Purchaser shall be obligated to assume, any Service Contracts which by their terms cannot be terminated without penalty or payment of a fee. For the avoidance of doubt, if a Service Contract provides that it will terminate automatically upon the sale of the Property, Purchaser shall not be permitted to assume such Service Contract. If Purchaser fails to timely notify Seller with respect to a specific Service Contract, Purchaser will be deemed to have elected to assume such Service Contract and to have waived its right to require Seller to give a termination notice with respect to such Service Contract at Closing. Seller shall deliver at Closing notices of termination of all Service Contracts that are not so assumed. Purchaser must assume the obligations arising from and after the Closing Date under those Service Contracts (a) that Purchaser has agreed to assume or deemed to have elected to assume, or that Purchaser is obligated to assume pursuant to this Section 4.5, and (b) for which a termination notice is delivered as of or prior to Closing but for which termination is not effective until after Closing.

4.6 Proprietary Information; Confidentiality. Purchaser acknowledges that the Property Documents are proprietary and confidential and have been and will be delivered or made available to Purchaser solely to assist Purchaser in determining the feasibility of purchasing the Property. Purchaser shall not use the Property Documents for any purpose other than as set forth in the preceding sentence. Purchaser shall not disclose the contents to any person other than to those persons who are responsible for determining the feasibility of Purchaser’s acquisition of the Property and who have agreed to preserve the confidentiality of such information as required hereby (collectively, “Permitted Outside Parties”). At any time and from time to time, within two Business Days after Seller’s request, Purchaser shall deliver to Seller a list of all parties to whom Purchaser has provided any Property Documents, any information taken from the Property Documents or any information obtained by, or on behalf of, Purchaser or its affiliates in connection with inspections from time to time of the Property. Purchaser shall not divulge the contents of the Property Documents and other information except in strict accordance with the confidentiality standards set forth in this Section 4.6. In permitting Purchaser to review the Property Documents or any other information, Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third-party benefits or relationships of any kind, either express or implied, have been offered, intended or created. Purchaser’s obligations under this Section 4.6 shall survive the termination of this Agreement.

4.7 No Representation or Warranty by Seller. Purchaser acknowledges that, except as expressly set forth in this Agreement, Seller has not made and does not make any warranty or representation regarding the truth, accuracy or completeness of the Property Documents or the source(s) thereof. Purchaser further acknowledges that some if not all of the Property Documents were prepared by third parties other than Seller. Seller expressly disclaims any and all liability for representations or warranties, express or implied, statements of fact and other matters contained in such information, or for omissions from the Property Documents, or in any other written or oral communications transmitted or made available to Purchaser. Except for any express representations and warranties made by Seller in this Agreement, Purchaser shall rely solely upon its own investigation with respect to the Property, including, without

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limitation, the Property’s physical, environmental or economic condition, compliance or lack of compliance with any ordinance, order, permit or regulation or any other attribute or matter relating thereto. Seller has not undertaken any independent investigation as to the truth, accuracy or completeness of the Property Documents and is providing the Property Documents solely as an accommodation to Purchaser.

4.8 Purchaser’s Responsibilities. In conducting any inspections, investigations or tests of the Property and/or Property Documents, Purchaser and its agents and representatives shall: (a) not disturb or interfere with the rights of Seller or any third parties to more than a de minimis extent; (b) not interfere with the operation and maintenance of the Property to more than a de minimis extent; (c) not damage any part of the Property or any personal property owned or held by Seller or any third party; (d) not injure or otherwise cause bodily harm to Seller or its agents, guests, invitees, contractors and employees or any other third parties or their respective agents, guests, invitees, contractors or employees; (e) comply with all applicable laws; (f) promptly pay when due the costs of all tests, investigations, and examinations done with regard to the Property; (g) not permit any liens to attach to the Real Property by reason of the exercise of its rights hereunder; (h) repair any damage to the Real Property resulting directly or indirectly from any such inspection or tests to the condition the Property was in immediately prior to such inspection or test; (i) fully comply with Seller’s security, safety and COVID-19 protocols, which include checking in at the security desk of the Property prior to any inspections and all personnel wearing masks at all times when inside any Improvements; and (j) not reveal or disclose any information obtained concerning the Property and the Property Documents to anyone other than the Permitted Outside Parties, in accordance with the confidentiality standards set forth in Section 4.6 above, or except as may be otherwise required by law (in which case Purchaser shall provide prior written notice to Seller before revealing or disclosing any such information and shall otherwise use reasonable efforts to ensure the confidential treatment of such information by any party to whom Purchaser is required by law to reveal or disclose such information). Purchaser’s obligations under this Section 4.8 shall survive the termination of this Agreement.

4.9 Purchaser’s Agreement to Indemnify. Purchaser hereby agrees to indemnify, defend and hold Seller, its partners, shareholders, members, managers, owners and affiliates and their respective officers, managers, directors, employees, agents and representatives (collectively, the “Seller Parties”) harmless from and against any and all liens, claims, causes of action, damages, liabilities and expenses (including reasonable attorneys’ fees) arising out of Purchaser’s inspections or tests permitted under this Agreement or any violation of the provisions of Sections 4.2, 4.6 and 4.8; provided, however, such indemnity shall not extend to protect the Seller Parties from any pre-existing liabilities for matters merely discovered by Purchaser (i.e., latent environmental contamination) so long as Purchaser’s actions do not aggravate any pre-existing liability of the Seller Parties. Purchaser’s obligations under this Section 4.9 shall survive the termination of this Agreement and shall survive the Closing.

4.10 Environmental Reports; Seller’s Right to Terminate. As additional consideration for the transaction contemplated in this Agreement, if requested by Seller in writing, Purchaser must provide (which may be delivered electronically by Purchaser to Seller in PDF format), within two Business Days following the receipt of a written request for the same from Seller, copies of Environmental Reports to Seller. Notwithstanding Section 4.9 above, Purchaser shall have no liability or culpability of any nature as a result of having provided such information to Seller or as a result of Seller’s use thereof, if any, or arising out of the fact that Purchaser merely conducted such tests or studies resulting in any Environmental Reports, so long as Purchaser’s actions do not aggravate any pre-existing liability of Seller. If such Environmental Reports, requested in writing by and provided to Seller, indicate a Material Environmental Defect, then Seller may terminate this Agreement by giving written notice to Purchaser within ten Business Days after Purchaser has provided Seller with copies of such Environmental Reports, whereupon the Earnest Money shall be returned to Purchaser, the parties shall have no further obligations hereunder except for obligations that expressly survive the termination of this Agreement.

Article 5
TITLE AND SURVEY

5.1 Title Commitment. Seller shall cause to be prepared and delivered to Purchaser on or before the Title Commitment Delivery Date: (a) a current commitment for title insurance or preliminary title report (the “Title Commitment”) issued by the Title Company, in the amount of the Purchase Price and on a Texas T-7 Form commitment, with Purchaser as the proposed insured, and (b) copies of all documents of record referred to in the Title Commitment as exceptions to title to the Property.

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5.2 Survey. Seller has delivered, caused to be delivered, or made available to Purchaser via Broker’s electronic data room, a copy of the most-current survey of the Real Property in Seller’s possession (the “Survey”). Purchaser may revise, modify or recertify the Survey as necessary in order for the Title Company to delete the survey exception from the Title Policy or otherwise satisfy Purchaser’s objectives.

5.3 Title Review. During the Title and Survey Review Period, Purchaser shall review title to the Property as disclosed by the Title Commitment and the Survey, and shall notify Seller in writing of any objections to title within five Business Days after Purchaser receives the Title Commitment. Seller shall have no obligation to cure title objections except financing liens of an ascertainable amount created by Seller, which liens Seller shall cause to be released at or prior to Closing (with Seller having the right to apply the Purchase Price or a portion thereof for such purpose), and Seller shall deliver the Property free and clear of any such financing liens. Seller further agrees to remove any exceptions or encumbrances to title which are voluntarily created by Seller after the Effective Date without Purchaser’s consent (if requested, such consent shall not be unreasonably withheld or delayed). The term “Permitted Exceptions” shall mean: the specific exceptions (including exceptions that are a part of the promulgated title insurance form) in the Title Commitment that the Title Company has not agreed to remove from the Title Commitment as of the end of the Title and Survey Review Period and that Seller is not required to remove as provided above (provided that the Title Company shall not remove exceptions from the Title Commitment without Seller’s prior written consent); matters created by, through or under Purchaser; items shown on the Survey which have not been removed as of the end of the Inspection Period; real estate taxes not yet due and payable; rights of Seller under the Lease (defined below); local, state and federal laws, ordinances or governmental regulations, including, but not limited to, building and zoning laws, ordinances and regulations, now or hereafter in effect relating to the Property; and any licensees under any Service Contracts not terminated as of Closing. Purchaser shall have no right to object to, request revision of or otherwise seek modification, amendment or alteration of, any Permitted Exception. Purchaser’s failure to provide title objections shall be deemed acceptance of the state of title, and Seller’s failure to respond to any notice delivered by Purchaser shall be deemed Seller’s election not to address any of the objections.

5.4 Delivery of Title Policy at Closing. In the event that the Title Company does not issue at Closing, or unconditionally commit at Closing to issue, to Purchaser, an owner’s title policy in accordance with the Title Commitment, insuring Purchaser’s fee simple title to the Real Property in the amount of the Purchase Price, subject only to the standard exceptions and exclusions from coverage contained in such policy and the Permitted Exceptions (the “Title Policy”) (it being expressly agreed by Purchaser that it shall not be a condition to Purchaser’s obligations to close that any endorsements be issued to the Title Policy), Purchaser shall have the right to terminate this Agreement, in which case the Earnest Money (other than the Non-Refundable Earnest Money) shall be immediately returned to Purchaser and the parties hereto shall have no further rights or obligations, other than those that by their terms survive the termination of this Agreement.

Article 6
OPERATIONS AND RISK OF LOSS

6.1 Ongoing Operations.

6.1.1 New Contracts. From and after the Effective Date through Closing or the earlier termination of this Agreement, Seller will not enter into any new Service Contract that will be an obligation affecting the Property subsequent to the Closing, except Service Contracts entered into in the ordinary course of business that are terminable without cause and without the payment of any termination penalty on not more than 30 days’ prior notice.

6.1.2 Maintenance/Operation. From the Effective Date through Closing or the earlier termination of this Agreement, and subject to Sections 6.2 and 6.3 and other events beyond the reasonable control of Seller and reasonable wear and tear, Seller shall use reasonable efforts to maintain and operate the Property in substantially the same manner as prior to the Effective Date pursuant to its normal course of business (such maintenance obligations not including capital expenditures or expenditures not incurred in such normal course of business).

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6.2 Damage. If prior to Closing the Property is damaged by fire or other casualty, Seller shall estimate the cost to repair and the time required to complete repairs and will provide Purchaser written notice of Seller’s estimation (the “Casualty Notice”) as soon as reasonably possible after the occurrence of the casualty.

6.2.1 Material. In the event of any Material Damage to or destruction of the Property or any portion thereof prior to Closing, Purchaser may, at its option, terminate this Agreement by delivering written notice to Seller on or before the expiration of 30 days after the date Seller delivers the Casualty Notice to Purchaser (and if necessary, the Closing Date shall be extended to give Purchaser the full 30-day period to make such election and to obtain insurance settlement agreements with Seller’s insurers). Upon any such termination, the Earnest Money (other than the Non-Refundable Earnest Money) shall be returned to Purchaser and the parties hereto shall have no further rights or obligations hereunder, other than those that by their terms survive the termination of this Agreement. If Purchaser does not terminate this Agreement within said 30-day period, then Purchaser shall be deemed to have waived its right to terminate under this Section 6.2.1 and the parties shall proceed under this Agreement and close on schedule (subject to extension of Closing as provided above), and as of Closing Seller shall assign to Purchaser, without representation or warranty by or recourse against Seller, all of Seller’s rights in and to any resulting insurance proceeds (including any rent loss insurance applicable to any period on and after the Closing Date) due Seller as a result of such damage or destruction and Purchaser shall assume full responsibility for all needed repairs, and Purchaser shall receive a credit at Closing for any deductible amount under such insurance policies (but the amount of the deductible plus insurance proceeds shall not exceed the lesser of (a) the cost of repair or (b) the sum of the Purchase Price and that portion of Seller’s rental or business loss proceeds relating to the time period after Closing, if any). For the purposes of this Agreement, “Material Damage” and “Materially Damaged” means damage which, in Seller’s reasonable estimation, exceeds (1) $250,000 to repair if the casualty is an uninsured casualty or (2) 10% of the Purchase Price to repair if the casualty is an insured casualty.

6.2.2 Not Material. If the Property is not Materially Damaged, then Purchaser shall not have the right to terminate this Agreement, and Seller shall, at its option, either (a) repair the damage before the Closing in a manner reasonably satisfactory to Purchaser (and if necessary, Seller may extend the Closing Date up to 30 days to complete such repairs), or (b) credit Purchaser at Closing for the reasonable cost to complete the repair (in which case Seller shall retain all insurance proceeds and Purchaser shall assume full responsibility for all needed repairs).

6.3 Condemnation. If proceedings in eminent domain are instituted with respect to the Property or any material portion thereof, Purchaser may, at its option, by written notice to Seller given within ten days after Seller notifies Purchaser of such proceedings (and if necessary the Closing Date shall be automatically extended to give Purchaser the full ten-day period to make such election), either: (a) terminate this Agreement, in which case the Earnest Money (other than the Non-Refundable Earnest Money) shall be immediately returned to Purchaser and the parties hereto shall have no further rights or obligations, other than those that by their terms survive the termination of this Agreement, or (b) proceed under this Agreement, in which event Seller shall, at the Closing, assign to Purchaser its entire right, title and interest in and to any condemnation award, and Purchaser shall have the sole right after the Closing to negotiate and otherwise deal with the condemning authority in respect of such matter. If Purchaser does not give Seller written notice of its election within the time required above, then Purchaser shall be deemed to have elected option (b) above. If proceedings in eminent domain are instituted with respect to a portion of the Property that is not material, then the parties shall proceed under this Agreement in the same manner as described in clause (b) above. As used in this Section 6.3 “material” means a portion of the Property subject to proceedings in eminent domain which, in Seller’s reasonable estimation, exceeds 10% of the Purchase Price.

6.4 Uniform Vendor and Purchaser Risk Act Not Applicable. It is the express intent of the parties hereto that the provisions of Sections 6.2 and 6.3 above govern the rights of the parties in the event of damage to or condemnation of the Property, and that the Uniform Vendor and Purchaser Risk Act (Section 5.007 of the Texas Property Code) shall not apply to this Agreement.

Article 7
CLOSING

7.1 Closing. The consummation of the transaction contemplated herein (“Closing”) shall occur on the Closing Date at the offices of Escrow Agent (or such other location as may be mutually agreed upon by Seller and Purchaser) and which may be in person or by mail. Funds shall be deposited into and held by Escrow Agent in a

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closing escrow account with a bank satisfactory to Purchaser and Seller. Seller and Purchaser agree to use reasonable efforts to complete all requirements for the Closing (e.g., delivery of all documents to the Title Company) on the Business Day immediately preceding the then-scheduled Closing Date. Upon satisfaction or completion of all closing conditions and deliveries, the parties shall direct Escrow Agent to immediately record and deliver the closing documents to the appropriate parties and make disbursements according to the closing statements executed by Seller and Purchaser.

7.2 Extension Option. Purchaser shall have the one-time right to elect to extend the Closing Date for one period of up to 30 days (the “Extension Option”) by (a) delivering written notice of such election to Seller and Escrow Agent at least ten days prior to the initial Closing Date, and (b) depositing $1,000,000.00 (the “Extension Fee”) with Escrow Agent upon exercise of the Extension Option. If deposited, the Extension Fee shall be treated as a part of the Earnest Money under this Agreement for all purposes and shall be credited to the Purchase Price at Closing (if Closing occurs); provided that if the Extension Option is exercised, Escrow Agent shall release all Earnest Money (including the Extension Fee) to Seller on the originally scheduled Closing Date to be retained by Seller in all instances, except for a Refundable Termination. Purchaser’s failure to timely and properly exercise the Extension Option shall be deemed to waive the Extension Option.

7.3 Conditions to Parties’ Obligation to Close.

7.3.1 Seller’s Conditions. In addition to all other conditions set forth herein, the obligation of Seller to consummate the transactions contemplated hereunder are conditioned upon the following:

(a) Representations and Warranties. Purchaser’s representations and warranties contained herein shall be true and correct in all material respects as of the Effective Date and as of the Closing Date, except for representations and warranties made as of, or limited by, a specific date, which will be true and correct in all material respects only as of the specified date or as limited by the specified date;

(b) Deliveries. As of the Closing Date, Purchaser shall have tendered all deliveries to be made at Closing; and

(c) Actions, Suits, etc. There shall exist no pending or threatened actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, against Purchaser that would materially and adversely affect Purchaser’s ability to perform its obligations under this Agreement.

7.3.2 Purchaser’s Conditions. In addition to all other conditions set forth herein, the obligation of Purchaser to consummate the transactions contemplated hereunder are conditioned upon the following:

(a) Representations and Warranties. Seller’s representations and warranties contained herein shall be true and correct in all material respects as of the Effective Date and as of the Closing Date, except for representations and warranties made as of, or limited by, a specific date, which will be true and correct in all material respects only as of the specified date or as limited by the specified date, in each case such that no Material Adverse Effect (defined below) has occurred. As used in this Agreement, a “Material Adverse Effect” shall mean one or more material liquidated monetary claims, material offset rights or aggregate damages resulting from the untruth, inaccuracy or incorrectness of Seller’s representations and warranties in excess of $250,000, which Purchaser had no knowledge prior to the expiration of the Inspection Period and for which Seller is unwilling or unable to give Purchaser a credit in cash at Closing;

(b) Deliveries. As of the Closing Date, Seller shall have tendered all deliveries to be made at Closing; and

(c) Actions, Suits, etc. There shall exist no pending or threatened actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, against Seller that would materially and adversely affect Seller’s ability to perform its obligations under this Agreement.

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7.3.3 Non-Satisfaction of Conditions. So long as a party is not in default hereunder, if any condition to such party’s obligation to proceed with the Closing hereunder (a “Closing Condition”) has not been satisfied as of the Closing Date (or such earlier date as is provided herein), such party may, as its sole remedies and recourses (except as provided in the last sentence of this Section 7.3.3 if the other party is in default), either (a) terminate this Agreement by delivering written notice to the other party on or before the Closing Date (or such earlier date as is provided herein) and the Earnest Money (other than the Non-Refundable Earnest Money) shall be disbursed to the terminating party in accordance with this Agreement and the Non-Refundable Earnest Money shall be disbursed to Seller, or (b) elect to close (or to permit any such earlier termination deadline to pass) notwithstanding the non-satisfaction of such Closing Condition, in which event such party shall be deemed to have waived such Closing Condition. In the event such party elects to close (or to permit any such earlier termination deadline to pass), notwithstanding the non-satisfaction of such Closing Condition, such party shall be deemed to have waived such Closing Condition, and there shall be no liability on the part of any other party hereto for breaches of representations and warranties of which the party electing to close had knowledge at the Closing. Notwithstanding any provision of this Section to the contrary, if the Closing Condition set forth in either Section 7.3.1(b) or 7.3.2(b) is not satisfied, or if a party is otherwise in default hereunder at or prior to Closing, the provisions of Article 10 of this Agreement (including the applicable notice and cure periods set forth therein) shall govern the rights and remedies of the parties hereunder with respect to such default.

7.4 Seller’s Deliveries in Escrow. As of or prior to the Closing Date, Seller shall deliver in escrow to Escrow Agent the following:

7.4.1 Deed. A Special Warranty Deed in the form of Exhibit B hereto (the “Deed”). Any discrepancy between the description of the Property in the deed from Seller’s immediate grantor and in the Survey of the Property shall be quitclaimed by Seller;

7.4.2 Bill of Sale, Assignment and Assumption. A Bill of Sale, Assignment and Assumption of Contracts in the form of Exhibit C hereto (the “Assignment”), executed by Seller, vesting in Purchaser, without warranty, Seller’s right, title and interest in and to the property described therein free of any claims, except for the Permitted Exceptions (as defined in the Deed) to the extent applicable;

7.4.3 Conveyancing or Transfer Tax Forms or Returns. Such conveyancing or transfer tax forms or returns, if any, as are required to be delivered or signed by Seller by applicable state and local law in connection with the conveyance of the Real Property;

7.4.4 FIRPTA. A Foreign Investment in Real Property Tax Act affidavit in the form of Exhibit D hereto executed by Seller;

7.4.5 Lease Agreement. A Lease Agreement in the form of Exhibit F hereto (the “Lease”), executed by Seller;

7.4.6 Authority. Evidence of the existence, organization and authority of Seller and of the authority of the persons executing documents on behalf of Seller reasonably satisfactory to the underwriter for the Title Policy; and

7.4.7 Additional Documents. Any additional documents that Escrow Agent or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement (provided, however, no such additional document shall expand any obligation, covenant, representation or warranty of Seller or result in any new or additional obligation, covenant, representation or warranty of Seller under this Agreement beyond those expressly set forth in this Agreement).

7.5 Purchaser’s Deliveries in Escrow. As of or prior to the Closing Date, Purchaser shall deliver in escrow to Escrow Agent the following:

7.5.1 Bill of Sale, Assignment and Assumption. The Assignment, executed by Purchaser;

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7.5.2 Conveyancing or Transfer Tax Forms or Returns. Such conveyancing or transfer tax forms or returns, if any, as are required to be delivered or signed by Purchaser by applicable state and local law in connection with the conveyance of the Real Property;

7.5.3 Authority. Evidence of the existence, organization and authority of Purchaser and of the authority of the persons executing documents on behalf of Purchaser reasonably satisfactory to the underwriter for the Title Policy;

7.5.4 Lease Agreement. The Lease, executed by Purchaser; and

7.5.5 Additional Documents. Any additional documents that Seller, Escrow Agent or the Title Company may reasonably require for the proper consummation of the transaction contemplated by this Agreement (provided, however, no such additional document shall expand any obligation, covenant, representation or warranty of Purchaser or result in any new or additional obligation, covenant, representation or warranty of Purchaser under this Agreement beyond those expressly set forth in this Agreement).

7.6 Closing Statements. As of or prior to the Closing Date, Seller and Purchaser shall deposit with Escrow Agent executed closing statements consistent with this Agreement in the form required by Escrow Agent.

7.7 Purchase Price. At or before Noon local time on the Closing Date, Purchaser shall deliver to Escrow Agent the Purchase Price, less the Earnest Money that is applied to the Purchase Price, plus or minus applicable prorations, in immediate, same-day U.S. federal funds wired for credit into Escrow Agent’s escrow account, which funds must be delivered in a manner to permit Escrow Agent to deliver good funds to Seller or its designee on the Closing Date (and, if requested by Seller, by wire transfer); in the event that Escrow Agent is unable to deliver good funds to Seller or its designee on the Closing Date, then the closing statements and related prorations will be revised as necessary.

7.8 Possession. Seller shall deliver possession of the Property to Purchaser at the Closing.

7.9 Delivery of Books and Records. After the Closing, to the extent copies of the same were not previously delivered by Seller to Purchaser, Seller shall deliver to the offices of Purchaser’s property manager or to the Real Property to the extent in Seller’s or its property manager’s possession: maintenance records and warranties; plans and specifications; licenses, permits and certificates of occupancy; copies of the assumed Service Contracts; and keys.

Article 8
PRORATIONS, DEPOSITS, COMMISSIONS

8.1 Prorations. At Closing, the following items shall be prorated as of the Closing Date with all items of income and expense for the Property being borne by Purchaser from and after (and including) the Closing Date: other income and rents that have been collected by Seller as of Closing, if any; fees and assessments; prepaid expenses and obligations under Service Contracts; accrued operating expenses; real and personal ad valorem taxes, any other taxes, assessments, and governmental charges or fees whether federal, state, county or municipal, and whether they be by taxing districts or authorities presently taxing or by others, and all tax consulting fees and expenses, including, if applicable, attorneys’ fees and expenses incurred to reduce the amount of taxes (collectively, “Taxes”); and any assessments by private covenant for the then-current calendar year of Closing. Specifically, the following shall apply to such prorations:

8.1.1 Taxes. If Taxes for the year of Closing are not known or cannot be reasonably estimated, Taxes shall be prorated based on Taxes for the year prior to Closing. Any additional Taxes relating to the year of Closing or prior years arising out of a change in the use of the Real Property or a change in ownership shall be assumed by Purchaser effective as of Closing and paid by Purchaser when due and payable, and Purchaser shall indemnify Seller from and against any and all such Taxes, which indemnification obligation shall survive the Closing. Seller reserves the right to pursue any challenge to Taxes attributable to any time period prior to Closing and shall be entitled to any refund or reduction of Taxes attributable to any time period prior to Closing.

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8.1.2 Utilities. Purchaser shall take all steps necessary to effectuate the transfer of all utilities, if any, to its name as of the Closing Date, and where necessary, post deposits with the utility companies. Seller shall ensure that all utility meters are read as of the Closing Date. Seller shall be entitled to recover any and all deposits held by any utility company as of the Closing Date. The provisions of the immediately preceding sentence shall survive the Closing.

8.2 Survey and Report Costs. Seller has procured an updated survey and zoning report for the Property, and Purchaser shall reimburse Seller for the full cost associated therewith at the Closing.

8.3 Closing Costs. Closing costs shall be allocated between Seller and Purchaser in accordance with Section 1.2.

8.4 Final Adjustment After Closing. If final bills are not available or cannot be issued prior to Closing for any item being prorated under Section 8.1, then Purchaser and Seller agree to allocate such items on a fair and equitable basis as soon as such bills are available, final adjustments to be made as soon as reasonably possible after the Closing. Payments in connection with the final adjustments shall be due within 30 days of written notice. All such rights and obligations shall survive the Closing.

8.5 Commissions. Seller shall be responsible to Broker for a real estate sales commission at Closing (but only in the event of a Closing in strict accordance with this Agreement) in accordance with a separate agreement between Seller and Broker. Broker may share its commission with any other licensed broker involved in this transaction, but the payment of the commission by Seller to Broker shall fully satisfy any obligations of Seller to pay a commission hereunder. Under no circumstances shall Seller owe a commission or other compensation directly to any other broker, agent or person. Any cooperating broker shall not be an affiliate, subsidiary or related in any way to Purchaser. Other than as stated above in this Section 8.5, Seller and Purchaser each represent and warrant to the other that no real estate brokerage commission is payable to any person or entity in connection with the transaction contemplated hereby, and each agrees to and does hereby indemnify and hold the other harmless against the payment of any commission to any other person or entity claiming by, through or under Seller or Purchaser, as applicable. This indemnification shall extend to any and all claims, liabilities, costs and expenses (including reasonable attorneys’ fees and litigation costs) arising as a result of such claims and shall survive the Closing.

Article 9
REPRESENTATIONS AND WARRANTIES

9.1 Seller’s Representations and Warranties. Seller represents and warrants to Purchaser that:

9.1.1 Organization and Authority. Seller is validly existing, and is in good standing in the state in which it was formed. Seller has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Seller at the Closing will be, authorized and executed and constitute, or will constitute, as appropriate, the valid and binding obligation of Seller, enforceable in accordance with their terms.

9.1.2 Conflicts and Pending Actions. There is no agreement to which Seller is a party or, to Seller’s knowledge, that is binding on Seller which is in conflict with this Agreement. As of the Effective Date, except as disclosed to Purchaser in writing, there is no action or proceeding (including litigation) pending or, to Seller’s knowledge, threatened against Seller or relating to the Property, which challenges or impairs Seller’s ability to execute or perform its obligations under this Agreement.

9.1.3 Service Contracts. To Seller’s knowledge, as of the Effective Date, the copies of the Service Contracts delivered to Purchaser as a part of the Property Information are copies of the documents used by Seller in its day-to-day operation of the Real Property.

9.1.4 Notices from Governmental Authorities. As of the Effective Date, and to Seller’s knowledge, Seller has not received from any governmental authority written notice of any material violation of any

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laws applicable (or alleged to be applicable) to the Real Property, or any part thereof, that has not been corrected, except as may be reflected by the Property Documents or otherwise disclosed in writing to Purchaser.

9.2 Purchaser’s Representations and Warranties. Purchaser represents and warrants to Seller that:

9.2.1 Organization and Authority. Purchaser is validly existing as a corporation in good standing in the State of Texas and is qualified to do business in the state in which the Real Property is located. Purchaser has the full right and authority and has obtained any and all consents required to enter into this Agreement, to deposit and invest the Earnest Money and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Purchaser at the Closing will be, authorized and properly executed and constitute, or will constitute, as appropriate, the valid and binding obligation of Purchaser, enforceable in accordance with their terms.

9.2.2 Conflicts and Pending Action. There is no agreement to which Purchaser is a party or, to Purchaser’s knowledge, binding on Purchaser which is in conflict with this Agreement. Purchaser has not received notice of any action or proceeding, pending or, to Purchaser’s knowledge, threatened, against Purchaser which challenges or impairs Purchaser’s ability to execute or perform its obligations under this Agreement.

9.2.3 Prohibited Persons and Transactions. Purchaser is currently in compliance with and shall at all times during the term of this Agreement (including any extension thereof) remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated Nationals and Blocked Persons List) and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto.

9.3 Representations and Warranties Generally.

9.3.1 Survival of Representations and Warranties. The representations and warranties set forth in this Article 9 shall survive the Closing for a period of six months (the “Survival Period”); provided, however, that such representations and warranties shall automatically terminate if (a) prior to the Closing, Purchaser assigns this Agreement in violation of Section 12.1 or (b) following the Closing, any direct or indirect transfer, assignment, conveyance or sale of the Property or any ownership interest in Purchaser occurs.

9.3.2 Seller’s Knowledge: Seller’s Agents. Terms such as “to Seller’s knowledge,” “to the best of Seller’s knowledge” or like phrases mean the actual present and conscious awareness or knowledge of Benni Bueckert (“Seller’s Representative”), without any duty of inquiry or investigation; provided that in no event shall Seller’s Representative, or any other officer or employee of Seller, have any individual liability under or relating to this Agreement. Said terms do not include constructive knowledge, imputed knowledge, or knowledge Seller or such persons do not have but could have obtained through further investigation or inquiry. No broker, agent, or party other than Seller is authorized to make any representation or warranty for or on behalf of Seller.

9.3.3 Action for Breach of Representation or Warranty or Covenant. Each party shall have the right to bring an action against the other on the breach of a representation or warranty or covenant hereunder or in the documents delivered by Seller at the Closing, but only on the following conditions: (1) the breach in question results from, or is based on, a condition, state of facts or other matter that was not known prior to Closing by the party bringing the action, (2) the party alleging the breach gives written notice of such breach to the other party before the earlier to occur of (i) 91 days following the date on which the party alleging the breach becomes aware of such breach and (ii) the end of the Survival Period and files the action with respect to such breach on or before the first day following the second anniversary of the Closing Date, and (3) neither party shall have the right to bring a cause of action for a breach of a representation or warranty or covenant unless the damage to such party on account of such breach (individually or when combined with damages from other breaches) equals or exceeds $250,000, and then only to the extent of such excess (but not in excess of the Cap defined below). The parties stipulate that the periods of time referenced above to give written notice of the alleged breach and to file the action with respect to such breach is reasonable and hereby waive any claims to the contrary. If a party fails to timely notify the other party or file such action within the required time periods as described above, such action shall be barred.

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9.3.4 Knowledge of Breach. Neither party shall have any liability after Closing for the breach of a representation or warranty or covenant hereunder of which the other party hereto had knowledge as of Closing. Without limiting the generality of the foregoing, and notwithstanding any other provision of this Agreement, Seller shall have no liability with respect to any of Seller’s representations, warranties and covenants hereunder if, prior to Closing, Purchaser has knowledge of any breach of a representation, warranty or covenant of Seller hereunder, or Purchaser obtains knowledge that contradicts any of Seller’s representations, warranties or covenants hereunder (and the representations and warranties of Seller shall be deemed to be modified thereby to be accurate), and Purchaser nevertheless consummates the transaction contemplated by this Agreement (in which event any such breach or contradiction shall be deemed waived by Purchaser). Furthermore, immediately as of the Closing, Seller’s representations and warranties shall be deemed to be modified to reflect any facts or circumstances disclosed in any estoppels received by Purchaser.

9.3.5 Liability of Seller. Notwithstanding any other provision of this Agreement, any agreement contemplated by this Agreement, or any rights which Purchaser might otherwise have at law, equity, or by statute, whether based on contract or some other claim, Purchaser agrees that any liability of Seller to Purchaser will be limited to one percent of the Purchase Price(the “Cap”).

9.3.6 Breach Prior to Closing. Any breach of a representation or warranty that occurs prior to Closing shall be governed exclusively by Section 7.3.3.

9.3.7 Survivability. The provisions of this Section 9.3 shall survive the Closing.

Article 10
DEFAULT AND REMEDIES

10.1 Seller’s Remedies. If Purchaser fails to consummate the purchase of the Property pursuant to this Agreement or otherwise defaults on its obligations hereunder at or prior to Closing for any reason except failure by Seller to perform hereunder, and such default or breach is not cured by the earlier of the third Business Day after written notice thereof from Seller or the Closing Date (Seller hereby agreeing to give such written notice to Purchaser within one Business Day after Seller first learns of any such default or breach by Purchaser, except no notice or cure period shall apply if Purchaser fails to consummate the purchase of the Property hereunder), Seller shall be entitled, as its sole remedy (except as provided in Sections 4.9, 8.5, 10.3 and 10.4 hereof), to terminate this Agreement and recover the Earnest Money as liquidated damages and not as penalty, in full satisfaction of claims against Purchaser hereunder. Seller and Purchaser agree that Seller’s damages resulting from Purchaser’s default are difficult, if not impossible, to determine and the Earnest Money is a fair estimate of those damages which has been agreed to in an effort to cause the amount of such damages to be certain. Purchaser hereby waives and releases any right to (and hereby covenants that it shall not) sue Seller or seek or claim a refund of the Earnest Money (or any part thereof) on the grounds it is unreasonable in amount and exceeds the actual damages of Seller or that the retention by Seller of the Earnest Money constitutes a penalty and not agreed upon and reasonable liquidated damages. Notwithstanding anything in this Section 10.1 or in Exhibit E to the contrary, in the event of Purchaser’s default or a termination of this Agreement, Seller shall have all remedies available at law or in equity in the event Purchaser or any party related to or affiliated with Purchaser is asserting any claims or right to the Property that would otherwise delay or prevent Seller from having clear and indefeasible title to the Property, and in said event Seller shall not be required to submit such matter to arbitration as contemplated by Exhibit E. In all other events Seller’s remedies shall be limited to those described in this Section 10.1 and Sections 4.9, 8.5, 10.3 and 10.4 hereof. If Closing is consummated, Seller shall have all remedies available at law or in equity in the event Purchaser fails to perform any obligation of Purchaser under this Agreement. IN NO EVENT SHALL PURCHASER’S DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, MEMBERS, MANAGERS, OWNERS OR AFFILIATES, ANY OFFICER, MANAGER, DIRECTOR, EMPLOYEE OR AGENT OF THE FOREGOING, OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE.

10.2 Purchaser’s Remedies. If Seller fails to consummate the sale of the Property pursuant to this Agreement or otherwise defaults on its obligations hereunder at or prior to Closing for any reason except failure by Purchaser to perform hereunder, and such default or breach is not cured by the earlier of the third Business Day after

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written notice thereof from Purchaser or the Closing Date (Purchaser hereby agreeing to give such written notice to Seller within one Business Day after Purchaser first learns of any such default or breach by Seller, except no notice or cure period shall apply if Seller fails to consummate the sale of the Property hereunder), Purchaser shall elect, as its sole remedy, either to (a) terminate this Agreement by giving Seller timely written notice of such election prior to or at Closing and recover the Earnest Money, (b) enforce specific performance to consummate the sale of the Property hereunder and to execute and deliver the documents required to convey the Property to Purchaser in accordance with this Agreement (it being specifically understood and agreed that the remedy of specific performance shall not be available to enforce any other obligation of Seller hereunder), or (c) waive said failure or breach and proceed to Closing without any reduction in the Purchase Price. Notwithstanding anything herein to the contrary, Purchaser shall not be entitled to a remedy of specific performance and shall be deemed to have elected to terminate this Agreement unless a duly authorized signatory of Purchaser is physically present at the offices of the Title Company on the Closing Date with all closing documents as required by Section 7.5, executed on behalf of Purchaser where applicable, in Purchaser’s possession and Purchaser files an arbitration action pursuant to Section 12.19 hereof for specific performance within ten Business Days of the scheduled Closing Date. Purchaser’s remedies shall be limited to those described in this Section 10.2 and Sections 8.5, 10.3 and 10.4 hereof. IN NO EVENT SHALL SELLER’S DIRECT OR INDIRECT PARTNERS, SHAREHOLDERS, MEMBERS, MANAGERS, OWNERS OR AFFILIATES, ANY OFFICER, MANAGER, DIRECTOR, EMPLOYEE OR AGENT OF THE FOREGOING, OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF HAVE ANY LIABILITY FOR ANY CLAIM, CAUSE OF ACTION OR OTHER LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PROPERTY, WHETHER BASED ON CONTRACT, COMMON LAW, STATUTE, EQUITY OR OTHERWISE.

10.3 Attorneys’ Fees. In the event either party hereto employs an attorney in connection with claims by one party against the other arising from the operation of this Agreement, the non-prevailing party shall pay the prevailing party all reasonable fees and expenses, including attorneys’ fees, incurred in connection with such claims.

10.4 Other Expenses. If this Agreement is terminated due to the default of a party, then the defaulting party shall pay any fees or charges due to Escrow Agent for holding the Earnest Money as well as any escrow cancellation fees or charges and any fees or charges due to the Title Company for preparation and/or cancellation of the Title Commitment.

Article 11
DISCLAIMERS, RELEASE AND INDEMNITY

11.1 Disclaimers By Seller. Except as expressly set forth in this Agreement, it is understood and agreed that Seller and Seller’s agents or employees have not at any time made and are not now making, and they specifically disclaim, any warranties, representations or guaranties of any kind or character, express or implied, with respect to the Property, including, but not limited to, warranties, representations or guaranties as to (a) matters of title (other than Seller’s special warranty of title to be contained in the Deed), (b) environmental matters relating to the Property or any portion thereof, including, without limitation, the presence of Hazardous Materials in, on, under or in the vicinity of the Property, (c) geological conditions, including, without limitation, subsidence, subsurface conditions, water table, underground water reservoirs, limitations regarding the withdrawal of water, and geologic faults and the resulting damage of past and/or future faulting, (d) whether, and to the extent to which the Property or any portion thereof is affected by any stream (surface or underground), body of water, wetlands, flood prone area, flood plain, floodway or special flood hazard, (e) drainage, (f) soil conditions, including the existence of instability, past soil repairs, soil additions or conditions of soil fill, or susceptibility to landslides, or the sufficiency of any undershoring, (g) the presence of endangered species or any environmentally sensitive or protected areas, (h) zoning or building entitlements to which the Property or any portion thereof may be subject, (i) the availability of any utilities to the Property or any portion thereof including, without limitation, water, sewage, gas and electric, (j) usages of adjoining property, (k) access to the Property or any portion thereof, (l) the value, compliance with the plans and specifications, size, location, age, use, design, quality, description, suitability, structural integrity, operation, title to, or physical or financial condition of the Property or any portion thereof, or any income, expenses, charges, liens, encumbrances, rights or claims on or affecting or pertaining to the Property or any part thereof, (m) the condition, construction or use of the Property or compliance of the Property with any or all past, present or future federal, state or local ordinances, rules, regulations or laws, building, fire or zoning ordinances, codes or other similar laws, (n) the existence or non-existence of underground storage tanks, surface impoundments, or landfills, (o) any other matter affecting the stability

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and integrity of the Property, (p) the potential for further development of the Property, (q) the merchantability of the Property or fitness of the Property for any particular purpose, (r) the truth, accuracy or completeness of the Property Documents or any survey of the Property, (s) tax consequences, or (t) any other matter or thing with respect to the Property.

11.2 Sale “As Is, Where Is”. Purchaser acknowledges and agrees that upon Closing, Seller shall sell and convey to Purchaser and Purchaser shall accept the Property “AS-IS, WHERE-IS, WITH ALL FAULTS,” except to the extent expressly provided otherwise in this Agreement and any document executed by Seller and delivered to Purchaser at Closing. Except as expressly set forth in this Agreement, Purchaser has not relied and will not rely on, and Seller has not made and is not liable for or bound by, any express or implied warranties, guarantees, statements, representations or information pertaining to the Property or relating thereto (including specifically, without limitation, Property information packages distributed with respect to the Property) made or furnished by Seller, or any property manager, real estate broker, agent or third party representing or purporting to represent Seller, to whomever made or given, directly or indirectly, orally or in writing. Purchaser represents that it is a knowledgeable, experienced and sophisticated purchaser of real estate and that, except as expressly set forth in this Agreement, it is relying solely on its own expertise and that of Purchaser’s consultants in purchasing the Property and shall make an independent verification of the accuracy of any documents and information provided by Seller. Purchaser will conduct such inspections and investigations of the Property as Purchaser deems necessary, including, but not limited to, the physical and environmental conditions thereof, and shall rely upon same. By failing to terminate this Agreement prior to the expiration of the Inspection Period, Purchaser acknowledges that Seller has afforded Purchaser a full opportunity to conduct such investigations of the Property as Purchaser deemed necessary to satisfy itself as to the condition of the Property and the existence or non-existence or curative action to be taken with respect to any Hazardous Materials on or discharged from the Property, and Purchaser will rely solely upon same and not upon any information provided by or on behalf of Seller or its agents or employees with respect thereto, other than such representations, warranties and covenants of Seller as are expressly set forth in this Agreement. Except as to representations or warranties of Seller expressly set forth in this Agreement, upon Closing, Purchaser shall assume the risk that adverse matters, including, but not limited to, adverse physical or construction defects or adverse environmental, health or safety conditions, may not have been revealed by Purchaser’s inspections and investigations. Purchaser hereby represents and warrants to Seller that: (a) Purchaser is represented by legal counsel in connection with the transaction contemplated by this Agreement; and (b) Purchaser is purchasing the Property for business, commercial, investment or other similar purpose and not for use as Purchaser’s residence. Purchaser waives and releases any and all rights or remedies it may have or be entitled to, deriving from disparity in size or from any significant disparate bargaining position in relation to Seller.

11.3 Seller Released from Liability. Purchaser acknowledges that it will have the opportunity to inspect the Property during the Inspection Period, and during such period, observe its physical characteristics and existing conditions and the opportunity to conduct such investigation and study on and of the Property and adjacent areas as Purchaser deems necessary, and Purchaser hereby FOREVER RELEASES AND DISCHARGES the Seller Parties from all responsibility and liability (other than that arising under representations or warranties of Seller expressly set forth in this Agreement), including without limitation, liabilities and responsibilities for the lessor’s obligations under the Leases relating to the physical, environmental or legal compliance status of the Property, whether arising before or after the Effective Date, and liabilities under the Comprehensive Environmental Response, Compensation and Liability Act Of 1980 (42 U.S.C. Sections 9601 et seq.), as amended (“CERCLA”), the Resource Conservation and Recovery Act (42 U.S.C. Section 9601 et seq.), as amended, and the Oil Pollution Act (33 U.S.C. Section 2701 et seq.), regarding the condition, valuation, salability or utility of the Property, or its suitability for any purpose whatsoever (including, but not limited to, with respect to the presence in the soil, air, structures and surface and subsurface waters, of Hazardous Materials or other materials or substances that have been or may in the future be determined to be toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Property under current or future federal, state and local laws, regulations or guidelines, and any structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Property). Except as to representations or warranties of Seller expressly set forth in this Agreement, Purchaser further hereby WAIVES (and by Closing this transaction will be deemed to have WAIVED) any and all objections and complaints (including, but not limited to, federal, state and local statutory and common law based actions, and any private right of action under any federal, state or local laws, regulations or guidelines to which the Property is or may be subject, including, but not limited to, CERCLA) concerning the physical characteristics and any existing conditions of the Property. Purchaser further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future

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environmental conditions on the Property and, except as to representations or warranties of Seller expressly set forth in this Agreement, the risk that adverse physical characteristics and conditions, including, without limitation, the presence of Hazardous Materials or other contaminants, may not have been revealed by its investigation.

11.4 “Hazardous Materials” Defined. For purposes hereof, “Hazardous Materials” means “Hazardous Material,” “Hazardous Substance,” “Pollutant or Contaminant,” and “Petroleum” and “Natural Gas Liquids,” as those terms are defined or used in Section 101 of CERCLA, and any other substances regulated because of their effect or potential effect on public health and the environment, including, without limitation, PCBs, lead paint, asbestos, mold, urea formaldehyde, radioactive materials, putrescible materials, and infectious materials.

11.5 Indemnity. From and after Closing, Purchaser agrees to indemnify, defend and hold the Seller Parties harmless of and from any and all liabilities, claims, demands, and expenses of any kind or nature which are in any way related to the ownership, maintenance, operation or physical condition of the Property, including, without limitation, in connection with Hazardous Materials and any requirements or demands of governmental agencies with jurisdiction over the Property.

11.6 Survival. The terms and conditions of this Article 11 shall expressly survive the Closing, not merge with the provisions of any closing documents and shall be incorporated into the Deed.

Purchaser acknowledges and agrees that the disclaimers and other agreements set forth herein are an integral part of this Agreement and that Seller would not have agreed to sell the Property to Purchaser for the Purchase Price without the disclaimers and other agreements set forth above.

Article 12
MISCELLANEOUS

12.1 Parties Bound; Assignment. This Agreement, and the terms, covenants, and conditions herein contained, shall inure to the benefit of and be binding upon the heirs, personal representatives, successors, and assigns of each of the parties hereto. Purchaser may assign its rights under this Agreement upon the following conditions: (a) the assignee of Purchaser must be an entity controlling, controlled by, or under common control with Purchaser or an affiliate of Purchaser owned by Paul D. Agarwal, (b) all of the Earnest Money must have been delivered in accordance herewith, (c) the Inspection Period shall be deemed to have ended, (d) the assignee of Purchaser shall assume all obligations of Purchaser hereunder, but Purchaser shall remain primarily liable for the performance of Purchaser’s obligations, and (e) a copy of the fully executed written assignment and assumption agreement shall be delivered to Seller at least ten days prior to Closing.

12.2 Headings. The article, section, subsection, paragraph and/or other headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof.

12.3 Invalidity and Waiver. If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and, to the greatest extent legally possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The failure by either party to enforce against the other any term or provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future.

12.4 Governing Law. This Agreement shall, in all respects, be governed, construed, applied, and enforced in accordance with the law of the state in which the Real Property is located.

12.5 Survival. The provisions of this Agreement that contemplate performance after the Closing and the obligations of the parties not fully performed at the Closing (other than any unfulfilled closing conditions which have been waived or deemed waived by the other party) shall survive the Closing and shall not be deemed to be merged into or waived by the instruments of Closing.

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12.6 Entirety and Amendments. This Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings relating to the Property. This Agreement may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is sought. All Exhibits hereto are incorporated herein by this reference for all purposes.

12.7 Time. Time is of the essence in the performance of this Agreement.

12.8 Confidentiality; Press Releases. Purchaser shall make no public announcement, press release or disclosure of the transactions contemplated under this Agreement, nor any information related to this Agreement to outside brokers, media or third parties, before or after the Closing, without the prior written specific consent of Seller; provided, however, that Purchaser may, subject to the provisions of Section 4.6, make disclosure of this Agreement to its Permitted Outside Parties as necessary to perform its obligations hereunder and as may be required under laws or regulations applicable to Purchaser. Without limiting the foregoing requirement for Seller approval, the names “Network Associates”, “McAfee” or any derivative thereof shall not be used or referenced in any public announcement, press release or disclosure relating to the transactions contemplated under this Agreement. Purchaser acknowledges and agrees that the use of such name in any public announcement, press release or disclosure is not accurate and Purchaser will instruct Purchaser’s partners, lenders, investors, brokers, agents, employees, officers, directors, attorneys and representatives (collectively, the “Purchaser Parties”) to comply with this provision. Purchaser, on behalf of itself and the Purchaser Parties, stipulates that the breach of the requirements of this Section 12.8 will cause irreparable harm to Seller for which damages may not constitute an adequate remedy. Accordingly, Purchaser agrees, on its own behalf and on behalf of the Purchaser Parties, that any breach of the requirements of this Section 12.8 may be enjoined by an appropriate court order or judgment. Seller’s remedies are not limited to injunctive relief for a breach of the requirements of this Section 12.8, and all legal and equitable remedies will continue to be available to Seller. For clarity, Seller may disclose the terms of this Agreement in connection with Seller’s reporting and disclosure requirements (including disclosures required by the U.S. Securities and Exchange Commission). The provisions of this Section 12.8 shall survive Closing.

12.9 Electronic Transactions. Except as expressly provided in Section 12.10 (entitled “Notices”) and Section 12.13 (entitled “Execution in Counterparts”), the parties hereby acknowledge and agree (a) this Agreement shall not be executed, entered into, altered, amended or modified by electronic means and (b) without limiting the generality of subparagraph (a), the parties hereby agree the transactions contemplated by this Agreement shall not be conducted by electronic means.

12.10 Notices. All notices required or permitted hereunder shall be in writing and shall be served on the parties at the addresses set forth in Section 1.3. Any such notices shall, unless otherwise provided herein, be given or served (a) by depositing the same in the United States mail, postage paid, certified and addressed to the party to be notified, with return receipt requested, (b) by overnight delivery using a nationally recognized overnight courier, (c) by personal delivery, or (d) by electronic mail addressed to the electronic mail address set forth in Section 1.3 for the party to be notified with a confirmation copy delivered by another method permitted under this Section 12.10. Notice given in accordance herewith for all permitted forms of notice other than by electronic mail, shall be effective upon the earlier to occur of actual delivery to the address of the addressee or refusal of receipt by the addressee (even if such addressee refuses delivery thereof). Notice given by electronic mail in accordance herewith shall be effective upon the entrance of such electronic mail into the information processing system designated by the recipient’s electronic mail address. Except for electronic mail notices as described above, no notice hereunder shall be effective if sent or delivered by electronic means. A party’s address may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of such notice. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice. Notices given by counsel to the Purchaser shall be deemed given by Purchaser and notices given by counsel to the Seller shall be deemed given by Seller.

12.11 Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and agree that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

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12.12 Calculation of Time Periods; Business Day. Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is not a Business Day, in which event the period shall run until the end of the next day which is a Business Day. The last day of any period of time described herein shall be deemed to end at 5:00 p.m. local time in the state in which the Real Property is located. As used herein, the term “Business Day” means any day that is not a Saturday, Sunday or legal holiday for national banks in the city in which the Real Property is located.

12.13 Execution in Counterparts. This Agreement (and any alterations, amendments or modifications thereto) may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Agreement. To facilitate execution of this Agreement (or any alteration, amendment or modification thereto), the parties may execute and exchange by electronic mail PDF counterparts of the signature pages. Signature pages may be detached from the counterparts and attached to a single copy of this Agreement (or any alteration, amendment or modification thereto) to physically form one document.

12.14 No Recordation. Without the prior written consent of Seller, there shall be no recordation of either this Agreement or any memorandum hereof, or any affidavit pertaining hereto, and any such recordation of this Agreement or memorandum or affidavit by Purchaser without the prior written consent of Seller shall constitute a default hereunder by Purchaser, whereupon Seller shall have the remedies set forth in Section 10.1 hereof. In addition to any such remedies, Purchaser shall be obligated to execute an instrument in recordable form releasing this Agreement or memorandum or affidavit, and Purchaser’s obligations pursuant to this Section 12.14 shall survive any termination of this Agreement as a surviving obligation.

12.15 Further Assurances. In addition to the acts and deeds recited herein and contemplated to be performed, executed and/or delivered by either party at Closing, each party agrees to perform, execute and deliver, but without any obligation to incur any additional liability or expense, on or after the Closing any further deliveries and assurances as may be reasonably necessary to consummate the transactions contemplated hereby or to further perfect the conveyance, transfer and assignment of the Property to Purchaser.

12.16 Discharge of Obligations. The acceptance of the Deed by Purchaser shall be deemed to be a full performance and discharge of every representation and warranty made by Seller herein and every agreement and obligation on the part of Seller to be performed pursuant to the provisions of this Agreement, except those which are herein specifically stated to survive Closing.

12.17 No Third-Party Beneficiary. The provisions of this Agreement and of the documents to be executed and delivered at Closing are and will be for the benefit of Seller and Purchaser only and are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered at Closing.

12.18 Reporting Person. Purchaser and Seller hereby designate the Title Company as the “reporting person” pursuant to the provisions of Section 6045(e) of the Internal Revenue Code of 1986, as amended.

12.19 Mandatory Arbitration. The parties have agreed to submit disputes to mandatory arbitration in accordance with the provisions of Exhibit E hereto and made a part hereof for all purposes. Each of Seller and Purchaser waives the right to commence an action in connection with this Agreement in any court and expressly agrees to be bound by the decision of the arbitrator determined in Exhibit E. This Section 12.19 will not prevent Seller or Purchaser from commencing an action in any court for the sole purposes of enforcing the obligation of the other party to submit to binding arbitration or the enforcement of an award granted by arbitration herein or as expressly permitted by Section 10.1 hereof. The terms of this Section 12.19 shall survive (a) the termination of this Agreement, and (b) the Closing.

12.20 Independent Responsibility/No Alter Ego. The parties hereby agree that the obligations of the parties under this Agreement are separate and distinct, and that no party’s affiliate, officer, manager, director, employee, agent or representative (of any type or nature) or other third party is responsible in any manner whatsoever for the debts, liabilities or obligations of such party hereto. As such, the parties agree that no party’s affiliate, officer, manager, director, employee, agent or representative (of any type or nature) or other third party is an alter-ego of such

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party (or any affiliate thereof) or in any manner is or shall be vicariously, derivatively or otherwise liable for the debts, liabilities or obligations of such party or any affiliate thereof (collectively, “Derivative Claims”). The parties further agree that, as a material part of and material inducement for the transactions contemplated by this Agreement, they will not assert any Derivative Claims in any dispute, claim or controversy relating to or arising out of this Agreement. The provisions of this Section shall survive the closing or consummation of the transactions contemplated by this Agreement or any termination or purported termination of this Agreement.

12.21 Reliance on Title Policy. Notwithstanding anything contained in this Agreement to the contrary, with respect to all matters affecting title to the Property (and/or any portion thereof), and any liens or other encumbrances affecting the Property (and/or any portion thereof), Purchaser acknowledges and agrees that it is solely relying upon the Title Policy. If Purchaser has any claim under the Title Policy, Purchaser agrees that it will look solely to the Title Policy for recovery on such claim, and Purchaser shall not assert any claim against Seller for a breach of a representation, warranty, or covenant with respect to such claim. This Section shall survive the Closing.

12.22 WAIVER OF JURY TRIAL. SELLER AND PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OR THE EARLIER TERMINATION OF THIS AGREEMENT.

12.23 Like-Kind Exchange. Seller may consummate the sale of the Property as part of a so-called like-kind exchange (the “Exchange”) pursuant to §1031 of the Internal Revenue Code of 1986, as amended, provided that Seller shall notify Purchaser in writing before Closing that it intends to consummate this transaction as part of an Exchange, and shall provide with such notice all material information relating to the parties and properties to the Exchange.

[SIGNATURE PAGES AND EXHIBITS TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the Effective Date.

SELLER:
McAFEE, LLC, a Delaware limited liability company
By:	/s/ Venkat Bhamidipati
Name:	Venkat Bhamidipati
Title:	CFO
Date Executed by Seller: September 13, 2021

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PURCHASER:
CAPITAL COMMERCIAL INVESTMENTS, INC., a Texas corporation
By:	/s/ Paul D. Agarwal
Name:	Paul D. Agarwal
Title:	President
Date Executed by Purchaser: September 13, 2021

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JOINDER BY ESCROW AGENT

Escrow Agent has executed this Agreement in order to confirm that Escrow Agent shall hold the Earnest Money required to be deposited under this Agreement and the interest earned thereto, in escrow, and shall disburse the Earnest Money, and the interest earned thereon, pursuant to the provisions of this Agreement.

CHICAGO TITLE INSURANCE COMPANY
By:	/s/ Kristi Covey
Name:	Kristi Covey
Title:	Authorized Agent
Date Executed by Escrow Agent: September 13, 2021

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Purchase and Sale Agreement – 5000 Headquarters Drive

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EX-10.2

Exhibit 10.2

 

Private & Confidential

McAfee, LLC

6220 America Center Drive

San Jose, CA 95002

September 20, 2021

Gagandeep Singh

1116 Tournament Dr

Hillsborough, CA 94010

Dear Gagan,

Hello and congratulations! On behalf of McAfee, LLC (“McAfee”), I am thrilled to invite you to join a talented team of passionate people around the globe and to offer you the full-time position of EVP, Chief Product & Revenue Officer reporting to our President and Chief Executive Officer.

Some particulars. Your work location will be based in San Jose, CA. Your new position is exempt, and you will be paid on a salaried basis. Your start date with McAfee will be no later than October 11, 2021 or a date that is otherwise mutually agreed by you and McAfee. You will be paid on a bi-monthly basis in accordance with payroll guidelines each month. As part of a competitive compensation package, your annual base pay will be $600,000 USD, subject to adjustment from time to time, which will be paid to you in accordance with our regular payroll practices.

Annual incentive plan

Additionally, you will be eligible to participate in the McAfee Corporate Bonus Plan, subject to its terms, which we also refer to as our “Annual Incentive Plan”. Under the plan, you will be eligible for a total annual target of $600,000 USD per full fiscal year, subject to adjustment from time to time. Your target bonus under the Annual Incentive Plan for our 2021 fiscal year will be 50% of your full year target amount.

Long-term incentive award

As a reflection of your future achievements and contributions, we will recommend to the Leadership Development and Compensation Committee of the Board of Directors of McAfee Corp. that you receive a new hire equity award in the form of restricted stock units, the total value of which is estimated to be $25,000,000 USD based upon the fair market value of our Class A common stock as of market close of the day of grant. Your grant will be subject to our standard time-based vesting schedule and is expected to vest over a four-year period with 1/4th of the award vesting on the 1st anniversary of the last day of the month in which your award is granted, and 1/16th of the award vesting each quarter over the remaining three years, subject in

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each case to you remaining employed by McAfee and its affiliates on the applicable vesting date; provided that if (A) (i) a Change in Control (as defined your severance agreement referenced below) occurs within 12 months of your date of hire, and (ii) you remain employed by McAfee as of the date of the Change in Control or (B) you resign your employment with the Company for Good Reason (as defined your severance agreement referenced below) within twelve (12) months after your date of hire (and such termination is not otherwise a Change in Control Qualifying Termination (as defined your severance agreement referenced below)), in each case (and, in the case of such a resignation for Good Reason, subject to your continued compliance with the restrictive covenants that apply to you and your execution and non-revocation of a release of claims substantially in the form attached to your severance agreement referenced below), an additional 25% of your new hire equity award will automatically vest as of immediately prior to such Change in Control or the date of such resignation for Good Reason, as applicable. More details regarding your new hire equity award will be provided to you once your new hire equity award has been approved. The grant will be subject to the terms and conditions of your award agreement and McAfee’s 2020 Omnibus Incentive Plan.

Severance Agreement & Termination of Employment

As a senior management team member, you will be eligible to receive severance if your employment terminates under certain circumstances. Upon your commencement of employment, you will enter into a severance agreement with McAfee Corp. in the form provided with this letter, which provides the terms on which you would receive severance. In addition, you agree to provide at least thirty (30) days’ advance written notice to McAfee if you resign from employment with McAfee and its affiliates for any reason.

Comprehensive Benefits

McAfee is a great place to work. One of the reasons this holds true is the collection of outstanding benefits we offer. You will be eligible for our 401(k), our health benefits, dental, vision, disability and life insurance. In addition, we offer flexible work arrangements (for some roles), holidays and vacation pay, education reimbursement (with manager approval), and volunteer opportunities. Of course, each of these benefits is subject to the terms and conditions of the individual benefit program and plans, including waiting periods for some. Additional information will be made available regarding each of these benefits upon the commencement of your employment with the Company. You will also be eligible for Ayco Financial services and will be contacted by them within your first 30 days of employment.

Mandatory Requirements

As a matter of our corporate governance requirements, this offer letter and the agreements provided with this letter will not become effective unless and until this offer letter has been approved by the Leadership Development and Compensation Committee of the McAfee Corp. Board of Directors.

Before you can begin your employment with McAfee, we are required to verify your eligibility to work at McAfee. To that end, this offer of employment is specifically conditioned upon your satisfactory completion of a backgroundinvestigation, as well as your meeting all requirements of the position offered to you. Similarly, because McAfee works in the technology industry, which are subject to export controls by the United States government, we must obtain authorization from the Bureau of Industry and Security and the U.S. Department of Commerce

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before employing citizens from certain controlled countries. If based on your citizenship, you are subject to export controls, your offer of employment is contingent upon McAfee’s timely acquisition of an export license on your behalf. Moreover, if you are a foreign national requiring sponsorship to obtain the indefinite right to work in the U.S., you must meet McAfee’s sponsorship guideline by filling a position for which McAfee experiences a shortage of qualified and available U.S. Workers and meeting the requirements for and obtaining a work visa and permanent residence. We reserve the right to withdraw this offer of employment if we are unable to secure such a license for you in a timely manner or if you fail to meet the conditions described in this paragraph, in which case the terms of this offer letter and the agreements provided with this letter will not apply.

While McAfee is an equal opportunity employer that hires thousands of people from all over the globe, as a condition of employment in the United States, the Immigration and Nationality Act requires all new McAfee employees to provide the Company with documentation of their legal right to work in the United States. To help you breeze through this requirement, we have provided a copy of the “List of Acceptable Employment Verification Documents,” which is also available at www.uscis.gov/i-9-central/acceptable-documents. All you need to do is bring your documents with you on your first day to complete the hiring process. It’s that easy.

Your employment at McAfee is “at will,” which means that both McAfee and you have the right to end your employment at any time, with or without advance notice, and with or without cause. In addition, your employment is contingent on you signing the (i) Proprietary Information and Inventions Assignment Agreement and (ii) McAfee Mutual Arbitration Agreement provided with this letter. These agreements set forth obligations you will have as an employee and provides a framework for the resolution of any disputes that may arise out of your employment with McAfee. Both must be signed and returned prior to your start date. You are also being provided with an Indemnification Agreement, under which you will be entitled to certain protections described in more detail in that agreement. Further, you acknowledge and agree that during your employment and other service with McAfee and its affiliates you will be subject to the terms of its policies as in effect from time to time, including the Insider Trading Policy, the McAfee Clawback Policy and the McAfee Executive and Director Equity Ownership Requirements.

To indicate your acceptance of McAfee’s offer of employment, please sign, date and return this letter to me by 5 p.m. CT on Monday, September 20, 2021.

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We are excited to have you join the McAfee team. If you have any questions, please email me at chatelle_lynch@mcafee.com.

Sincerely,

/s/ Chatelle Lynch

Chatelle Lynch

SVP, Chief People Officer

By signing below, you attest that you understand and accept the terms of employment with McAfee, as set out in this letter. 

/s/ Gagandeep Singh

Signature of Candidate                                                               

Gagandeep Singh

Gagandeep Singh

September 22, 2021

Date 

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EX-10.3

Exhibit 10.3

September 27, 2021

VIA E-MAIL

Terry Hicks

Dear Mr. Hicks:

As we have discussed, your employment with McAfee, LLC (the “Company”) and its affiliates will terminate effective as of October 1, 2021 (the “Separation Date”). The purpose of this letter (this “Agreement”) is to confirm the terms concerning your separation from employment, as follows:

1.Separation from Employment. You acknowledge and agree that as of the Separation Date, your employment with the Company and its Affiliates will terminate and you will, without any further action required, be deemed to resign from any and all (i) officer positions you hold with the Company or any of its Affiliates; (ii) memberships you hold on any boards of directors, boards of managers or other governing boards or bodies of the Company or any of its Affiliates; and (iii) memberships you hold on any of the committees of any such boards or bodies. For purposes of this Agreement, “Affiliates” means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company, whether control by management authority, equity interest or otherwise, including without limitation, Foundation Technology Worldwide LLC (“FTW”) and McAfee Corp. (“Parent”).

2.Accrued Salary.You will receive, on or as soon as reasonably practicable following the Separation Date, the earned but unpaid portion of your base salary through the Separation Date.

3.Severance Benefits. In consideration of your acceptance of this Agreement and subject to your meeting in full your obligations hereunder (including continuing compliance with the restrictive covenants that apply to you and signing this Agreement and the Supplemental Release of Claims attached as Exhibit A (which may not be executed by you prior to the Separation Date) and not revoking either this Agreement or the Supplemental Release of Claims during the seven (7) day revocation period referenced herein or therein), you will be entitled to receive from McAfee (or Parent or FTW, in the case of the continued equity vesting referenced in clause (c) below):

(a)One (1) times the sum of (x) your final base salary ($675,000), plus (y) your target annual bonus ($825,052.50) (the “Cash Severance”), which shall be paid in accordance with the Company’s regular payroll practices in substantially equal payments over the twelve (12)-month period following the Separation Date (the “Severance Period”), beginning on the first payroll date that is at least thirty (30) days following the end of the seven (7)-day revocation period referenced on the signature page hereto (assuming you sign and do not revoke this Agreement or the Supplemental Release of Claims); provided that the first

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payment will include the portion of the Cash Severance that would otherwise have been made prior to such date; and

(b)provided that you timely and properly elect to purchase continued healthcare coverage under COBRA, direct payment to its COBRA provider on your behalf of a monthly amount equal to the employer portion of the monthly premiums ($779.42) paid under the Company’s group health plans as of the Separation Date, for the period ending on the earlier of (i) the date that is twelve (12) months following the Separation Date, and (ii) the date on which you become eligible to be covered under another employer’s health plan (of which you will provide prompt notice to the Company);

(c)continued eligibility to vest in the restricted stock units of Parent (“RSUs”) and Management Incentive Units of FTW (“MIUs”) that are regularly scheduled to vest on September 30, 2021 and, notwithstanding your termination of employment on the Separation Date, October 21, 2021, in each case, subject to their otherwise applicable terms; and

(d)continued provision of Ayco financial services for the three (3) month period that follows the Separation Date.

4.Acknowledgement of Full Payment and Withholding.

(a)You acknowledge and agree that the payments and benefits provided under Section 2 and Section 5 of this Agreement are in complete satisfaction of any and all compensation due to you from the Company and its Affiliates, whether for services provided to the Company or its Affiliates or otherwise, through the Separation Date and that, except as expressly provided under this Agreement, no further compensation is owed or will be paid to you by the Company or any of its Affiliates.

(b)All payments made by the Company under this Agreement shall be reduced by any tax and other amounts required to be withheld by the Company under applicable law and all other lawful deductions authorized by you.

5.Status of Employee Benefits, Paid Time Off and Expenses.

(a)Except for any right you may have to continue your participation and that of your eligible dependents in the Company’s medical plans under the federal law known as “COBRA”, your active participation in all employee benefit plans of the Company and its Affiliates shall end in accordance with the terms of those plans on the Separation Date. You will receive information about your COBRA continuation rights under separate cover.

(b)Within four (4) weeks following the Separation Date, you must submit your final expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement, and, in accordance with Company policy, shall provide reasonable substantiation and documentation for the same. The Company will reimburse you for your authorized and documented expenses within thirty (30) days of receiving such statement pursuant to its regular business practice.

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6.Equity. All vested shares of Class A and Class B common stock of Parent, MIUs and Class A units of FTW held by you as of the Separation Date, as well as any that vest pursuant to Section 3(c) above, will remain subject to their existing terms and conditions after the Separation Date. Taking into account Section 3(c) above and the forfeitures of other unvested equity and equity-based awards in connection with the Separation Date, the records of the Company, Parent, FTW and their Affiliates will definitively determine and be conclusive and binding on all persons with respect to your ownership of equity and equity-based awards of the Company, Parent, FTW and their Affiliates. Without limiting the foregoing, the parties acknowledge that (i) in respect of the MIUs and Class A Units of FTW that you hold you will continue to have certain rights and obligations under the Tax Receivable Agreement, dated as of October 21, 2020, by and among Parent, FTW, and certain other persons from time to time party thereto, and (ii) during the six (6) month period following your Separation Date, certain equity you hold related to the period prior to Parent’s initial public offering will be subject to the transfer restrictions set forth your Equity Adjustment Agreement for Senior Executives by which you are bound. Except as expressly provided in Section 3(c) above, all MIUs and RSUs held by you that are unvested as of the Separation Date will be forfeited in accordance with their terms for no consideration due or payable to you as of the Separation Date.

7.Continuing Obligations In exchange for the compensation and benefits provided to you under this Agreement to which you would not otherwise be entitled, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, you acknowledge and agree that you are currently, and will continue to be, bound after the termination of your employment with the Company and/or any of its Affiliates by the terms of a Restrictive Covenant Agreement (the “RCA”) by and between you and FTW dated November 14, 2018 and, if applicable, a Proprietary Information and Inventions Assignment Agreement by and between you and the Company (the “PIIAA”), containing restrictive covenants for the benefit of the Company and its Affiliates (collectively, the “Continuing Obligations”). The Continuing Obligations, as well as the other terms set forth in the RCA, are incorporated by reference as if set forth herein. You agree that the Continuing Obligations are reasonable and necessary to protect the good will, confidential information, trade secrets and other legitimate interests of Parent and its subsidiaries. The Continuing Obligations are completely severable and independent agreements supported by good and valuable consideration and, as such, shall survive the termination of this Agreement for any reason whatsoever. Additionally, should a court of competent jurisdiction or other applicable adjudicator determine that the scope of any provision of any of the Continuing Obligations is too broad to be enforced as written, the parties hereby authorize the court to reform the provision to such narrower scope as it determines to be reasonable and enforceable, and the parties intend that the affected provision be enforced as so amended. You acknowledge and agree that the Company’s remedies at law for a breach or threatened breach could be inadequate and the Company could suffer significant harm and irreparable damages as a result of a breach or threatened breach. In recognition of this fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement (other than pursuant to Section 2) cause any then vested MIUs, Class A Units of FTW, Class A shares of McAfee Corp. and/or other distributions or dividends which you may be entitled to be forfeited, recover any such amounts that were previously paid to you in respect of such vested equity and/or obtain equitable relief in the form of specific performance, temporary restraining order, temporary or

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permanent injunction or any other equitable remedy which may then be available. The remedies under this Agreement are without prejudice to the Company’s right to seek any other remedy to which it may be entitled at law or in equity.

8.Return of Company Documents and Other Property. In signing this Agreement, you represent, warrant and covenant that not later than the Separation Date you will have returned to the Company any and all documents, materials and information (whether in hardcopy, on electronic media or otherwise) related to the business of the Company Group (whether present or otherwise), and all keys, access cards, credit cards, computer hardware and software, telephones and telephone-related equipment and all other property of the Company Group in your possession or control. Further, you represent, warrant and covenant that following the Separation Date you will not retain any copy or derivation of any documents, materials or information (whether in hardcopy, on electronic media or otherwise) of the Company Group. Further, you acknowledge you have disclosed to the Company all passwords necessary or desirable to enable the Company to access all information which you have password-protected on any computer equipment, network or system of the Company or any of its Affiliates.

9.Employee Release of Claims.

(a)In exchange for the severance pay and other benefits provided to you under this Agreement to which you would not otherwise be entitled, on your own behalf and on the behalf of your heirs, executors, administrators, beneficiaries, representatives and assigns, and all others connected with or claiming through you, you hereby release and forever discharge the Company, FTW, Parent and their current and past parents, subsidiaries and other affiliates and all of their respective past, present and future officers, directors, trustees, shareholders, employees, agents, employee benefit plans, general and limited partners, members, managers, investors, joint venturers, representatives, successors and assigns, and all others connected with any of them, both individually and in their official capacities (collectively, the “Released Parties”), from any and all causes of action, rights and claims of any type or description, known or unknown, which you have had in the past, now have, or might now have, through the date of you signing of this Agreement, in any way related to, connected with or arising out of your employment or its termination, any other agreement, plan or arrangement with the Company, FTW, Parent or any of their Affiliates by which you are bound or with respect to which you might benefit, or pursuant to any federal, state or local law, regulation or other requirement (including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act, and/or the fair employment practices statute of the state or states in which you were previously employed by the Company or otherwise had a relationship with the Company or any of its subsidiaries or other Affiliates, each as amended from time to time) (collectively, the “Released Claims”). The foregoing release shall not apply to (a) any claim that arises after you sign this Agreement, (b) any rights to indemnification that you may have, (c) any claim that may not be waived pursuant to applicable law, (d) your rights to severance pay and benefits under this Agreement, (e) any rights you may have in respect of any vested equity that remains outstanding in accordance with its terms after my termination of employment (after giving effect to this Agreement), or (f) your

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rights to any vested benefits to which you are entitled under the terms of any of the Company’s employee benefit plans.

In signing this Agreement, to the extent applicable, you expressly waive and relinquish all rights and benefits provided by Section 1542 of the Civil Code of the State of California, and do so understanding and acknowledging the significance of such specific waiver of Section 1542, which section states as follows:

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or the released party.

Therefore, notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release and discharge of the Released Parties, you expressly acknowledge that the general release and waiver of claims set forth in this Section 9(a) is intended to include in its effect, without limitation, all claims which you do not now or suspect to exist in your favor at the time you sign it, and that this Agreement contemplates the extinguishment of any and all such claims.

(b)Nothing contained in this Agreement (or the RCA or PIIAA) shall be construed to prohibit you from filing a charge with or participating in any investigation or proceeding conducted by the federal Equal Employment Opportunity Commission or a comparable state or local agency, provided, however, that you hereby agree to waive, to the maximum extent permitted by law, your right to recover monetary damages or other individual relief in any charge, investigation, proceeding, complaint or lawsuit filed by you or by anyone else on your behalf. Nothing in this Agreement (or the RCA or PIIAA) is intended to or will (i) limit, restrict or in any other way affect your communicating with any governmental agency or entity, or communicating with any official or staff person of a governmental agency or entity, concerning matters relevant to the governmental agency or entity, (ii) preclude or impede you from exercising any protected rights, including under the National Labor Relations Act or the federal securities laws, including the Dodd-Frank Act, to the extent that such rights cannot be waived by agreement or (iii) prevent you from furnishing truthful information in response to a legal subpoena or other legal process or complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized governmental agency, provided that such compliance does not exceed that required by law, regulation or order. You agree that you will provide prompt written notice of any such valid order of a court of competent jurisdiction or an authorized governmental agency to the then-serving chief legal officer of the Company. Neither this Agreement nor the RCA or PIIAA limits or prohibits you from receiving an award for information provided to any governmental agency to the extent that such limitation or prohibition is a violation of law.

(c)This Agreement, including the general release of claims set forth in Section 9(a), creates legally binding obligations and the Company and its Affiliates therefore advise you to consult an attorney before signing this Agreement. In signing this Agreement, you give the Company and its Affiliates assurance that you have signed it voluntarily and with a full understanding of its terms; that you have had sufficient opportunity of not less than

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twenty-one (21) days, before signing this Agreement, to consider its terms and to consult with an attorney, if you wished to do so, or to consult with any other of person, and that, in signing this Agreement, you have not relied on any promises or representations, express or implied, that are not set forth expressly in this Agreement.

10.Miscellaneous.

(a)This Agreement constitutes the entire agreement between you and the Company and supersedes all prior and contemporaneous communications, agreements and understandings, whether written or oral, with respect to your employment, its termination and all related matters, excluding only Section 1(c) of the severance letter by and between you and Parent (the “Severance Agreement”) (but only if and to the extent your termination of employment is deemed a Change in Control Qualifying Termination (as defined in the Severance Agreement) due to the consummation of a Change in Control (as defined in the Severance Agreement) within three (3) months following the Separation Date), the RCA, the PIIAA, any arbitration agreement by and between you and the Company and your obligations applicable documents governing the terms of your vested equity and equity-based awards that survive your termination of employment (with it being understood that the provisions of such agreements shall remain in full force and effect in accordance with their terms). In the event that any amount or benefit becomes payable or is provided to you after the Separation Date pursuant to Section 1(c) of the Severance Agreement, such amounts and/or benefits shall be reduced on a dollar-for-dollar basis by all payments and benefits made under this Agreement (including the value of any of your RSUs or MIUs that vest pursuant to Section 3(c) above) and shall otherwise be payable pursuant to the terms of the Severance Agreement.

(b)This Agreement may not be modified or amended, and no breach shall be deemed to be waived, unless agreed to in writing by you and the Company or its expressly authorized designee. The captions and headings in this Agreement are for convenience only, and in no way define or describe the scope or content of any provision of this Agreement.

(c)The obligation of the Company to make payments or provide benefits to you or on your behalf under this Agreement, and your right to retain the same, is expressly conditioned upon your continued full performance of your obligations under this Agreement, and under the applicable documents governing the terms of your vested equity and equity-based awards that survive your termination of employment.

(d)All amounts payable under the Agreement are intended to comply with, or be exempt from, the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and will be construed and administered accordingly. The payments made pursuant to this Agreement are also intended to be exempt from Section 409A to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and each amount to be paid or benefit to be provided to you pursuant to this Agreement, shall be construed as a separate payment for purposes of Section 409A. Notwithstanding anything herein to the contrary, to the extent any payments made or contemplated hereunder constitute nonqualified deferred compensation within the meaning of Section 409A, if you are a “specified employee” as defined in Section 409A as of the Separation

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Date and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to you) until the date that is six (6) months and one (1) day following Separation Date (or the earliest date as is permitted under Section 409A). To the extent required to avoid an accelerated or additional tax under Section 409A, amounts reimbursable to you under this Agreement shall be paid to you on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to you) during any one year may not affect amounts reimbursable or provided in any subsequent year and may not be liquidated or exchanged for any other benefit. In no event shall the Company Group have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A.

(e)The validity and effect of this Agreement and the rights and obligations of the parties hereto shall be construed and determined in accordance with the law of the State of California, without regard to any conflict of law provisions thereof. The parties irrevocably consent to the jurisdiction of, and venue in, the state and federal courts in the State of California, with respect to any matters pertaining to, or arising from, this Agreement.

[Remainder of page intentionally left blank]

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If the terms of this Agreement are acceptable to you, please sign, date and return it to me within twenty-one (21) days of the date you receive it. You may revoke this Agreement at any time during the seven (7)-day period immediately following the date of your signing by notifying me in writing of your revocation within that period. If you do not revoke this Agreement, then, on the eighth (8th) day following the date that you signed it, this Agreement shall take effect as a legally binding agreement between you and the Company on the basis set forth above. The enclosed copy of this letter, which you should also sign and date, is for your records.

Sincerely,

McAfee, LLC

By: /s/ Chatelle Lynch

Name: Chatelle Lynch

Title: SVP, Chief People Officer

Accepted and agreed:

Signature: /s/ Terry Hicks

Terry Hicks

Date: October 6, 2021

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EX-10.4

Exhibit 10.4

 

Employee Stock Purchase Plan

1.Purpose. The purpose of the Plan is to provide eligible Employees with a means of acquiring an equity interest in the Company through payroll deductions or other contributions to enhance such Employees’ sense of participation in the affairs of the Company. This Plan shall apply to Offering Periods beginning on or after the effective date of the initial public offering of the Shares, as determined by the Committee.

This Plan includes two components: (a) a component intended to qualify as an “employee stock purchase plan” under Section 423 of the Code (the “423 Component”), the provisions of which shall be construed consistent with the requirements of Section 423 of the Code; and (b) a component that does not qualify as an “employee stock purchase plan” under Section 423 of the Code (the “Non-423 Component”). Options shall be granted under both components, consistent with the terms of the Plan, pursuant to rules, procedures or sub-plans adopted by the Committee. Except as otherwise provided in this Plan or determined by the Committee in a manner consistent with this Plan, the Non-423 Component will operate and be administered in the same manner as the 423 Component.

2.Definitions. As used herein, the terms set forth below have the meanings assigned to them in this Section 2 and shall include the plural as well as the singular.

“1933 Act” means the Securities Act of 1933, as amended.

“1934 Act” means the Securities Exchange Act of 1934, as amended.

“Board” means the Board of Directors of the Company.

“Business Day” means a day on which the Exchange is open for trading.

“Brokerage Account” means the account in which the Purchased Shares are held.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Committee” means the Leadership Development & Compensation Committee of the Board, or the designee of the Leadership Development & Compensation Committee.

“Company” means McAfee Corp., a Delaware corporation.

“Compensation” means the following received by a Participant from the Company, FTW, or any of their respective subsidiaries: (A) base pay, (B) commissions, (C) overtime, shift differentials, on-call pay, parental top-up pay and back pay, (D) regular annual, quarterly and monthly cash bonuses payable pursuant to a short-term cash incentive plan, and (E) vacation, holiday, bonding leave, parental leave, bereavement, jury duty and sick pay. Compensation does not include: (1) income related to stock option awards, restricted stock, restricted stock unit grants, profits interests and other equity incentive awards (including but not limited to those originally issued by FTW) or awards replacing such equity

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incentive awards; (2) sign-on bonuses, retention bonuses, stipends, or other non-recurring or special bonuses; (3) expense reimbursements; (4) relocation-related payments; (5) benefit plan payments (including but not limited to short-term disability pay, long-term disability pay, military pay, tuition reimbursement and adoption assistance); (6) payments related to the death of a Participant; (7) income from non-cash and fringe benefits (including but not limited to car, housing, school, meal and other allowances); (8) severance payments or pay in lieu of notice; (9) “cash out” payments of vacation or other paid time off, (10) gross-up or top-up payments (including medical top-up pay but excluding parental top-up pay) and imputed income related to student loans or other benefits, or (11) other forms of compensation or income not specifically listed herein.

“Employee” means any individual who is a common law employee of the Company or any other Participating Affiliate. For purposes of this Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or the Participating Affiliate, as appropriate, and only to the extent permitted under Section 423 of the Code with respect to the 423 Component. For purposes of the Plan, an individual who performs services for the Company or a Participating Affiliate pursuant to an agreement (written or oral) that classifies such individual’s relationship with the Company or a Participating Affiliate as other than a common law employee shall not otherwise (unless such individual is otherwise expressly classified as an employee by a different Participating Affiliate or by the Company) be considered an “employee” with respect to any period preceding the date on which a court or administrative agency issues a final determination that such individual is an “employee.”

“Enrollment Date” means the first Business Day of each Offering Period.

“Exchange” means the Nasdaq Global Select Market.

“Exercise Date” means the last Business Day of each Offering Period (or, if determined by the Committee, the Purchase Period, if different from the Offering Period).

“Fair Market Value” means the closing transaction price of a Share, as reported on the Exchange on the date as of which such value is being determined or, if the Shares are not listed on the Exchange as of an applicable date, the closing transaction price of a Share on the principal national stock exchange on which the Shares are traded on the date as of which such value is being determined or, if there are no reported transactions for such date, the closing transaction price of a Share on the immediately preceding date on which a closing transaction price was reported.

“FTW” means Foundation Technology Worldwide LLC, a Delaware limited liability company.

“Offering Period” means the six month period beginning on a date designated by the Committee and each successive six (6)-month period thereafter or such other period designated by the Committee; provided that in no event shall an Offering Period exceed 27 months, with the commencement of the first Offering Period to be determined by the Committee. Notwithstanding anything herein to the contrary, the Committee may establish an Offering Period with multiple Purchase Periods within such Offering Period.

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“Option” means an option granted under this Plan that entitles a Participant to purchase Shares.

“Participant” means an Employee who satisfies the requirements of Sections 3 and 5 of this Plan.

“Participating Affiliate” means, (i) with respect to the 423 Component, each U.S. Subsidiary other than those for which the Committee or the Board has excluded its employees from participation in this Plan and (ii) with respect to the Non-423 Component, any entity that, directly or indirectly, is controlled by, controls or is under common control with the Company and/or any entity in which the Company has a significant equity interest, including, for the avoidance of doubt, FTW, McAfee, LLC and their respective subsidiaries, and excluding, in each case, any entity for which the Committee or the Board has excluded its employees from participation in this Plan.

“Plan” means this McAfee Employee Stock Purchase Plan.

“Purchase Account” means the notional bookkeeping account credited with the amount that shall be used to purchase Shares through the exercise of Options under this Plan.

“Purchase Period” means the period designated by Committee during which payroll deductions or other contributions of the Participants are credited under this Plan. Unless otherwise determined by the Committee, a Purchase Period will coincide with an entire Offering Period; provided that there may be multiple Purchase Periods within an Offering Period, if determined by the Committee prior to the commencement of the applicable Offering Period.

“Purchase Price” shall be the lesser of: (i) 85% percent of the Fair Market Value of a Share on the applicable Enrollment Date for an Offering Period and (ii) 85% percent of the Fair Market Value of a Share on the applicable Exercise Date; provided that the Committee may determine a different per share Purchase Price provided that such per share Purchase Price is communicated to Participants prior to the beginning of the Offering Period and provided that in no event shall such per share Purchase Price be less than the lesser of (i) 85% of the Fair Market Value of a Share on the applicable Enrollment Date or (ii) 85% of the Fair Market Value of a Share on the Exercise Date.

“Purchased Shares” means the full Shares issued or delivered pursuant to the exercise of Options under this Plan.

“Shares” means the Class A common stock, par value $0.001 per share, of the Company.

“Subsidiary” means an entity, U.S. or non-U.S., that is part of an unbroken chain of corporations beginning with the Company with respect to which not less than 50% of the voting equity is held by the Company or a Subsidiary, whether or not such entity now exists or is hereafter organized or acquired by the Company or a Subsidiary; provided that such entity is also a “subsidiary” within the meaning of Section 424 of the Code.

“Termination Date” means the date on which a Participant terminates employment or on which the Participant ceases to provide services to the Company or a Participating Affiliate as an employee, and specifically does not include any period following that date on which

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the Participant may be eligible for or in receipt of other payments from the Company including in lieu of notice or termination or severance pay or as wrongful dismissal damages.

3.Eligibility.

(a)Only Employees of the Company or a Participating Affiliate shall be eligible to be granted Options under this Plan and, in no event may a Participant be granted an Option under this Plan following his or her Termination Date.

(b)Any provisions of this Plan to the contrary notwithstanding, no Employee shall be granted an Option if (i) immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding Options or options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any of its Subsidiaries, (ii) such Option would permit his or her rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined at the time each such Option is granted) for each calendar year in which such Option is outstanding at any time, or (iii) such Employee customarily works for the Company and its Participating Affiliates 20 hours per week or less or customarily works for the Company and its Participating Affiliates less than five months in a calendar year; provided, however, that in the case of clause (iii), the Committee may provide for alternative minimum hours or length of service eligibility criteria prior to the commencement of an Offering Period, subject to Section 423 of the Code with respect to the 423 Component. In addition, except as otherwise determined by the Committee prior to the commencement of an Offering Period, during any Offering Period, (x) no Participant may purchase more than the number of Shares that is equal to $30,000, divided by the closing transaction price of a Share on the immediately preceding date prior to the first day of the Offering Period on which a closing transaction price was reported, and (y) in the aggregate, no more than one percent (1%) of the sum of (A) the number of Shares and (B) the number of FTW units (excluding those held by the Company), in each case, outstanding on the last day of the preceding fiscal year may be purchased.

4.Exercise of an Option. Options shall be automatically exercised on behalf of Participants in this Plan every Exercise Date, using payroll deductions or other contributions that have been credited to the Participants’ Purchase Accounts during the applicable Purchase Period or that have been retained from a prior Purchase Period pursuant to Section 8 hereof.

5.Participation.

(a)An Employee shall be eligible to participate on the first Enrollment Date that occurs at least six months (or such other period of time determined by the Committee and, with respect to the 423 Component, consistent with Section 423 of the Code) after such Employee’s first date of employment with the Company or a Participating Affiliate; provided that such Employee properly completes and submits an election form in a manner and by the deadline prescribed by the Company.

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(b)An Employee who does not become a Participant on the first Enrollment Date on which he or she is eligible may thereafter become a Participant on any subsequent Enrollment Date by properly completing and submitting an election form in a manner and by the deadline prescribed by the Company.

(c)Payroll deductions for a Participant shall commence on the first payroll date following the Enrollment Date and shall end on the last payroll date in the Purchase Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 12 hereof.

6.Payroll Deductions/ Other Participant Contributions.

(a)A Participant shall elect to have payroll deductions made during a Purchase Period equal to no less than 1% of the Participant’s Compensation up to a maximum of 15% (or such greater amount as the Committee establishes from time to time). The amount of such payroll deductions shall be in whole percentages. All payroll deductions made by a Participant shall be credited to his or her Purchase Account. A Participant who elects to have payroll deductions credited to his or her Purchase Account may not make any additional payments into his or her Purchase Account. Unless otherwise determined by the Company and subject to the other terms of this Plan, a Participant’s payroll deduction election will remain in effect for subsequent Offering Periods unless the Participant files an election change form in accordance with the procedures established by the Company not less than ten (10) business days (or such other deadline as is determined by the Company from time to time) prior to an applicable Purchase Period. Notwithstanding the foregoing or any provisions to the contrary in this Plan, the Company may (but is not required to) allow participants to make other contributions under this Plan via cash, check, or other means instead of payroll deductions, and for any Offering Period under the 423 Component, the Company determines that such other contributions are permissible under Section 423 of the Code. Any such other contributions must be made in a manner, in an amount and by the deadline prescribed by the Company and, once made, shall be credited to the Participant’s Purchase Account.

(b)Except as otherwise determined by the Committee prior to commencement of an Offering Period, (i) a Participant may not increase the rate of payroll deductions or contributions during an Offering Period and (ii) unless otherwise determined by the Company, one time during an Offering Period, a Participant may decrease (including to 0%) the rate of payroll deductions or contributions with respect to the remainder of such Offering Period; provided that a reduction in a Participant’s contribution rate occurring during an Offering Period as a result of an election permitted by the Company that was made prior to the commencement of an Offering Period shall not be treated as a reduction during an Offering Period for purposes of such “one time” limitation. A Participant may change his or her payroll deduction percentage under subsection (a) above for any subsequent Offering Period by properly completing and submitting an election change form in accordance with the procedures prescribed by the Committee. The change in amount shall be effective as of the first Enrollment Date following the date of filing of the election change form.

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(c)Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant’s payroll deductions may be decreased to 0% at any time during an Offering Period. Subject to Sections 13, 18 and 19 of the Plan, payroll deductions shall recommence at the rate provided in such Participant’s election form at the beginning of the first Offering Period which is scheduled to end in the calendar year following the calendar year in which the Participant’s payroll deductions were decreased to 0%, unless terminated by the Participant as provided in Section 12 hereof.

7.Grant of Option. On each Enrollment Date, each Participant in the applicable Offering Period shall be granted an Option to purchase, on the applicable Exercise Date, a number of full Shares determined by dividing the amount credited prior to such Exercise Date to the Participant’s Purchase Account as of the applicable Exercise Date by the applicable Purchase Price.

8.Exercise of Option. A Participant’s Option for the purchase of Shares shall be exercised automatically on the Exercise Date. The maximum number of Shares subject to the Option shall be purchased for such Participant at the applicable Purchase Price with the amount credited to his or her Purchase Account.

No fractional Shares shall be purchased under the Plan. All amounts credited to a Participant’s Purchase Account that are not used to purchase Shares on an Exercise Date, whether because of the Participant’s withdrawal from participation in an Offering Period, the Participant’s over contribution to the Purchase Account due to limits under the Plan, the fact that fractional Shares may not be purchased or for any other reason, shall be distributed to the Participant or his or her designated beneficiary or legal representative, as applicable, without interest, as soon as administratively practicable after such withdrawal or other event, as applicable.

During a Participant’s lifetime, a Participant’s Option is exercisable only by him or her. The Company shall, at its sole discretion, satisfy the exercise of all Participants’ Options for the purchase of Shares through (a) the issuance of authorized but unissued Shares, (b) the transfer of treasury Shares, (c) the purchase of Shares on behalf of the applicable Participants on the open market through an independent broker and/or (d) a combination of the foregoing.

9.Issuance of Stock. The Shares purchased by each Participant shall be issued in book entry form and shall be considered to be issued and outstanding to such Participant’s credit as of the Exercise Date. The Committee may permit or require that shares be deposited directly in a Brokerage Account with one or more brokers designated by the Committee or to one or more designated agents of the Company, and the Committee may use electronic or automated methods of share transfer. The Committee may require that Shares be retained with such brokers or agents for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares, and may also impose a transaction fee with respect to a sale of Shares issued to a Participant’s credit and held by such a broker or agent. The Committee may (but is not required to) permit Shares purchased under this Plan to participate in a dividend reinvestment plan or program maintained by the Company and establish a default method for the payment of dividends.

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10.Approval by Stockholders. Notwithstanding the above, this Plan is expressly made subject to the approval of the stockholders of the Company within 12 months before or after the date this Plan is adopted by the Board. Such stockholder approval shall be obtained in the manner and to the degree required under applicable federal and state law. If this Plan is not so approved by the stockholders within 12 months before or after the date this Plan is adopted by the Board, this Plan shall not come into effect.

11.Administration.

(a)Powers and Duties of the Committee. This Plan shall be administered by the Committee. Subject to the provisions of this Plan, Section 423 of the Code and the regulations thereunder with respect to the 423 Component, the Committee shall have the discretionary authority to determine the time and frequency of granting Options, the duration of Offering Periods and Purchase Periods, the terms and conditions of the Options and the number of Shares subject to each Option. The Committee shall also have the discretionary authority to do everything necessary and appropriate to administer the Plan, including, without limitation, interpreting the provisions of the Plan (but any such interpretation shall not be inconsistent with the provisions of Section 423 of the Code with respect to the 423 Component). All actions, decisions, and determinations of, and interpretations by the Committee with respect to this Plan shall be final and binding upon all Participants, upon their executors, administrators, personal representatives, heirs, and legatees and upon all other persons. No member of the Board or the Committee shall be liable for any action, decision, determination, or interpretation made in good faith with respect to this Plan or any Option granted hereunder. With respect to the 423 Component, an Offering Period shall be administered in a manner that is intended to provide that all Participants have the same rights and privileges as are provided by Section 423(b)(5) of the Code.

(b)Administrator. The Company, Board or the Committee may delegate any or all of its powers or authority under this Plan, to the extent permitted by applicable law, to one or more members of the Board or the Committee or any officer or employee of the Company or any of its affiliates. The Company, Board or the Committee may also engage the services of a brokerage firm or financial institution (the “Administrator”) to perform certain ministerial and procedural duties under this Plan including, but not limited to, mailing and receiving notices contemplated under this Plan, determining the number of Purchased Shares for each Participant, maintaining or causing to be maintained the Purchase Account and the Brokerage Account, disbursing funds maintained in the Purchase Account or proceeds from the sale of Shares through the Brokerage Account, filing with the appropriate tax authorities proper tax returns and forms (including information returns) and providing to each Participant statements as required by law or regulation.

(c)Indemnification. Each person who is or shall have been (i) a member of the Board, (ii) a member of the Committee, or (iii) an officer or employee of the Company or any of its affiliates to whom authority was delegated in relation to this Plan, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her

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in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under this Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided that he or she shall give the Company a reasonable opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf; and providedfurther that this Section 11(c) shall not apply to any loss, cost, liability or expense that is a result of an indemnified person’s own willful misconduct or except as expressly provided by statute.

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s certificate of incorporation or bylaws, any contract with the Company, as a matter of law, or otherwise, or of any power that the Company may have to indemnify them or hold them harmless.

12.Withdrawal. A Participant may withdraw from an Offering Period by properly completing and submitting to the Company a withdrawal form in accordance with the procedures prescribed by the Committee or the Company, which must be submitted prior to the date specified by the Committee or the Company before the Exercise Date. Upon withdrawal, any amounts credited to the Participant’s Purchase Account prior to the effective date of the Participant’s withdrawal from this Plan will be returned to the Participant, without interest, as soon as administratively practicable after such withdrawal. No further payroll deductions or contributions for the purchase of Shares will be made during the Offering Period in which the withdrawal occurs or any subsequent Offering Periods, unless (as to any subsequent Offering Period) the Participant properly completes and submits an election form, by the deadline prescribed by the Company. A Participant’s withdrawal from an Offering Period under this Plan will not, except as described in the immediately preceding sentence, have any effect upon his or her eligibility to participate in subsequent Offering Periods or in any similar plan that may hereafter be adopted by the Company or any of its affiliates.

13.Termination of Employment. On the Termination Date of a Participant for any reason prior to the applicable Exercise Date, whether voluntary or involuntary, and including termination of employment due to retirement, death or as a result of liquidation, dissolution, sale, merger or a similar event affecting the Company or a Participating Affiliate, the amount credited to his or her Purchase Account will be returned to him or her or, in the case of the Participant’s death, to the person or persons entitled thereto under Section 16, without interest, as soon as administratively practicable after such Termination Date and his or her Option will be automatically terminated.

14.Funding; Interest. Except as required by applicable law, the Company shall not be required to fund or set aside any funds or amounts under this Plan, including in respect of any Purchase Accounts. No interest shall accrue on the amounts credited to Purchase Accounts in this Plan.

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15.Stock.

(a)The stock subject to Options shall be common stock of the Company as traded on the Exchange or on such other exchange as the Shares may be listed from time to time.

(b)Subject to adjustment upon changes in capitalization of the Company as provided in Section 18 hereof, the maximum number of Shares which shall be made available for sale under this Plan shall be 9,389,809 Shares. In addition, subject to adjustments upon changes in capitalization of the Company as provided in Section 18 hereof, the maximum number of Shares which shall be made available for sale under this Plan shall automatically increase on the first day of each fiscal year beginning with the first day of the second (2nd) fiscal year that begins after the date the Plan is adopted and ending with the first day of the tenth (10th) fiscal year that begins after the date the Plan is adopted, by an amount equal to the lesser of (i) one percent (1%) of the sum of (A) the number of Shares and (B) the number of FTW units (excluding those held by the Company), in each case, outstanding on the last day of the preceding fiscal year, or (ii) such number of Shares as may be established by the Board; provided that in no event shall the aggregate number of additional Shares made available under this Plan pursuant to this sentence exceed 51,643,947. If, on a given Exercise Date, the number of Shares with respect to which Options are to be exercised exceeds the number of Shares then available under this Plan, the Committee shall make a pro rata allocation of the Shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.

(c)A Participant shall have no interest or voting right in Shares covered by his or her Option until such Option has been exercised and the Participant has become a holder of record of Shares acquired pursuant to such exercise.

16.Designation of Beneficiary. The Committee may permit Participants to designate beneficiaries to receive any Purchased Shares or the amount credited to the Participant’s Purchase Account under this Plan in the event of such Participant’s death. Beneficiary designations shall be made in accordance with procedures prescribed by the Committee. If no properly designated beneficiary survives the Participant, the Purchased Shares and amount credited to the Participant’s Purchase Account, if any, will be distributed to the Participant’s estate.

17.Assignability of Options. Neither amounts credited to a Participant’s Purchase Account nor any rights with regard to the exercise of an Option or to receive Shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 16 hereof) by the Participant. Any such attempt at assignment, transfer, pledge, or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from an Offering Period in accordance with Section 12 hereof.

18.Adjustment of Number of Shares Subject to Options.

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(a)Adjustment. Subject to any required action by the stockholders of the Company, the maximum number and kind of securities available for purchase under this Plan, as well as the price per security, the number of securities covered by each Option under this Plan which has not yet been exercised and all limits denominated in shares under the Plan shall be appropriately adjusted in the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation or any successor or replacement accounting standard), such as a stock split, reverse stock split, stock dividend, recapitalization through a large, nonrecurring cash dividend, combination or reclassification of the common stock of the Company. Such adjustment shall be made by the Board or the Committee, whose determination in that respect shall be final, binding, and conclusive. If any such adjustment would result in a fractional security being available under this Plan, such fractional security shall be disregarded. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. The Options granted pursuant to the 423 Component shall not be adjusted in a manner that causes such Options to fail to qualify as options issued pursuant to an “employee stock purchase plan” within the meaning of Section 423 of the Code.

(b)Dissolution or Liquidation. Unless otherwise determined by the Board, in the event of the planned dissolution or liquidation of the Company, the Offering Period then in progress will terminate immediately prior to the consummation of such proposed action, unless an earlier date is otherwise provided by the Committee or the Board, and the Board may either provide for the purchase of Shares as of the date on which such Offering Period terminates (which will be deemed to occur in all events prior to the consummation of such proposed action, if falling on the same date) or return to each Participant the amount credited to such Participant’s Purchase Account.

(c)Merger or Asset Sale. In the event of a Change in Control (as defined in the Company’s 2020 Omnibus Incentive Plan) or the merger of the Company with or into another corporation, each outstanding Option shall be assumed or a substantially similar option substituted by the successor corporation or a parent or subsidiary of the successor corporation, unless the Board or the Committee determines, in the exercise of its sole discretion, that in lieu of such assumption or substitution to either terminate all outstanding Options and return to each Participant the amounts credited to such Participant’s Purchase Account or to provide for the Offering Period in progress to end on a date prior to the date of the Company’s consummation of such Change in Control or merger, resulting in the Exercise Date occurring as of the last Business Day of such shortened Offering Period.

19.Amendments or Termination of this Plan.

(a)Subject to any stockholder approval required by applicable law, regulation or Exchange or other applicable stock exchange rule, the Board or the Committee may at any time and for any reason amend, modify, suspend, discontinue or terminate

10

this Plan without notice; provided that the terms of any amendment to the Plan or any offering hereunder must be in writing or in electronic form.

(b)Without stockholder consent, the Board or the Committee shall be entitled to change the Purchase Price, Offering Periods, Purchase Periods, eligibility requirements, limit or increase the frequency and/or number of changes in the amount withheld during a Purchase Period, return all amounts in Purchase Accounts to holder of such account, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in an amount less than or greater than the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Shares for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Board or the Committee determines in its sole discretion advisable which are consistent with this Plan; provided that changes to (i) the Purchase Price, (ii) the Offering Period, (iii) the Purchase Period, (iv) the maximum percentage of Compensation that may be deducted pursuant to Section 6(a) or (v) the maximum number of Shares that may be purchased in a Purchase Period, shall not be effective until communicated to Participants.

20.No Other Obligations. The receipt of an Option pursuant to this Plan shall impose no obligation upon the Participant to purchase any Shares covered by such Option. Nor shall the granting of an Option pursuant to this Plan constitute an agreement or an understanding, express or implied, on the part of the Company or any of its affiliates to employ the Participant for any specified period.

21.Notices and Communication. Any notice or other form of communication which the Company or a Participant may be required or permitted to give to the other shall be provided through such means as designated by the Committee, including but not limited to any paper or electronic method.

22.Condition upon Issuance of Shares.

(a)Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, U.S. or non-U.S., including, without limitation, the 1933 Act and the 1934 Act and the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

11

23.General Compliance. This Plan will be administered, and Options will be exercised in compliance with the 1933 Act, 1934 Act and all other applicable securities laws and Company policies, including without limitation, any insider trading policy of the Company.

24.Term of this Plan. This Plan shall become effective upon the earlier to occur of (i) its adoption by the Board and (ii) its approval by the stockholders of the Company (the “Effective Date”), and shall continue in effect until the earlier of (A) the termination of this Plan pursuant to Section 19 hereof and (B) the tenth anniversary of the Effective Date, with no new Offering Periods commencing on or after such tenth anniversary.

25.Governing Law. This Plan and all Options granted hereunder shall be construed in accordance with and governed by the laws of the State of Delaware without reference to choice of law principles and subject in all cases to the Code and the regulations thereunder with respect to the 423 Component. By electing to participate in this Plan, each Participant agrees or will be deemed to have agreed to (i) submit irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Plan or any award, (ii) not commence any suit, action or other proceeding arising out of or based upon this Plan or any award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware, and (iii) waive, and not assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Plan or the subject matter thereof may not be enforced in or by such court. Further, by electing to participate in this Plan, each Participant waives (or will be deemed to have waived), to the maximum extent permitted under applicable law, any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under this Plan, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees (or will be deemed to have agreed) that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By electing to participate in this Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding, or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in this Plan, nothing herein is to be construed as limiting the ability of the Company (or any of its Participating Affiliates) and a Participant to agree to submit any dispute arising under the terms of this Plan to binding arbitration or as limiting the ability of the Company (or any of its Participating Affiliates) to require any individual to agree to submit such disputes to binding arbitration as a condition of receiving an award hereunder.

26.Non-U.S. Participants. Without the amendment of this Plan, the Company may provide for the participation in this Plan by Employees who are subject to the laws of non-U.S. countries or jurisdictions on such terms and conditions additional to or different from those specified in this Plan as may in the judgment of the Company be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such

12

purposes the Company may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws of other countries or jurisdictions in which the Company or the Participating Affiliates operate or have employees. Each subplan shall constitute a separate “offering” under this Plan in accordance with Treas. Reg. §1.423-2(a) and, to the extent inconsistent with the requirements of Section 423, any such subplan shall be considered part of the Non-423 Component, and rights granted thereunder shall not be required by the terms of this Plan to comply with Section 423 of the Code.

27.Sections 423 and 409A. The 423 Component shall be exempt from the application of Section 409A of the Code, and any ambiguities herein shall be interpreted to so be exempt from Section 409A of the Code. The Non-423 Component is intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. In furtherance of the foregoing and notwithstanding any provision in this Plan to the contrary, if the Committee determines that an Option granted under this Plan may be subject to Section 409A of the Code or that any provision in this Plan would cause an Option to be subject to Section 409A, the Committee may amend the terms of this Plan and/or of an outstanding Option granted under this Plan, or take such other action the Committee determines is necessary or appropriate, in each case, without the participant’s consent, to exempt any outstanding Option or future Option that may be granted under this Plan from or to allow any such Options to comply with Section 409A of the Code. Notwithstanding the foregoing, neither the Company, the Board, the Committee nor any person acting on their behalf shall have any liability to a Participant or any other party by reason of any acceleration of income, any additional tax, or any other tax or liability asserted by reason of the failure of any Option or this Plan to be exempt from or compliant with Section 423 of the Code, Section 409A of the Code or by reason of any other tax resulting from a Participant’s participation in the Plan.

28.Taxes. Payroll deductions will be made on an after-tax basis. The Committee and the Company will have the right, as a condition to exercising an Option, to make such provision as it deems necessary to satisfy its obligations to withhold U.S. federal, state or local and non-U.S. income or other taxes incurred by reason of the exercise of the Option and/or the purchase or disposition of Shares under this Plan. In the discretion of the Committee and the Company and subject to applicable law (including, if applicable, requirements for exemption from Section 16 of the 1934 Act), such tax obligations may be paid in whole or in part by delivery of Shares to the Company, including Shares purchased under this Plan, valued at Fair Market Value, but not in excess of the maximum statutory amounts required to be withheld. Without limiting the foregoing, the Committee or the Company may require (and by becoming a Participant in the Plan, the Participant agrees) that a Participant, as a condition to the exercise of an Option under this Plan, deliver an amount in cash necessary to satisfy all applicable withholding obligations in respect of such exercise and, if such condition is not satisfied by a Participant within ten (10) days following an otherwise applicable Exercise Date, the amount in such Participant’s Participant Account will be returned to him or her by the Company.

13

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter Leav, certify that:

1.I have reviewed this quarterly report on Form 10-Q of McAfee Corp. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	By:	/s/ Peter Leav
		Peter Leav
		President, Chief Executive Officer, and Director
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Venkat Bhamidipati, certify that:

1.I have reviewed this quarterly report on Form 10-Q of McAfee Corp. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 9, 2021	By:	/s/ Venkat Bhamidipati
		Venkat Bhamidipati
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of McAfee Corp. (the “Company”) on Form 10-Q for the period ended September 25, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 9, 2021	By:	/s/ Peter Leav
		Peter Leav
		President, Chief Executive Officer, and Director
		(Principal Executive Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of McAfee Corp. (the “Company”) on Form 10-Q for the period ended September 25, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 9, 2021	By:	/s/ Venkat Bhamidipati
		Venkat Bhamidipati
		Executive Vice President and Chief Financial Officer
		(Chief Financial Officer)

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates it by reference.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 25, 2021	Nov. 02, 2021
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 25, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Entity Registrant Name	McAfee Corp.
Entity Central Index Key	0001783317
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Current Fiscal Year End Date	--12-25
Entity Filer Category	Non-accelerated Filer
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Title of 12(b) Security	Class A Common Stock, $0.001 par value
Trading Symbol	MCFE
Security Exchange Name	NASDAQ
Entity File Number	001-39651
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-2467341
Entity Address, Address Line One	6220 America Center Drive
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95002
City Area Code	866
Local Phone Number	622-3911
Document Quarterly Report	true
Document Transition Report	false
Class A Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		182,658,495
Class B Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		254,297,067

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Current assets:
Cash and cash equivalents	$ 848	$ 231
Accounts receivable, net	124	102
Deferred costs	171	137
Receivable from Enterprise Business	116	0
Other current assets	36	42
Held-for-sale assets	31	0
Current assets of discontinued operations	0	402
Total current assets	1,326	914
Property and equipment, net	55	98
Goodwill	1,018	1,018
Identified intangible assets, net	595	729
Deferred tax assets	398	24
Other long-term assets	92	67
Long-term assets of discontinued operations	0	2,578
Total assets	3,484	5,428
Current liabilities:
Accounts payable and other current liabilities	303	235
Accrued compensation and benefits	66	179
Accrued marketing	101	118
Income taxes payable	207	14
Long-term debt, current portion	44	44
Deferred revenue	953	823
Payable to Enterprise Business	50	0
Current liabilities of discontinued operations	0	972
Total current liabilities	1,724	2,385
Long-term debt, net	2,889	3,943
Deferred tax liabilities	17	5
Tax receivable agreement liability, less current portion.	392	0
Other long-term liabilities	136	155
Deferred revenue, less current portion	91	80
Long-term liabilities of discontinued operations	0	660
Total liabilities	5,249	7,228
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests	5,836	4,840
Stockholders’ equity/members’ deficit:
Additional paid-in capital	(7,571)	(6,477)
Accumulated deficit	0	(118)
Accumulated other comprehensive income (loss)	(30)	(45)
Total deficit	(7,601)	(6,640)
Total liabilities, redeemable noncontrolling interests and deficit	3,484	5,428
Class A Common Stock
Stockholders’ equity/members’ deficit:
Common stock	0	0
Class B Common Stock
Stockholders’ equity/members’ deficit:
Common stock	$ 0	$ 0

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 25, 2021	Dec. 26, 2020
Class A Common Stock
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	1,500,000,000	1,500,000,000
Common Stock, shares issued	179,848,875	161,267,412
Common Stock, shares outstanding	179,848,875	161,267,412
Class B Common Stock
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	300,000,000	300,000,000
Common Stock, shares issued	255,490,562	267,065,127
Common Stock, shares outstanding	255,490,562	267,065,127

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Income Statement [Abstract]
Net revenue	$ 491	$ 395	$ 1,400	$ 1,132
Cost of sales	118	112	349	321
Gross profit	373	283	1,051	811
Operating expenses:
Sales and marketing	91	87	264	225
Research and development	48	35	138	109
General and administrative	51	43	143	141
Amortization of intangibles	13	36	63	108
Restructuring and transition charges (Note 9)	27	0	35	1
Total operating expenses	230	201	643	584
Operating income	143	82	408	227
Interest expense	(61)	(72)	(170)	(222)
Foreign exchange gain (loss), net	14	(43)	29	(49)
Other income (expense), net	(292)	(1)	(301)	0
Income (loss) from continuing operations before income taxes	(196)	(34)	(34)	(44)
Provision for income tax expense (benefit)	(166)	5	(159)	0
Income (loss) from continuing operations	(30)	(39)	125	(44)
Income from discontinued operations, net of taxes	2,420	39	2,467	75
Net income	2,390	$ 0	2,592	$ 31
Less: Net income attributable to redeemable noncontrolling interests	1,648		1,784
Net income attributable to McAfee Corp.	742		808
Net income attributable to McAfee Corp.:
Income from continuing operations attributable to McAfee Corp.	(92)		(40)
Income from discontinued operations attributable to McAfee Corp.	834		848
Net income attributable to McAfee Corp.	$ 742		$ 808
Earnings per share attributable to McAfee Corp., basic and diluted:
Continuing operations	$ (0.54)		$ (0.24)
Discontinued operations	4.90		5.11
Earnings per share, basic and diluted	$ 4.36		$ 4.87
Weighted-average shares outstanding, basic and diluted	170.3		165.9

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Statement Of Other Comprehensive Income [Abstract]
Net income	$ 2,390	$ 0	$ 2,592	$ 31
Interest rate cash flow hedges:
Gain (loss) on interest rate cash flow hedges, net of tax	0	(7)	9	(102)
Reclassification adjustments for income on interest rate cash flow hedges	12	13	36	27
Pension and postretirement benefits income, net of tax	0	0	1	0
Total comprehensive income (loss)	2,402	$ 6	2,638	$ (44)
Less: Comprehensive income attributable to redeemable noncontrolling interests	1,655		1,813
Total comprehensive income attributable to McAfee Corp.	$ 747		$ 825

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020	Sep. 26, 2020
Cash flows from operating activities:
Net income	$ 2,390	$ 0	$ 2,592	$ 31	$ 31
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			195	372
Equity-based compensation			85	25
Deferred taxes			(161)	3
Foreign exchange (gain) loss, net	(14)	43	(29)	49	49
Pre-tax gain on divestiture of Enterprise Business			(2,634)	0
Tax Receivable Agreement Remeasurement			310	0
Other operating activities			31	40
Change in assets and liabilities:
Receivable and payable from/to Enterprise Business			(36)	0
Accounts receivable, net			108	94
Deferred costs			(34)	(29)
Other assets			(42)	(10)
Income taxes payable			193	(2)
Other current liabilities			24	(10)
Deferred revenue			(10)	(26)
Other liabilities			(54)	(73)
Net cash provided by operating activities			538	464
Cash flows from investing activities:
Acquisitions, net of cash acquired			0	(5)
Additions to property and equipment			(19)	(32)
Proceeds from divestiture of Enterprise Business, net of transaction costs			3,880	0
Other investing activities			(4)	(3)
Net cash provided by (used in) investing activities			3,857	(40)
Cash flows from financing activities:
Proceeds from issuance of equity			11	2
Payment for the long-term debt			(1,027)	(33)
Distributions to members of FTW			(1,860)	(200)
Payment of dividends			(812)	0
Payment of tax withholding for shares and units withheld			(79)	(4)
Other financing activities			(3)	(10)
Net cash used in financing activities			(3,770)	(245)
Effect of exchange rate fluctuations on cash and cash equivalents			(8)	2
Change in cash and cash equivalents			617	181
Cash and cash equivalents, beginning of period			231	167
Cash and cash equivalents, end of period	$ 848	$ 348	848	348	$ 348
Supplemental disclosures of noncash investing and financing activities and cash flow information:
Acquisition of property and equipment included in current liabilities			(4)	(2)
Distributions to members of FTW included in liabilities			(45)	(5)
Dividends payable included in liabilities			(21)	0
Other financing activities included in liabilities			(8)	0
Tax withholding for shares and units withheld included in liabilities			(5)	0
Proceeds receivable related to divestiture of Enterprise Business			65	0
Transaction costs payable related to divestiture of Enterprise Business			(28)	0
Cash paid during the period for:
Interest, net of cash flow hedges			(148)	(210)
Income taxes, net of refunds			$ (51)	$ (35)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) AND REDEEMABLE NONCONTROLLING INTERESTS - USD ($)	Total	Redeemable Noncontrolling Interests	Foundation Technology Worldwide L L C Prior To Reorganization Transactions Accumulated Other Comprehensive Income (Loss)	Foundation Technology Worldwide L L C Prior To Reorganization Transactions Members' Equity (Deficit)	Foundation Technology Worldwide L L C Prior To Reorganization Transactions Accumulated Deficit	McAfee Corp. Stockholders' Equity	McAfee Corp. Stockholders' Equity Accumulated Other Comprehensive Income (Loss)	McAfee Corp. Stockholders' Equity Accumulated Deficit	McAfee Corp. Stockholders' Equity Common Stock Class A Common Stock	McAfee Corp. Stockholders' Equity Common Stock Class B Common Stock	McAfee Corp. Stockholders' Equity Additional Paid-in Capital	McAfee Corp. Stockholders' Equity Total Parent Entity Deficit
Balance at Dec. 28, 2019			$ (62,000,000)	$ (647,000,000)	$ (1,385,000,000)	$ (2,094,000,000)	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Balance, Shares at Dec. 28, 2019									0	0
Temporary equity, Balance at Dec. 28, 2019		$ 0
Distributions to Members	$ (201,000,000)			(201,000,000)
Other comprehensive loss, net of tax	(75,000,000)		(75,000,000)
Stock compensation expense, net of withholding to cover taxes	22,000,000			22,000,000
Unit issuances	2,000,000			2,000,000
Unit repurchases (Note 6)	(10,000,000)			(10,000,000)
Reclassification of redeemable units (Note 5)	(41,000,000)			(41,000,000)
Net income	31,000,000				31,000,000
Other	2,000,000			2,000,000
Balance at Sep. 26, 2020		0	(137,000,000)	(873,000,000)	(1,354,000,000)	(2,364,000,000)	0	0	$ 0	$ 0	0	0
Balance, Shares at Sep. 26, 2020									0	0
Temporary equity, Balance at Sep. 26, 2020		0
Balance at Jun. 27, 2020		0	(143,000,000)	(785,000,000)	(1,354,000,000)	(2,282,000,000)	0	0	$ 0	$ 0	0	0
Balance, Shares at Jun. 27, 2020									0	0
Distributions to Members				(70,000,000)		(70,000,000)
Other comprehensive loss, net of tax			6,000,000			6,000,000
Stock compensation expense, net of withholding to cover taxes				5,000,000		5,000,000
Unit issuances				1,000,000		1,000,000
Reclassification of redeemable units (Note 5)				24,000,000		24,000,000
Net income	0
Balance at Sep. 26, 2020		0	(137,000,000)	(873,000,000)	(1,354,000,000)	(2,364,000,000)	0	0	$ 0	$ 0	0	0
Balance, Shares at Sep. 26, 2020									0	0
Temporary equity, Balance at Sep. 26, 2020		0
Balance at Dec. 26, 2020	(6,640,000,000)		0	0	0	(1,800,000,000)	(45,000,000)	(118,000,000)	$ 0	$ 0	(6,477,000,000)	(6,640,000,000)
Balance, Shares at Dec. 26, 2020									161,267,412	267,065,127
Temporary equity, Balance at Dec. 26, 2020	4,840,000,000	4,840,000,000
Distributions to RNCI		(1,878,000,000)				(1,878,000,000)
Dividend declared						(819,000,000)		(690,000,000)			(129,000,000)	(819,000,000)
Other comprehensive loss, net of tax		29,000,000				46,000,000	17,000,000					17,000,000
Stock compensation expense, net of withholding to cover taxes						6,000,000					6,000,000	6,000,000
Stock compensation expense, net of withholding to cover taxes, Shares									5,250,424
Stock issuances						11,000,000					11,000,000	11,000,000
Stock issuances, Shares									577,782
RNCI units conversion into Class A shares									12,753,257	(11,574,565)
Deferred tax adjustments						167,000,000					167,000,000	167,000,000
TRA Adjustments						(82,000,000)					(82,000,000)	(82,000,000)
Net income	2,592,000,000	1,784,000,000				2,592,000,000		808,000,000				808,000,000
Other						(8,000,000)					(8,000,000)	(8,000,000)
Impact of change in ownership in RNCI		78,000,000					(2,000,000)				(76,000,000)	(78,000,000)
Fair value adjustment for RNCI		983,000,000									(983,000,000)	(983,000,000)
Balance at Sep. 25, 2021	(7,601,000,000)	5,836,000,000	0	0	0	(1,765,000,000)	(30,000,000)	0	$ 0	$ 0	(7,571,000,000)	(7,601,000,000)
Balance, Shares at Sep. 25, 2021									179,848,875	255,490,562
Temporary equity, Balance at Sep. 25, 2021	5,836,000,000
Balance at Jun. 26, 2021		7,687,000,000	0	0	0	(1,704,000,000)	(33,000,000)	(52,000,000)	$ 0	$ 0	(9,306,000,000)	(9,391,000,000)
Balance, Shares at Jun. 26, 2021									166,004,840	265,376,691
Distributions to RNCI		(1,726,000,000)				1,726,000,000
Dividend declared						(781,000,000)		(690,000,000)			(91,000,000)	(781,000,000)
Other comprehensive loss, net of tax		7,000,000				12,000,000	5,000,000					5,000,000
Stock compensation expense, net of withholding to cover taxes						(39,000,000)					(39,000,000)	(39,000,000)
Stock compensation expense, net of withholding to cover taxes, Shares									3,013,153
Stock issuances						6,000,000					6,000,000	6,000,000
Stock issuances, Shares									355,629
RNCI units conversion into Class A shares									10,475,253	(9,886,129)
Deferred tax adjustments						167,000,000					167,000,000	167,000,000
TRA Adjustments						(82,000,000)					(82,000,000)	(82,000,000)
Net income	2,390,000,000	1,648,000,000				2,390,000,000		742,000,000				742,000,000
Other						(8,000,000)					(8,000,000)	(8,000,000)
Impact of change in ownership in RNCI		36,000,000					(2,000,000)				(34,000,000)	(36,000,000)
Fair value adjustment for RNCI		(1,816,000,000)									1,816,000,000	1,816,000,000
Balance at Sep. 25, 2021	(7,601,000,000)	$ 5,836,000,000	$ 0	$ 0	$ 0	$ (1,765,000,000)	$ (30,000,000)	$ 0	$ 0	$ 0	$ (7,571,000,000)	$ (7,601,000,000)
Balance, Shares at Sep. 25, 2021									179,848,875	255,490,562
Temporary equity, Balance at Sep. 25, 2021	$ 5,836,000,000

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Basis of Presentation

9 Months Ended

Sep. 25, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

NOTE 1: BASIS OF PRESENTATION

Background

McAfee is a leading-edge cybersecurity company that provides advanced security solutions to consumers. Security technologies from McAfee use a unique, predictive capability that is powered by McAfee Global Threat Intelligence, which enables home users to stay one step ahead of the next wave of fileless attacks, viruses, malware, and other online threats.

McAfee Corp. (the “Corporation”) was formed as a Delaware corporation on July 19, 2019 for the purpose of facilitating an initial public offering (“IPO”) and related transactions in order to carry on the business of Foundation Technology Worldwide LLC (“FTW”) and its subsidiaries (the Corporation, FTW and its subsidiaries are collectively the “Company,” “we,” “us” or “our”). On October 21, 2020, the Corporation became the sole managing member and holder of 100% of the voting power of FTW due to the reorganization transactions described below. With respect to the Corporation and FTW, each entity owns only the respective entities below it in the corporate structure and each entity has no other material operations, assets, or liabilities.

In October 2020, the Corporation completed an IPO pursuant to which the Corporation and selling stockholders sold an aggregate of 37 million shares of Class A common stock par value $0.001 per share (“Class A common stock”) at a public offering price of $20.00 per share. The Corporation issued 31 million shares and received $586 million in proceeds, net of underwriting discounts and commissions, of which $553 million was used to purchase newly-issued limited liability company units (“LLC Units”) and $33 million was used to purchase LLC Units from existing holders (“Continuing LLC Owners”) of interests in FTW, at a purchase price per unit equal to the public offering price per share of Class A common stock, less underwriting discounts and commissions.

We refer to the holders of management incentive units of FTW (“MIUs”) as well as members of management who hold LLC Units following the closing of the offering or are to receive Class A common stock in satisfaction of existing incentive awards as “Management Owners.” We refer to those of our pre-IPO investors and certain of their affiliates who received shares of Class A common stock in connection with the Reorganization Transactions (as defined below) and who do not hold LLC Units as “Continuing Corporate Owners,” and together with the Continuing LLC Owners, as “Continuing Owners.”

The Reorganization Transactions

Reorganization

In connection with the closing of the IPO, the following Reorganization Transactions were consummated:

a new limited liability company operating agreement (“New LLC Agreement”) was adopted for FTW making the Corporation the sole managing member of FTW;

the Corporation’s certificate of incorporation was amended and restated to, among other things, (i) provide for Class A common stock and Class B common stock and (ii) issue shares of Class B common stock to the Continuing Owners and Management Owners, on a one-to-one basis with the number of LLC Units they own (except that Management Owners will not receive shares of Class B common stock in connection with their exchange of Management Incentive Units (“MIUs”)), the exchange of which will be settled in cash or shares of Class A common stock, at the option of the Company, for nominal consideration;

the Corporation (i) issued 126.3 million shares of its Class A common stock to certain of the Continuing Owners in exchange for their contribution of LLC units or the equity of certain other entities, which pursuant to the Reorganization Transactions, became its direct or indirect subsidiaries and (ii) settled 5.7 million restricted stock units (“RSUs”) with shares of its Class A common stock, net of tax withholding, held by certain employees, which were satisfied in connection with the Reorganization Transactions; and

the Corporation entered into (i) a tax receivable agreement (“TRA”) with certain of our Continuing Owners and certain Management Owners (collectively “TRA Beneficiaries”) and (ii) a stockholders agreement and a registration rights agreement with investment funds affiliated with or advised by TPG Global, LLC (“TPG”) and Thoma Bravo, L.P. (“Thoma Bravo”), respectively, and Intel Americas, Inc. (“Intel”).

Divestiture of Enterprise Business

On March 6, 2021, we entered into a definitive agreement (the “Purchase Agreement”) with a consortium led by Symphony Technology Group (“STG”) under which STG agreed to purchase certain of our Enterprise assets together with certain of our Enterprise liabilities (“Enterprise Business”), representing substantially all of our Enterprise segment, for an all-cash purchase price of $4.0 billion. The divestiture transaction closed on July 27, 2021. The divestiture of our Enterprise Business represents a strategic shift in our operations that allows us to focus on our Consumer business. As a result of the divestiture, the results of our Enterprise Business were reclassified as discontinued operations in our condensed consolidated statements of operations and excluded from both continuing operations and segment results for all periods presented. Starting in the first quarter of fiscal 2021, we began to operate in one reportable segment as the Enterprise Business comprised substantially all of our Enterprise segment. Results of discontinued operations includes all revenues and expenses directly derived from our Enterprise Business, with the exception of general corporate overhead costs that were previously allocated to our Enterprise segment but have not been allocated to discontinued operations. The Enterprise Business, as specified in the Purchase Agreement and related Amendments, was reclassified as discontinued operations in our condensed consolidated balance sheets. See Note 3 for additional information about the divestiture of our Enterprise Business.

Principles of Consolidation

Subsequent to the Reorganization Transactions and IPO, the Corporation is a holding company, and its sole material asset held directly or through wholly-owned subsidiaries is its equity interest in FTW. The Corporation, as the sole managing member of FTW, exclusively operates and controls the business and affairs of FTW. The Corporation consolidates the financial results of FTW and reports a redeemable noncontrolling interest (“RNCI”) related to the LLC Units held by the Continuing LLC Owners and vested MIUs held by Management Owners (Note 14 and 16).

As the Continuing LLC Owners control both the Corporation and FTW, before and after the Reorganization Transactions, the Reorganization Transactions were accounted for as a reorganization of entities under common control. As a result, the financial statements for periods prior to the IPO and the Reorganization Transactions are the financial statements of FTW as the predecessor to the Corporation for accounting and reporting purposes.

Financial information includes the accounts of the Company and was prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All intercompany balances and transactions within the Company have been eliminated in consolidation. These condensed consolidated financial statements, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of our financial information. The condensed consolidated balance sheet as of December 26, 2020, has been derived from the audited financial statements as of that date, but it does not include all of the information and footnotes required by GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying Notes thereto included in our Annual Report on Form 10-K for the year ended December 26, 2020, which were recast to reflect discontinued operations and filed with our Current Report on Form 8-K on August 2, 2021. The results of operations for the three and nine months ended September 25, 2021 are not necessarily indicative of the results expected for the entire fiscal year. We have reclassified certain prior period amounts to conform to our current period presentation.

We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a majority voting interest. We also consider for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it (Note 16).

Our functional currency for all of our subsidiaries is the U.S. dollar (“USD”).

Use of Estimates

The preparation of the condensed consolidated financial statements required us to make certain estimates and judgments that affect the amounts reported. Actual results may differ materially from our estimates. The accounting estimates that required our most significant and subjective judgments include:

projections of future cash flows related to revenue share and related agreements with our personal computer original equipment manufacturer partners;

amounts classified as discontinued operations;

the valuation and recoverability of identified intangible assets and goodwill;

recognition and measurement of current and deferred income taxes as well as our uncertain tax positions, including the income tax impact of the gain on the divestiture of the Enterprise Business;

fair value of our equity awards;

fair value of long-term debt and related swaps;

amount of liability related to the tax receivable agreement;

determining the nature and timing of satisfaction of performance obligations, assessing any associated material rights and determining the standalone selling price (“SSP”) of performance obligations; and

determining our technology constrained customer life.

The effect of the novel coronavirus (“COVID-19”) pandemic on our business, operations, and financial results is dependent upon future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are unknown at this time. As a result, some of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, several of our estimates and assumptions may change materially in future periods due to the impact of the COVID-19 pandemic.

Fiscal Calendar

We maintain a 52- or 53-week fiscal year that ends on the last Saturday in December. The year ending December 25, 2021 is a 52-week year starting on December 27, 2020. These condensed consolidated financial statements are presented as of September 25, 2021 and December 26, 2020, and for the three and nine months ended September 25, 2021 and the three and nine months ended September 26, 2020. The three and nine months ended September 25, 2021 consisted of 13 and 39 weeks, respectively, and the three and nine months ended September 26, 2020 consisted of 13 and 39 weeks, respectively.

Significant Accounting Policies

There have been no material changes to our significant accounting policies as of and for the nine months ended September 25, 2021, except for those related to discontinued operations, assets held for sale, and those noted in Note 2, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 26, 2020, which were recast to reflect discontinued operations and filed with our Current Report on Form 8-K on August 2, 2021.

Discontinued Operations

We review the presentation of planned business dispositions in the condensed consolidated financial statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business, and if so, whether it is anticipated that after the disposal the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results. In addition, we evaluate whether the business has met the criteria as a business held for sale. In order for a planned disposition to be classified as a business held for sale, the established criteria must be met as of the reporting date, including an active program to market the business and the expected disposition of the business within one year.

Planned business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that qualify as discontinued operations, all comparative periods presented are reclassified in the condensed consolidated balance sheets. Additionally, the results of operations of a discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the condensed consolidated statements of operations. Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations.

Assets Held for Sale

Long-lived assets held for sale are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending upon the nature of the assets and external data available.

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Recent Accounting Standards

9 Months Ended

Sep. 25, 2021

New Accounting Pronouncements And Changes In Accounting Principles [Abstract]

Recent Accounting Standards

NOTE 2: RECENT ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. ASU 2019-12 also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. We adopted ASU 2019-12 on December 27, 2020 and it had no material impact on our consolidated financial statements and related disclosures.

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies current guidance for convertible financial instruments. ASU 2020-06 also amends derivatives guidance for certain contracts in an entity’s own equity. Finally, ASU 2020-06 amends earnings per share guidance related to convertible instruments. ASU 2020-06 is effective for us in the first quarter of fiscal year 2022. We do not expect adoption of ASU 2020-06 to have a material effect on our consolidated financial statements. 

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Discontinued Operations and Held-For-Sale Assets

9 Months Ended

Sep. 25, 2021

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Held-For-Sale Assets

NOTE 3: DISCONTINUED OPERATIONS AND HELD-FOR-SALE ASSETS

Divestiture of Enterprise Business

On March 6, 2021, we entered into a definitive agreement with a consortium led by STG, pursuant to which STG agreed to purchase our Enterprise Business for an all-cash purchase price of $4.0 billion, which closed on July 27, 2021.

The following table presents the gain associated with the sale, presented in the results of our discontinued operations below:

(in millions)
Gross purchase price	$	4,000
Net assets sold		(1,283	)
Transaction costs		(83	)
Pre-tax gain on divestiture of Enterprise Business		2,634
Income tax expense on gain on divestiture of Enterprise Business		(383	)
Total gain on divestiture of Enterprise Business	$	2,251

The carrying value of the net assets sold are as follow:

(in millions)
Accounts receivable, net	$	155
Deferred costs		95
Other current assets		16
Property and equipment, net		55
Intangible assets, net		881
Goodwill		1,413
Other long-term assets		159
Accounts payable and other current liabilities		(57	)
Accrued compensation and benefits		(20	)
Accrued marketing		(9	)
Deferred revenue		(1,345	)
Other long-term liabilities		(60	)
Total net assets sold	$	1,283

Transition Services Agreement

In connection with the divestiture of the Enterprise Business, we entered into a Transition Service Agreement (“TSA”) under which we will provide assistance to the Enterprise Business subsequent to the divestiture including, but not limited to, business support services and information technology services as well as a commercial services agreement under which we will provide certain product services and licensed technology for up to 24 months after the closing date. Income for the transition services was $7 million for the three months ended September 25, 2021 and was recorded as part of Other income (expense), net in our condensed consolidated statements of operations. We also received $13 million under the commercial services agreement and earned $2 million revenue for the three months ended September 25, 2021. The revenue is recorded within Net revenue on the condensed consolidated statements of operations and the remaining $11 million is recorded within Deferred revenue on the condensed consolidated balance sheet.

Our Receivable from and Payable to Enterprise Business consisted of the following:

(in millions)	September 25, 2021
Receivable from Enterprise Business
Proceeds receivable(1)	$	65
TSA receivables and misdirected payments		51
Total	$	116
Payable to Enterprise Business
Transaction costs		(26	)
Misdirected payments		(24	)
Total	$	(50	)

(1)Amount primarily related to receivable due on delayed closing in certain non-U.S. jurisdictions. In November 2021, $56 million of this amount was received upon closing of certain of these jurisdictions.

Discontinued Operations

The following table presents the aggregate amounts of the classes of assets and liabilities of the Enterprise Business classified as discontinued operations:

(in millions)	December 26, 2020
Assets:
Accounts receivable, net	$	290
Deferred costs		96
Other current assets		16
Total current assets of discontinued operations		402
Property and equipment, net		51
Intangible assets, net		915
Goodwill		1,413
Deferred tax assets		43
Other long-term assets		156
Total assets of discontinued operations	$	2,980
Liabilities:
Accounts payable and other current liabilities	$	56
Accrued compensation and benefits		18
Accrued marketing		6
Deferred revenue		892
Total current liabilities of discontinued operations		972
Deferred tax liabilities		7
Other long-term liabilities		49
Deferred revenue, less current portion		604
Total liabilities of discontinued operations	$	1,632

The following table presents information regarding certain components of income from discontinued operations, net of taxes:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Net revenue	$	104	$	333	$	781	$	997
Operating income	$	26	$	46	$	95	$	100
Pre-tax gain on divestiture of Enterprise Business	$	2,634	$	—	$	2,634	$	—
Income before income taxes	$	2,659	$	46	$	2,724	$	100
Income tax expense(1)	$	239	$	7	$	257	$	25
Income from discontinued operations, net of taxes	$	2,420	$	39	$	2,467	$	75

(1)Income tax expense for the three and nine months ended September 25, 2021 includes $383 million of income tax expense on gain on divestiture of Enterprise Business. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW as it is recognized as result of the divestiture of Enterprise Business.

In July 2021, two amendments to the definitive agreement with a consortium led by STG for the purchase of the Enterprise Business were executed. The amendments modified certain provisions for assets and liabilities to be transferred as well as the timing and procedures for transfer of certain assets and employees in foreign jurisdictions in connection with the sale, and clarifying requirements for maintenance of such assets prior to transfer. The amendments also include certain other modifications or clarifications of the purchase agreement. As a result of the amendments, our results of operations for the six months ended June 26, 2021 and June 28, 2020 and our December 26, 2020 condensed consolidated balance sheet reflect changes in the assets and liabilities that were determined to be part of discontinued operations as reported in our previously filed Form 10-Q for the period ended June 26, 2021. These changes resulted in decreases of $4 million and $4 million to income from discontinued operations, net of tax, for the six months ended June 26, 2021 and June 28, 2020, respectively, and total assets from discontinued assets increased $18 million as of December 26, 2020, as compared to the amounts reported in our previously filed Form 10-Q for the period ended June 26, 2021. These changes are reflected in the information presented above and all relevant disclosures.

In connection with the sale of the Enterprise Business, we have incurred costs up to the date of the sale consisting primarily of consulting fees, legal fees, and other costs to facilitate the separation of the Enterprise Business, including incremental costs associated with data disentanglement and acceleration of data migration to the cloud. During the three and nine months ended September 25, 2021, we recorded $16 million and $77 million, respectively, for these costs. These costs are recorded within Income from discontinued operations, net of taxes, on the condensed consolidated statements of operations.

The following table presents significant non-cash items and capital expenditures of discontinued operations:

	Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020
Depreciation and amortization	$	43	$	167
Equity-based compensation expense	$	36	$	4
Additions to property and equipment	$	4	$	6

Sale of Plano Facility

On September 13, 2021, we entered into a Purchase and Sale Agreement with Capital Commercial Investments, Inc. pursuant to which the Company will sell its property (land and office building with approximately 170,000 square feet of space) and certain property and equipment located in Plano, Texas, for a purchase price of $31 million, net of expected costs to sell. Pursuant to the terms of the Agreement, upon closing the Company will enter into a lease agreement for a limited portion of the facility to use for transitional purposes through April 30, 2022. As a result, the assets are classified as Held-for-sale assets as of September 25, 2021.

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Revenue from Contract with Customers

9 Months Ended

Sep. 25, 2021

Revenue From Contract With Customer [Abstract]

Revenue from Contracts with Customers

NOTE 4: REVENUE FROM CONTRACTS WITH CUSTOMERS

Deferred Revenue

During the nine months ended September 25, 2021, we recognized $721 million from our deferred revenue balance as of December 26, 2020. During the nine months ended September 26, 2020, we recognized $630 million in revenue from our deferred revenue balance as of December 28, 2019.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 25, 2021, we have $1,044 million estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied), which includes deferred revenue and amounts that will be billed and recognized as revenue in future periods. We expect to recognize approximately 91% as revenue in the next 12 months and 9% in the next 13 to 36 months.

Net Revenue by Geographic Region

Net revenue by geographic region based on the sell-to address of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Americas	$	327		66.6	%	$	260		65.8	%	$	928		66.3	%	$	742		65.5	%
EMEA		113		23.0	%		93		23.5	%		326		23.3	%		268		23.7	%
APJ		51		10.4	%		42		10.6	%		146		10.4	%		122		10.8	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan. See Note 8 for individual countries that accounted for more than 10% of net revenue.

Net Revenue by Channel

Direct to Consumer revenue is from subscribers who transact with us directly through McAfee web properties, including those converted after the trial period of the McAfee product preinstalled on their new PC purchase or converted subsequent to their subscription period purchased from another channel. Indirect revenue is driven by users who purchase directly through a partner inclusive of mobile providers, ISPs, electronics retailers, ecommerce sites, and search providers.

Net revenue by channel of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Direct to Consumer	$	356		72.5	%	$	305		77.2	%	$	1,029		73.5	%	$	879		77.7	%
Indirect		135		27.5	%		90		22.8	%		371		26.5	%		253		22.3	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

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Leases

9 Months Ended

Sep. 25, 2021

Leases [Abstract]

Leases

NOTE 5: LEASES

As of September 25, 2021, we have operating leases primarily for corporate offices and data centers and no significant finance leases. Information related to our leases, including leases associated with our discontinued operations, was as follows:

	Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities	$	22	$	29
Right-of-use assets obtained in exchange for lease obligations		33		16
Lease expense from continuing operations	$	8	$	11
Lease expense from discontinued operations		7		17
Total lease expense	$	15	$	28

Balance sheet information related to leases, excluding leases associated with our discontinued operations, was as follows:

(in millions)	September 25, 2021			December 26, 2020
Other long-term assets	$	29		$	33
Accounts payable and other current liabilities	$	7		$	8
Other long-term liabilities		35			38
Total lease liabilities	$	42		$	46
Weighted Average Remaining Lease Term (in years)		7			8
Weighted Average Discount Rate (percentage)		6.3	%		6.3	%

Maturities of lease liabilities were as follows:

(in millions)	September 25, 2021
Remainder of 2021	$	3
2022		8
2023		6
2024		5
2025		5
Thereafter		26
Total lease payments		53
Less imputed interest		(11	)
Total lease liabilities	$	42

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Transactions with Members, Shareholders and Related Parties

9 Months Ended

Sep. 25, 2021

Related Party Transactions [Abstract]

Transactions with Members, Shareholders and Related Parties

NOTE 6: TRANSACTIONS WITH MEMBERS, SHAREHOLDERS AND RELATED PARTIES

Total tax and excess cash distributions to its members declared by FTW were as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
FTW members excluding McAfee Corp.	$	1,726	$	70	$	1,878	$	201
McAfee Corp.		1,052		—		1,142		—
Total tax and excess cash distributions declared	$	2,778	$	70	$	3,020	$	201

McAfee Corp. used a portion of its share of the cash distributions declared by FTW to declare or pay the dividends noted in the table below during the nine months ended September 25, 2021. Remaining distributions received by McAfee Corp. were used for corporate taxes and general corporate purposes.

Declaration Date	Record Date	Payment Date	Dividend per Share		Amount (in millions)
December 9, 2020	December 24, 2020	January 7, 2021	$	0.087	$	14
March 11, 2021	March 26, 2021	April 9, 2021	$	0.115	$	19
June 10, 2021	June 25, 2021	July 9, 2021	$	0.115	$	19
August 3, 2021	August 13, 2021	August 27, 2021	$	4.500	$	760
September 13, 2021	September 24, 2021	October 8, 2021	$	0.115	$	21

Distributions and dividends of $66 million were recorded primarily within Accounts payable and other current liabilities on the condensed consolidated balance sheet as of September 25, 2021, and $51 million was paid in October 2021.

As a result of the divestiture of the Enterprise Business, in August 2021 the Board of Directors of McAfee Corp. declared a special one-time cash dividend of $4.50 per share of Class A common stock payable to shareholders of record on August 13, 2021 (the “Special Dividend”). In connection with the declaration of the Special Dividend, the Board of Directors of McAfee Corp., as sole managing member of FTW, authorized FTW to declare a special one-time cash distribution to its members in the aggregate of $2.8 billion (the “Special Distribution”). The Special Distribution resulted in the payment of $1.7 billion to Continuing LLC Owners and $1.1 billion to McAfee Corp. McAfee Corp. used $0.8 billion of its share of the Special Distribution to pay the Special Dividend to participating shareholders on August 27, 2021.

We had these additional transactions, inclusive of discontinued operations, with TPG, Intel or other Continuing LLC Owners and companies owned or partially owned by those parties that therefore qualify as related parties. These transactions include sales of our products and purchases of various goods or services.

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Sales with related parties:
Intel	$	—	$	1	$	—	$	1
TPG		—		1		—		1
TPG affiliates	$	—	$	1	$	1	$	2
Other		—		—		—		2
Total	$	—	$	3	$	1	$	6
Payments to related parties:
Intel	$	—	$	—	$	1	$	2
TPG		—		1		—		6
TPG affiliates		3		8		21		23
Other		11		—		13		9
Total	$	14	$	9	$	35	$	40

Revenue from the sales transactions are recognized in accordance with our revenue recognition policy.

Our Intel receivable, net consisted of the following:

(in millions)	September 25, 2021			December 26, 2020
Intel receivable(1)
Tax indemnity	$	9		$	8
Total		9			8
Intel payable(1)
Tax indemnity		(3	)		(2	)
Total		(3	)		(2	)
Total, net(2)	$	6		$	6

(1)We have the contractual right of offset of our receivables and payables with Intel.

(2)As of September 25, 2021, $5 million and $1 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet. As of December 26, 2020, $3 million and $3 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet.

In February 2020, we entered into an agreement with our former President and Chief Executive Officer to repurchase equity units for an aggregate repurchase price of $10 million. We also agreed to repurchase his remaining outstanding equity units in April 2021 at fair market value, contingent on the satisfaction of certain terms and conditions. Upon a sale of the company or an IPO prior to the repurchase date, the units were not required to be repurchased. The units were classified as temporary equity within Redeemable units from the time of the agreement until the IPO when they were reclassified to permanent equity. As of September 26, 2020, the estimated value of the April 2021 repurchase was $41 million.

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Goodwill and Intangible Assets, Net

9 Months Ended

Sep. 25, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

NOTE 7: GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets disposed of as a result of our agreement with STG to sell certain assets of Enterprise Business were included in assets of discontinued operations in our condensed consolidated balance sheets as of December 26, 2020, and accordingly, are excluded from the tables below.

Intangible Assets, Net

	September 25, 2021							December 26, 2020
(in millions)	Gross Assets		Accumulated Amortization			Net		Gross Assets		Accumulated Amortization			Net
Intangible assets subject to amortization:
Customer relationships and other	$	758	$	(619	)	$	139	$	758	$	(556	)	$	202
Acquired and developed technology		517		(472	)		45		517		(401	)		116
Total intangible assets subject to    amortization		1,275		(1,091	)		184		1,275		(957	)		318
Intangible assets not subject to amortization:
Brand		411		—			411		411		—			411
Total intangible assets not subject to    amortization		411		—			411		411		—			411
Total intangible assets	$	1,686	$	(1,091	)	$	595	$	1,686	$	(957	)	$	729

Amortization expense for purchased and developed intangible assets is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		Statements of Operations Classification
Customer relationships and other	$	13	$	36	$	63	$	108	Amortization of intangibles
Acquired and developed technology		22		26		71		80	Cost of sales
Total	$	35	$	62	$	134	$	188

Based on identified intangible assets that are subject to amortization as of September 25, 2021, we expect future amortization expense to be as follows:

(in millions)	Total
Remainder of 2021	$	36
2022		76
2023		28
2024		20
2025		19
Thereafter		5
Total	$	184

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Segment And Geographic Information

9 Months Ended

Sep. 25, 2021

Segment Reporting [Abstract]

Segment And Geographic Information

NOTE 8: SEGMENT AND GEOGRAPHIC INFORMATION

Historically, we had two operating segments, which also represented our reportable segments and reporting units. The Consumer segment focused on providing security solutions for consumers, while the Enterprise segment focused on providing security solutions for large enterprise, governments, small and medium-sized businesses. On March 6, 2021, we entered into a definitive agreement to sell certain assets together with certain liabilities of our Enterprise Business to STG, representing substantially all of our Enterprise segment. The divestiture of the Enterprise Business, which was completed on July 27, 2021, allows us to shift our operational focus to our Consumer business and represents a strategic shift in our operations. Therefore, the results of our Enterprise Business until the closing of the sale were classified as discontinued operations in our condensed consolidated statements of operations and thus excluded from both continuing operations and segment results for all periods presented. Accordingly, we now have one reportable segment with the change reflected in all periods presented.

Net revenue by country based on the sell-to address of the end-users is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
U.S.	$	300	$	238	$	852	$	680
Other(1)		191		157		548		452
Total net revenue	$	491	$	395	$	1,400	$	1,132

(1)No other individual country accounted for more than 10% of net revenue.

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Restructuring And Transition Charges

9 Months Ended

Sep. 25, 2021

Restructuring And Related Activities [Abstract]

Restructuring And Transition Charges

NOTE 9: RESTRUCTURING AND TRANSITION CHARGES

Restructuring charges generally include significant actions impacting the way we manage our business. Employee severance and benefit charges are largely based upon substantive severance plans, while some charges result from mandated requirements in certain foreign jurisdictions. These charges include items such as employee severance, ongoing benefits, and excess payroll costs directly attributable to the restructuring plan. Transition charges are costs incurred subsequent to the divestiture of the Enterprise Business in support of the transition services agreement. These costs include legal, advisory, consulting and other costs and are generally paid when incurred.

In connection with divestiture of the Enterprise Business, a portion of our Restructuring and transition charges were classified to discontinued operations for all periods presented. Restructuring and transition charges are as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Employee severance and benefits	$	—	$	—	$	8	$	1
Transition charges		27		—		27		—
Restructuring and transition charges attributable to continuing operations		27		—		35		1
Employee severance and benefits		1		—		25		8
Facility restructuring		—		—		1		—
Restructuring charges attributable to discontinued operations		1		—		26		8
Total restructuring and transition charges	$	28	$	—	$	61	$	9

In January 2020, we commenced the 2020 transformation initiative, in which we realigned our staffing across various departments. As part of the initiative, we incurred employee severance and benefits costs of $1 million recorded in restructuring charges in the condensed consolidated statement of operations for the nine months ended September 26, 2020.

In December 2020, we initiated a workforce reduction and other restructuring activities designed to continue to improve operating margins in connection with the reorientation of our Enterprise Business and realignment of staffing in other departments, which was announced in February 2021 following the notification of affected employees. These activities have been substantially completed. As part of the initiative, in December 2020 we recognized $16 million in connection with the workforce reduction and other restructuring activities. During the three and nine months ended September 25, 2021, we recognized $1 million and $34 million, respectively, of employee severance and benefits and facility restructuring charges in Restructuring and transition charges within the condensed consolidated statement of operations. These charges consist primarily of one-time termination benefits to the impacted employees, including severance payments and healthcare and other accrued benefits. We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the workforce reduction.

The balance of our restructuring and transition activities are as follows:

(in millions)	Total
Employee severance and benefits
As of December 26, 2020	$	16
Additional accruals, inclusive of expenses attributed to discontinued operations		33
Cash payments		(46	)
As of September 25, 2021	$	3

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Employee Incentives

9 Months Ended

Sep. 25, 2021

Compensation And Retirement Disclosure [Abstract]

Employee Incentives

NOTE 10: EMPLOYEE INCENTIVES

Equity-Based Compensation

Equity-based compensation costs recognized in our condensed consolidated statements of operations were:

	Three Months Ended					Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020		September 25, 2021		September 26, 2020
Cost of sales	$	1		$	—	$	3	$	—
Sales and marketing		2			—		9		1
Research and development		6			1		16		1
General and administrative		8			4		22		19
Total equity-based compensation expense from continuing operations		17			5		50		21
Discontinued operations		(9	)		1		36		4
Total equity-based compensation expense	$	8		$	6	$	86	$	25

As of September 25, 2021, there was $186 million of unrecognized equity-based compensation cost, which is expected to be recognized over a weighted average vesting period of 2.7 years.

During the nine months ended September 25, 2021, we granted 1.8 million Restricted Stock Units (“RSU”s) with a grant date fair value of $42 million as part of the divestiture of the Enterprise Business (“Enterprise RSU grant”). The Enterprise RSU grants are expected to vest over a weighted average service period of less than one year.

During the nine months ended September 25, 2021, we granted an additional 4.9 million RSU's with a grant date fair value of $109 million. These RSUs are generally expected to vest over a four-year period. We also granted 0.6 million Performance Stock Units (“PSU”s) with a fair value of $13 million. PSUs are generally expected to vest over a weighted average three-year period.

In connection with the special dividend (Note 6), the Board authorized two changes to outstanding equity awards. First, on our unvested RSUs and PSUs as of August 13, 2021, the Board authorized an increase to the outstanding number of units of approximately 17% or 2.2 million units. Second, on our unexercised stock options as of August 13, 2021, the Board authorized a reduction of the strike price of $4.50, equal to the per unit amount paid for the special dividend. As these changes were intended to “make-whole” holders of these instruments, changes were not applied where circumstances allowed an individual or award type a contractual right to participate in the special dividend.

Deferred Cash and Equity

As of September 25, 2021, our outstanding deferred cash and equity related to our acquisitions is as follows:

	(in millions)
Outstanding deferred cash and equity balance at December 26, 2020	$	13
Accruals		6
Cash payment		(15	)
Outstanding deferred cash and equity balance at September 25, 2021	$	4

As of September 25, 2021, we have no unrecognized expense relating to deferred cash. Deferred cash is recorded within Accrued compensation and benefits on the condensed consolidated balance sheet.

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Debt

9 Months Ended

Sep. 25, 2021

Debt Disclosure [Abstract]

Debt

NOTE 11: DEBT

Our long-term debt balance consisted of the following:

(in millions)	September 25, 2021			December 26, 2020
Long-term debt, net:
1st Lien USD Term Loan(1)	$	2,355		$	2,701
1st Lien Euro Term Loan(2)		585			1,298
Long-term debt, net of unamortized discounts		2,940			3,999
Unamortized deferred financing costs		(7	)		(12	)
Current installments of long-term debt		(44	)		(44	)
Total	$	2,889		$	3,943

(1)During the nine months ended September 25, 2021, the weighted average interest rate was 3.9%

(2)During the nine months ended September 25, 2021, the weighted average interest rate was 3.5%

Long-Term Debt

As of September 25, 2021, the material terms of our outstanding debt remain unchanged from those described in our consolidated financial statements as of December 26, 2020.

In August 2021, we used a portion of the proceeds of the divestiture of the Enterprise Business (Note 3) to prepay $332 million of 1st Lien USD Term Loan and €563 million of 1st Lien Euro Term Loan. In connection with this prepayment, we incurred a loss on extinguishment of debt of $10 million related to recognition of unamortized discount and deferred financing costs recorded in Interest expense on the condensed consolidated statement of operations.

Revolving Credit Facility

As of September 25, 2021 and December 26, 2020, we had a letter of credit of $4 million issued against the Revolving Credit Facility and $660 million of undrawn capacity under the Revolving Credit Facility, for which our commitment fee on the unused portion was 0.25%.

Debt Covenants and Restrictions

No event of default had occurred under any of our debt obligations as of September 25, 2021. We were not required to make any additional prepayments above the 0.25% per quarter amortization of the 1st Lien Term Loans during the nine months ended September 25, 2021.

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Income Tax

9 Months Ended

Sep. 25, 2021

Income Tax Disclosure [Abstract]

Income Tax

NOTE 12: INCOME TAX

McAfee Corp. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from FTW based upon McAfee Corp.’s economic interest in FTW. FTW is a pass through entity for U.S. federal income tax purposes and will not incur any federal income taxes either for itself or its U.S. subsidiaries that are also pass through or disregarded subsidiaries. Taxable income or loss for these entities will flow through to its respective members for U.S. tax purposes. FTW does have certain U.S. and foreign subsidiaries that are corporations and are subject to income tax in their respective jurisdictions.

We consider many factors when evaluating and estimating our tax positions, which may require periodic adjustments and may not accurately anticipate actual outcomes. Tax position recognition is a matter of judgment based on the individual facts and circumstances of our position evaluated in light of all available evidence. As of September 25, 2021 and December 26, 2020, we had uncertain tax positions, including interest and penalties, of $12 million and $16 million, respectively, primarily recorded within Other long-term liabilities and Other long-term assets on the condensed consolidated balance sheets. In the next 12 months, it is reasonably possible to have an audit closure or statute expirations in one of our foreign jurisdictions. We do not believe the amount to have a significant impact to our consolidated financial statements. A portion of income taxes and uncertain tax positions has been indemnified by Intel (Note 6).

Tax Receivable Agreement Liability and Deferred Tax Assets

On July 27, 2021, we completed the divestiture of the Enterprise Business (Note 3). For the nine months ended September 25, 2021, of the $257 million of taxes recognized in discontinued operations, income tax expense related to the divestiture was $383 million. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW that is recorded in discontinued operations as it is recognized as result of the Enterprise sale transaction.

As a result of the divestiture, we expect to utilize certain deferred tax assets from the domestic portion of the gain on the sale. In addition to objectively verifiable evidence, we have considered subjective evidence, such as our projections for future growth, in evaluating if the realizability of the net deferred tax assets has met the more likely than not recognition criteria. We have concluded that a full valuation allowance against the net deferred tax assets of our domestic entities will no longer be required. During the three months ended September 25, 2021, we have released $200 million of the $213 million of valuation allowance that existed as of December 26, 2020. An additional valuation allowance of $11 million is expected to be released in the fourth quarter as part of the annual effective tax rate calculation. The remaining valuation allowance of $2 million relates to state net operating loss carryforwards that we have determined are not more likely than not going to be utilized. In addition, we recognized a deferred tax asset of $167 million with a corresponding charge to equity for exchanges (the “Exchanges”) in fiscal 2021.

Changes to our deferred tax asset consisted of the following:

			Offset To
(in millions)	Deferred Tax Asset		Additional Paid-in Capital		Provision for Income Tax (Expense) Benefits		Income from Discontinued Operations
Release of valuation allowance on deferred tax assets	$	200	$	—	$	184	$	16
Exchanges and tax attributes in Fiscal 2021		167		167		—		—

As the net deferred tax assets have been recognized as of the date of divestiture, the full liability under the TRA also became probable. Therefore, for the three months ended September 25, 2021, we have recognized an additional long-term TRA liability of $380 million. The remeasurement of the TRA liability as of the date of divestiture, including 2021 exchanges of LLC Units for Class A shares in the Company prior to the remeasurement, resulted in an additional TRA expense of $298 million for the three months ended September 25, 2021. The TRA liability that is a result of the exchanges after the date of divestiture was recorded as a reduction to equity of $82 million.

Our TRA balances and changes to them consisted of the following:

	TRA Liability				Offset To
(in millions)	Current Portion		Noncurrent Portion		Additional Paid-in Capital			Other Income			Income from Discontinued Operations
As of December 26, 2020	$	2	$	—
Exchanges and tax attributes that existed prior to divestiture		—		310	$	—		$	(306	)	$	(4	)
Exchanges and tax attributes that existed on or after divestiture		—		82		(82	)		—			—
As of September 25, 2021	$	2	$	392	$	(82	)	$	(306	)	$	(4	)

See Note 18 to the condensed consolidated financial statements for further information on changes to the TRA subsequent to September 25, 2021.

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Fair Value of Financial Instruments and Interest Rate Swaps

9 Months Ended

Sep. 25, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments and Interest Rate Swaps

NOTE 13: FAIR VALUE OF FINANCIAL INSTRUMENTS AND INTEREST RATE SWAPS

Fair Value of Financial Instruments

For assets and liabilities that are measured using quoted prices in active markets (Level 1), total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs, discounts or blockage factors. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities (Level 2), adjusted for contract restrictions and other terms specific to that asset or liability. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques (Level 3) and not based on market exchange, dealer or broker traded transactions. These valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The fair value of our financial instruments are as follows:

(in millions)	Level 1		Level 2			Level 3
As of September 25, 2021
Financial instruments not carried at fair value:
Long-term debt, gross of discounts and deferred    issuance costs (Note 11)	$	—	$	(2,970	)	$	—
Financial instruments carried at fair value:
Interest rate swaps	$	—	$	(75	)	$	—
As of December 26, 2020
Financial instruments not carried at fair value:
Long-term debt, gross of discounts and deferred    issuance costs (Note 11)	$	—	$	(4,033	)	$	—
Financial instruments carried at fair value:
Interest rate swaps	$	—	$	(119	)	$	—

The fair value of the debt is based on third party quotations and is therefore classified as Level 2. The fair value of our derivative financial instruments, including interest rate swaps, are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 fair value measurement inputs such as spot rates, foreign currency exchange rates, and the instrument’s term, notional amount and discount rate.

The fair values of our financial instruments included in Cash and cash equivalents, Accounts receivable, net, Other current assets, Accounts payable and other current liabilities on the condensed consolidated balance sheets approximate their carrying amounts due to their short maturities. We measure the fair value of money market accounts, included in Cash and cash equivalents on the condensed consolidated balance sheets, on a recurring basis and have classified them as Level 1 because the fair value is measured with quoted prices in active markets. These amounts have been excluded from the table.

There were no transfers of assets or liabilities between fair value measurement levels. Transfers between fair value measurement levels are recognized at the end of the reporting period.

Interest Rate Swaps

We have multiple interest rate swaps in order to fix the LIBOR portion of our USD denominated variable rate borrowings (Note 11). As of September 25, 2021, the outstanding effective arrangements were as follows:

Notional Value (in millions)	Effective Date	Expiration Date	Fixed Rate
$100	January 29, 2018	January 29, 2022	2.41%
$275	January 29, 2018	January 29, 2023	2.48%
$275	January 29, 2018	January 29, 2023	2.49%
$475	March 29, 2019	March 29, 2024	2.40%
$750	March 4, 2020	September 29, 2024	2.07%
$250	March 29, 2020	March 29, 2024	0.93%
$225	January 29, 2021	January 29, 2024	0.42%

In August 2021, we terminated $150 million of our $250 million notional interest rate swap that had an expiration date of January 29, 2022 with a $2 million payment.

The gross amounts of our interest rate swaps, which are subject to master netting arrangements, were as follows:

(in millions)	Gross amounts recognized			Gross amount offset in Balance Sheets			Net amounts presented in Balance Sheets
As of September 25, 2021
Other long-term assets	$	1		$	(1	)	$	—
Accounts payable and other current liabilities		(39	)		—			(39	)
Other long-term liabilities		(37	)		1			(36	)
As of December 26, 2020
Accounts payable and other current liabilities	$	(43	)	$	—		$	(43	)
Other long-term liabilities		(76	)		—			(76	)

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Redeemable Noncontrolling Interests

9 Months Ended

Sep. 25, 2021

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests

NOTE 14: REDEEMABLE NONCONTROLLING INTERESTS

We report a RNCI based on the LLC Units of FTW held by Continuing LLC Owners and vested MIUs held by Management Owners. The Continuing LLC Owners (or certain permitted transferees), subject to certain restrictions, can exchange their LLC Units for shares of Class A common stock on a one-for-one basis (simultaneously cancelling an equal number of shares of Class B common stock of the exchanging member), subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions, or, at the option of the Company, for cash (based on the market price of the shares of our Class A common stock). The holders of MIUs also have the right, from time to time and subject to certain restrictions, to exchange their MIUs for LLC Units, which will then be immediately redeemed for cash or shares of Class A common stock, at the option of the Company, based on the value of such MIUs relative to their applicable distribution threshold.

The Company’s decision of whether to exchange LLC Units for Class A common stock or cash is currently made solely at the discretion of the Continuing LLC Owners through their control of our Board of Directors. Accordingly, the LLC Units owned by the Continuing LLC Owners are treated as RNCI as the holders have the option to exchange their LLC Units for cash or for shares of the Corporation’s Class A common stock. The RNCI is reported at the greater of the redemption value of the units or the carrying value as of the balance sheet date, with a corresponding adjustment to Additional paid-in capital. The redemption value of our redeemable noncontrolling interests was derived from the closing stock price of the Company’s Class A common stock on the last day of the period.

Future redemptions or direct exchanges of LLC Units by the Continuing LLC Owners will result in a change in ownership and reduce or increase the carrying value of the RNCI and increase or decrease Additional paid-in capital when FTW has positive or negative net assets, respectively.

The following table summarizes the ownership and economic interest in FTW LLC:

	September 25, 2021					December 26, 2020
(in millions except percentages)	Units Outstanding		Ownership %			Units Outstanding		Ownership %
Number of LLC Units held by McAfee Corp.		179.9		40.8	%		161.3		37.2	%
Number of LLC Units and vested MIUs held by RNCI		261.2		59.2	%		272.5		62.8	%
Total LLC Units and vested MIUs outstanding		441.1		100.0	%		433.8		100.0	%

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Earnings Per Share

9 Months Ended

Sep. 25, 2021

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 15: EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to McAfee Corp. for the periods subsequent to the Reorganization Transactions by the weighted average number of shares of Class A common stock outstanding for the same period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period in which the shares were outstanding. Diluted earnings per share has been computed in a manner consistent with that of basic net income per share while giving effect to shares of potentially dilutive common stock that were outstanding during the period.

Prior to the Reorganization Transactions, the FTW capital structure primarily included FTW LLC Units. Certain holders of these units exchanged their FTW LLC units for Class A common stock of the Corporation in the Reorganization Transactions with the remaining FTW LLC Units reflecting RNCI in the Corporation. The completion of the Reorganization Transactions created the Corporation’s current capital structure, which is not reflective of the capital structure of FTW’s business prior to the Reorganization Transactions. Therefore, earnings per share information has not been presented for the three and nine months ended September 26, 2020.

Shares of Class B common stock do not share in the earnings or losses attributable to McAfee Corp. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related FTW LLC Units, are exchangeable into shares of Class A common stock on a one-for-one basis.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and nine months ended September 25, 2021, the periods wherein the Corporation had outstanding Class A common stock.

	Three Months Ended							Nine Months Ended
(in millions except per share data)	September 25, 2021							September 25, 2021
	Continuing Operations			Discontinued Operations		Total		Continuing Operations			Discontinued Operations		Total
Numerator:
Net income (loss) attributable to McAfee Corp., basic and diluted	$	(92	)	$	834	$	742	$	(40	)	$	848	$	808
Denominator:
Weighted average shares of Class A common stock outstanding, basic and diluted		170.3			170.3		170.3		165.9			165.9		165.9
Earnings per share attributable to McAfee Corp., basic and diluted
Earnings per share, basic and diluted(1)	$	(0.54	)	$	4.90	$	4.36	$	(0.24	)	$	5.11	$	4.87

(1)For the three and nine months ended September 25, 2021, 278.4 million and 274.6 million weighted average units were excluded from dilution, respectively. The excluded units consist primarily of RNCI that is excluded from dilution because its effects would have been anti-dilutive. 

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Variable Interest Entities

9 Months Ended

Sep. 25, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Variable Interest Entities

NOTE 16: VARIABLE INTEREST ENTITIES

Upon completion of our IPO, McAfee Corp. became the sole managing member of FTW with 100% of the management and voting power in FTW. In its capacity as managing member, McAfee Corp. has the sole authority to make decisions on behalf of FTW and bind FTW to signed agreements. Further, FTW maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that FTW is a limited partnership or similar legal entity as contemplated in ASC 810, Consolidation.

Further, management concluded that McAfee Corp. is FTW’s primary beneficiary based on two conditions. First, McAfee Corp., in its capacity as managing member with sole voting rights, has the power to direct the activities of FTW that most significantly impact its economic performance, including selecting, terminating and setting the compensation of management responsible for FTW’s policies and procedures, as well as establishing the strategic, operating and capital decisions of FTW in the ordinary course of business. Second, McAfee Corp. has an obligation to absorb potential losses of FTW or the right to receive potential benefits from FTW in proportion to its equity interest. As the primary beneficiary, McAfee Corp. consolidates the results of FTW for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

The following table reflects the balance sheet of FTW that is consolidated within the condensed consolidated balance sheets, including Receivable from Parent, net and McAfee Corp.’s interest in the variable interest entity (“VIE”) that are eliminated upon consolidation.

(in millions)	September 25, 2021			December 26, 2020
Assets
Current assets:
Cash and cash equivalents	$	567		$	231
Accounts receivable, net		124			102
Deferred costs		171			137
Receivable from Enterprise Business		116			—
Other current assets		36			42
Held-for-sale assets		31			—
Current assets of discontinued operations		—			402
Total current assets		1,045			914
Property and equipment, net		55			98
Goodwill		1,018			1,018
Identified intangible assets, net		595			729
Deferred tax assets		44			24
Receivable from Parent, net		—			46
Other long-term assets		92			67
Long-term assets of discontinued operations		—			2,578
Total assets	$	2,849		$	5,474
Liabilities and deficit
Current liabilities:
Accounts payable and other current liabilities	$	276		$	219
Accrued compensation and benefits		66			179
Accrued marketing		101			118
Income taxes payable		44			14
Long-term debt, current portion		44			44
Liability to Parent, net		4			—
Deferred revenue		953			823
Payable to Enterprise Business		50			—
Current liabilities of discontinued operations		—			972
Total current liabilities		1,538			2,369
Long-term debt, net		2,889			3,943
Deferred tax liabilities		17			5
Other long-term liabilities		130			155
Deferred revenue, less current portion		91			80
Long-term liabilities of discontinued operations		—			660
Total liabilities		4,665			7,212
Members’ deficit:
Deficit attributable to Continuing LLC Owners		(1,075	)		(1,092	)
Deficit attributable to McAfee Corp.		(741	)		(646	)
Total deficit		(1,816	)		(1,738	)
Total liabilities and deficit	$	2,849		$	5,474

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Commitments and Contingencies

9 Months Ended

Sep. 25, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 17: COMMITMENTS AND CONTINGENCIES

As of September 25, 2021, we have unconditional purchase obligations, including those related to our discontinued operations in connection with costs to support our obligations under our transition services agreement, of $420 million that expire at various dates through 2026 and guarantees of $10 million that expire at various dates through 2028.

We are a party to various legal proceedings that have arisen in the ordinary course of our business. At present, we do not expect that any ordinary course legal proceedings, individually or in the aggregate, will have a material adverse effect on our business, results of operations, financial condition or cash flows.

In the ordinary course of our business, we are subject to examination by taxing authorities for both direct and indirect taxes in many of the domestic and foreign jurisdictions in which we operate. We are unable to make a reasonably reliable estimate as to when or if settlements with taxing authorities may occur. However, we do not anticipate that the resolution of these tax matters or any events related thereto will have a material adverse effect on our business, results of operations, financial condition or cash flows.

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Subsequent Events

9 Months Ended

Sep. 25, 2021

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 18: SUBSEQUENT EVENTS

On November 5, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Condor BidCo, Inc., a Delaware corporation (“Parent”), and Condor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company whereupon the separate corporate existence of Merger Subsidiary will cease and the Company will be the surviving corporation in the Merger (the “Surviving Corporation”) and will continue as a wholly owned subsidiary of Parent (the “Merger”).

As a result of the Merger, at the effective time of the Merger (the “Effective Time”) (subject to certain exceptions, including for shares of Class A Common Stock of the Company and Class B Common Stock of the Company (collectively, the “Company Stock”) owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware), each share of Company Stock outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive $26.00 in cash, without interest (the per share consideration, the “Per Share Consideration” and the aggregate consideration, the “Merger Consideration”).

Pursuant to the Merger Agreement, immediately prior to the Effective Time, except as provided therein, (i) the Company will require each member of FTW to effect an exchange of all such member’s vested MIUs (if any) for New Class A Units, and, thereafter, will require each member to effect a redemption of all of such member’s Class A LLC Units and Class B Common Stock in exchange for shares of Class A Common Stock (the “Exchange and Redemption”) and (ii) each share of Class B Common Stock will automatically be canceled immediately upon the consummation of the Exchange and Redemption, such that no shares of Class B Common Stock remain outstanding immediately prior to the Effective Time. In addition, the Board shall take all actions so that all MIUs of FTW shall be vested in full as of immediately prior to the Exchange and Redemption.

Pursuant to the Merger Agreement, immediately prior to the Effective Time:

(i) each in-the-money option to purchase shares of Company Stock (a “Company Stock Option”) that is outstanding and vested (including each in-the-money option that accelerates and becomes vested by its terms in connection with the transactions) will be canceled and converted into the right to receive, without interest, an amount in cash determined by multiplying the excess of the Per Share Consideration over the option exercise price by the number of shares of Company Stock subject to such option as of immediately prior to the Effective Time;

(ii) each Company Stock Option that is not an in-the-money Company Stock Option shall be canceled for no consideration;

(iii) each restricted stock unit (“Company RSU”) and performance stock unit (“Company PSU”, and collectively with the Company Stock Options, shares of restricted Company Stock and Company RSUs, “Company Awards”) with respect to Company Stock that is outstanding and vested (including each Company RSU and each Company PSU that accelerates and becomes vested by its terms in connection with the transactions) will be canceled and converted into the right to receive, without interest, an amount in cash equal to the number of shares of Company Stock subject to the vested Company RSU or Company PSU award as of immediately prior to the Effective Time multiplied by the Per Share Consideration; and

(iv) each Company Award that is then outstanding and not vested will be converted into a cash award, which will remain subject to the same time-vesting terms and conditions that apply immediately prior to closing, will be paid out on the next payroll date following the applicable vesting date, so long as the applicable portion becomes vested prior to the holder’s termination of service, and will be subject to vesting, payment and other conditions that are no less favorable to the holder than those that applied to the corresponding award immediately prior to closing.

Each cash award will provide the holder with the opportunity to be paid an amount in cash equal to (1) with respect to each in-the-money Company Stock Option that is not vested, (A) the excess of the Per Share Consideration over the option exercise price of such in-the-money Company Stock Option multiplied by (B) the number of shares of Common Stock subject to such in-the-money Company Stock Option as of immediately prior to the closing and (2) with respect to each restricted stock award, Company RSU, or Company PSU that is not vested, (A) the number of shares of Company Stock subject to such restricted stock award, Company RSU, or Company PSU as of immediately prior to the closing multiplied by (B) the Per Share Consideration; provided, that (x) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends on or ended prior to the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU converted into the Cash Award, such Company PSU shall be deemed earned based on the actual performance during such performance period, and (y) in the case of a Company PSU that is not vested and that has an applicable one-year performance period that ends after the closing, for purposes of determining the number of shares of Company Stock subject to such Company PSU converted into the Cash Award, the number of shares of Company Stock subject to such Company PSU shall be determined as though such performance conditions were satisfied at the applicable target levels. Each award payable in a fixed amount of cash issued in connection with the initial public offering of the Company to employees in certain jurisdictions, and each right to receive previously accrued but not yet paid cash dividends or distributions in respect of Company Awards, Class A LLC Units, or MIUs of FTW will be assumed, honored, or continued in accordance with its terms defined in the Merger Agreement.

The Company has made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants to use reasonable best efforts to conduct its business in the ordinary course during the period between the date of the Merger Agreement and the Closing. The parties have agreed to use reasonable best efforts to take all actions necessary to consummate the merger, including cooperating to obtain the regulatory approvals necessary to complete the Merger.

Until 11:59 p.m. (New York City time) on the date that is (i) forty five (45) calendar days following the date of the Merger Agreement (the “No Shop Period Start Date”) or (ii) in respect of any Excluded Party (as defined in the Merger Agreement), fifteen (15) days after the No Shop Period Start Date (the “Cut-Off Date”; such time period, the “Go Shop Period”), the Company, its subsidiaries and their respective directors, officers, employees and other representatives have the right to, among other things, directly or indirectly, (1) solicit alternative acquisition proposals and (2) provide information (including nonpublic information) to third parties in connection therewith pursuant to an acceptable confidentiality agreement. From and after the Cut-Off Date or the No Shop Period Start Date (as applicable), the Company, its subsidiaries and its and their respective representatives must comply with customary non-solicitation restrictions. Subject to certain customary “fiduciary out” exceptions, the Board is required to recommend that the Company’s stockholders adopt the Merger Agreement.

In connection with the closing of the Merger, the Company, FTW and certain other parties thereto have entered into a Tax Receivable Agreement and LLC Agreement Amendment (the “Amendment”). The Amendment provides for, among other things, (i) the payment of amounts due under the tax receivable agreement currently in effect (the “TRA”) with respect to U.S. federal income tax year 2020 of the Company in accordance with the terms of the TRA up to an aggregate amount of $2 million, which payments shall be paid no later than 10 business days prior to the Closing Date, (ii) the suspension of all other payments under the TRA from and after November 5, 2021 and (iii) the amendment of the TRA, effective as of immediately prior to and contingent upon the occurrence of the Effective Time of the Merger, which shall result in the TRA (and all of the Company’s obligations thereunder, including the obligation to make any of the foregoing suspended payments) terminating immediately prior to the Effective Time of the Merger.

The obligation of the parties to consummate the Merger is subject to receipt of stockholder approval, the expiration of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, receipt of clearance under other regulatory approvals, clearance by the Committee on Foreign Investment in the United States and other customary conditions.

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Recent Accounting Standards (Policies)

9 Months Ended

Sep. 25, 2021

Accounting Policies [Abstract]

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. ASU 2019-12 also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. We adopted ASU 2019-12 on December 27, 2020 and it had no material impact on our consolidated financial statements and related disclosures.

Recent Accounting Standards Not Yet Adopted

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies current guidance for convertible financial instruments. ASU 2020-06 also amends derivatives guidance for certain contracts in an entity’s own equity. Finally, ASU 2020-06 amends earnings per share guidance related to convertible instruments. ASU 2020-06 is effective for us in the first quarter of fiscal year 2022. We do not expect adoption of ASU 2020-06 to have a material effect on our consolidated financial statements. 

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Discontinued Operations and Held For Sale Assets (Tables)

9 Months Ended

Sep. 25, 2021

Discontinued Operations and Disposal Groups [Abstract]

Schedule Of Gain Before Income Taxes Associated With The Sale

The following table presents the gain associated with the sale, presented in the results of our discontinued operations below:

(in millions)
Gross purchase price	$	4,000
Net assets sold		(1,283	)
Transaction costs		(83	)
Pre-tax gain on divestiture of Enterprise Business		2,634
Income tax expense on gain on divestiture of Enterprise Business		(383	)
Total gain on divestiture of Enterprise Business	$	2,251

Schedule Of Carrying Value of the Net Assets Sold Disposal Group

The carrying value of the net assets sold are as follow:

(in millions)
Accounts receivable, net	$	155
Deferred costs		95
Other current assets		16
Property and equipment, net		55
Intangible assets, net		881
Goodwill		1,413
Other long-term assets		159
Accounts payable and other current liabilities		(57	)
Accrued compensation and benefits		(20	)
Accrued marketing		(9	)
Deferred revenue		(1,345	)
Other long-term liabilities		(60	)
Total net assets sold	$	1,283

Receivable from and Payable to Purchaser of Enterprise Business

Our Receivable from and Payable to Enterprise Business consisted of the following:

(in millions)	September 25, 2021
Receivable from Enterprise Business
Proceeds receivable(1)	$	65
TSA receivables and misdirected payments		51
Total	$	116
Payable to Enterprise Business
Transaction costs		(26	)
Misdirected payments		(24	)
Total	$	(50	)

(1)Amount primarily related to receivable due on delayed closing in certain non-U.S. jurisdictions. In November 2021, $56 million of this amount was received upon closing of certain of these jurisdictions.

Schedule of Assets and Liabilities to be Sold

Discontinued Operations

The following table presents the aggregate amounts of the classes of assets and liabilities of the Enterprise Business classified as discontinued operations:

(in millions)	December 26, 2020
Assets:
Accounts receivable, net	$	290
Deferred costs		96
Other current assets		16
Total current assets of discontinued operations		402
Property and equipment, net		51
Intangible assets, net		915
Goodwill		1,413
Deferred tax assets		43
Other long-term assets		156
Total assets of discontinued operations	$	2,980
Liabilities:
Accounts payable and other current liabilities	$	56
Accrued compensation and benefits		18
Accrued marketing		6
Deferred revenue		892
Total current liabilities of discontinued operations		972
Deferred tax liabilities		7
Other long-term liabilities		49
Deferred revenue, less current portion		604
Total liabilities of discontinued operations	$	1,632

Summary of Components of Income

The following table presents information regarding certain components of income from discontinued operations, net of taxes:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Net revenue	$	104	$	333	$	781	$	997
Operating income	$	26	$	46	$	95	$	100
Pre-tax gain on divestiture of Enterprise Business	$	2,634	$	—	$	2,634	$	—
Income before income taxes	$	2,659	$	46	$	2,724	$	100
Income tax expense(1)	$	239	$	7	$	257	$	25
Income from discontinued operations, net of taxes	$	2,420	$	39	$	2,467	$	75

(1)Income tax expense for the three and nine months ended September 25, 2021 includes $383 million of income tax expense on gain on divestiture of Enterprise Business. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW as it is recognized as result of the divestiture of Enterprise Business.

Summary of Significant Non-Cash Items and Capital Expenditures

The following table presents significant non-cash items and capital expenditures of discontinued operations:

	Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020
Depreciation and amortization	$	43	$	167
Equity-based compensation expense	$	36	$	4
Additions to property and equipment	$	4	$	6

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Revenue from Contract with Customers (Tables)

9 Months Ended

Sep. 25, 2021

Revenue From Contract With Customer [Abstract]

Schedule of Revenue by Geographic Region

Net revenue by geographic region based on the sell-to address of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Americas	$	327		66.6	%	$	260		65.8	%	$	928		66.3	%	$	742		65.5	%
EMEA		113		23.0	%		93		23.5	%		326		23.3	%		268		23.7	%
APJ		51		10.4	%		42		10.6	%		146		10.4	%		122		10.8	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

Net revenue by country based on the sell-to address of the end-users is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
U.S.	$	300	$	238	$	852	$	680
Other(1)		191		157		548		452
Total net revenue	$	491	$	395	$	1,400	$	1,132

(1)No other individual country accounted for more than 10% of net revenue.

Schedule of Revenue by Channel

Net revenue by channel of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Direct to Consumer	$	356		72.5	%	$	305		77.2	%	$	1,029		73.5	%	$	879		77.7	%
Indirect		135		27.5	%		90		22.8	%		371		26.5	%		253		22.3	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

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Leases (Tables)

9 Months Ended

Sep. 25, 2021

Leases [Abstract]

Schedule of Information Related to Leases

Information related to our leases, including leases associated with our discontinued operations, was as follows:

	Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020
Cash paid for amounts included in the measurement of lease liabilities	$	22	$	29
Right-of-use assets obtained in exchange for lease obligations		33		16
Lease expense from continuing operations	$	8	$	11
Lease expense from discontinued operations		7		17
Total lease expense	$	15	$	28

Schedule of Balance Sheet Information Related to Leases

Balance sheet information related to leases, excluding leases associated with our discontinued operations, was as follows:

(in millions)	September 25, 2021			December 26, 2020
Other long-term assets	$	29		$	33
Accounts payable and other current liabilities	$	7		$	8
Other long-term liabilities		35			38
Total lease liabilities	$	42		$	46
Weighted Average Remaining Lease Term (in years)		7			8
Weighted Average Discount Rate (percentage)		6.3	%		6.3	%

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities were as follows:

(in millions)	September 25, 2021
Remainder of 2021	$	3
2022		8
2023		6
2024		5
2025		5
Thereafter		26
Total lease payments		53
Less imputed interest		(11	)
Total lease liabilities	$	42

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Transactions with Members, Shareholders and Related Parties (Tables)

9 Months Ended

Sep. 25, 2021

Related Party Transactions [Abstract]

Summary of Dividends Declared or Paid

Total tax and excess cash distributions to its members declared by FTW were as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
FTW members excluding McAfee Corp.	$	1,726	$	70	$	1,878	$	201
McAfee Corp.		1,052		—		1,142		—
Total tax and excess cash distributions declared	$	2,778	$	70	$	3,020	$	201

McAfee Corp. used a portion of its share of the cash distributions declared by FTW to declare or pay the dividends noted in the table below during the nine months ended September 25, 2021. Remaining distributions received by McAfee Corp. were used for corporate taxes and general corporate purposes.

Declaration Date	Record Date	Payment Date	Dividend per Share		Amount (in millions)
December 9, 2020	December 24, 2020	January 7, 2021	$	0.087	$	14
March 11, 2021	March 26, 2021	April 9, 2021	$	0.115	$	19
June 10, 2021	June 25, 2021	July 9, 2021	$	0.115	$	19
August 3, 2021	August 13, 2021	August 27, 2021	$	4.500	$	760
September 13, 2021	September 24, 2021	October 8, 2021	$	0.115	$	21

Summary of Transactions with Related Parties

These transactions include sales of our products and purchases of various goods or services.

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Sales with related parties:
Intel	$	—	$	1	$	—	$	1
TPG		—		1		—		1
TPG affiliates	$	—	$	1	$	1	$	2
Other		—		—		—		2
Total	$	—	$	3	$	1	$	6
Payments to related parties:
Intel	$	—	$	—	$	1	$	2
TPG		—		1		—		6
TPG affiliates		3		8		21		23
Other		11		—		13		9
Total	$	14	$	9	$	35	$	40

Schedule of Receivable, Net

Our Intel receivable, net consisted of the following:

(in millions)	September 25, 2021			December 26, 2020
Intel receivable(1)
Tax indemnity	$	9		$	8
Total		9			8
Intel payable(1)
Tax indemnity		(3	)		(2	)
Total		(3	)		(2	)
Total, net(2)	$	6		$	6

(1)We have the contractual right of offset of our receivables and payables with Intel.

As of September 25, 2021, $5 million and $1 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet. As of December 26, 2020, $3 million and $3 million are recorded in Other current assets and Other long-term assets, respectively, on the condensed consolidated balance sheet.

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 25, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets, Net

Intangible Assets, Net

	September 25, 2021							December 26, 2020
(in millions)	Gross Assets		Accumulated Amortization			Net		Gross Assets		Accumulated Amortization			Net
Intangible assets subject to amortization:
Customer relationships and other	$	758	$	(619	)	$	139	$	758	$	(556	)	$	202
Acquired and developed technology		517		(472	)		45		517		(401	)		116
Total intangible assets subject to    amortization		1,275		(1,091	)		184		1,275		(957	)		318
Intangible assets not subject to amortization:
Brand		411		—			411		411		—			411
Total intangible assets not subject to    amortization		411		—			411		411		—			411
Total intangible assets	$	1,686	$	(1,091	)	$	595	$	1,686	$	(957	)	$	729

Schedule of Amortization Expense For Purchased and Developed Intangible Assets

Amortization expense for purchased and developed intangible assets is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020		Statements of Operations Classification
Customer relationships and other	$	13	$	36	$	63	$	108	Amortization of intangibles
Acquired and developed technology		22		26		71		80	Cost of sales
Total	$	35	$	62	$	134	$	188

Schedule of Future Amortization Expense

Based on identified intangible assets that are subject to amortization as of September 25, 2021, we expect future amortization expense to be as follows:

(in millions)	Total
Remainder of 2021	$	36
2022		76
2023		28
2024		20
2025		19
Thereafter		5
Total	$	184

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Segment and Geographic Information (Tables)

9 Months Ended

Sep. 25, 2021

Segment Reporting [Abstract]

Revenue by geographic region

Net revenue by geographic region based on the sell-to address of the end-users is as follows:

	Three Months Ended										Nine Months Ended
(in millions except percentages)	September 25, 2021		% of Total			September 26, 2020		% of Total			September 25, 2021		% of Total			September 26, 2020		% of Total
Americas	$	327		66.6	%	$	260		65.8	%	$	928		66.3	%	$	742		65.5	%
EMEA		113		23.0	%		93		23.5	%		326		23.3	%		268		23.7	%
APJ		51		10.4	%		42		10.6	%		146		10.4	%		122		10.8	%
Total net revenue	$	491		100.0	%	$	395		100.0	%	$	1,400		100.0	%	$	1,132		100.0	%

Net revenue by country based on the sell-to address of the end-users is as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
U.S.	$	300	$	238	$	852	$	680
Other(1)		191		157		548		452
Total net revenue	$	491	$	395	$	1,400	$	1,132

(1)No other individual country accounted for more than 10% of net revenue.

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Restructuring And Transition Charges (Tables)

9 Months Ended

Sep. 25, 2021

Restructuring And Related Activities [Abstract]

Schedule of Restructuring Charges

Restructuring and transition charges are as follows:

	Three Months Ended				Nine Months Ended
(in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Employee severance and benefits	$	—	$	—	$	8	$	1
Transition charges		27		—		27		—
Restructuring and transition charges attributable to continuing operations		27		—		35		1
Employee severance and benefits		1		—		25		8
Facility restructuring		—		—		1		—
Restructuring charges attributable to discontinued operations		1		—		26		8
Total restructuring and transition charges	$	28	$	—	$	61	$	9

Schedule of Balance of Restructuring Activities

(in millions)	Total
Employee severance and benefits
As of December 26, 2020	$	16
Additional accruals, inclusive of expenses attributed to discontinued operations		33
Cash payments		(46	)
As of September 25, 2021	$	3

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Employee Incentives (Tables)

9 Months Ended

Sep. 25, 2021

Schedule of Equity Based Compensation Costs Recognized

Equity-Based Compensation

Equity-based compensation costs recognized in our condensed consolidated statements of operations were:

	Three Months Ended					Nine Months Ended
(in millions)	September 25, 2021			September 26, 2020		September 25, 2021		September 26, 2020
Cost of sales	$	1		$	—	$	3	$	—
Sales and marketing		2			—		9		1
Research and development		6			1		16		1
General and administrative		8			4		22		19
Total equity-based compensation expense from continuing operations		17			5		50		21
Discontinued operations		(9	)		1		36		4
Total equity-based compensation expense	$	8		$	6	$	86	$	25

Schedule of Outstanding Deferred Cash and Equity Related to Acquisitions

As of September 25, 2021, our outstanding deferred cash and equity related to our acquisitions is as follows:

	(in millions)
Outstanding deferred cash and equity balance at December 26, 2020	$	13
Accruals		6
Cash payment		(15	)
Outstanding deferred cash and equity balance at September 25, 2021	$	4

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Debt (Tables)

9 Months Ended

Sep. 25, 2021

Debt Disclosure [Abstract]

Schedule of Long-term Debt

Our long-term debt balance consisted of the following:

(in millions)	September 25, 2021			December 26, 2020
Long-term debt, net:
1st Lien USD Term Loan(1)	$	2,355		$	2,701
1st Lien Euro Term Loan(2)		585			1,298
Long-term debt, net of unamortized discounts		2,940			3,999
Unamortized deferred financing costs		(7	)		(12	)
Current installments of long-term debt		(44	)		(44	)
Total	$	2,889		$	3,943

(1)During the nine months ended September 25, 2021, the weighted average interest rate was 3.9%

(2)During the nine months ended September 25, 2021, the weighted average interest rate was 3.5%

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Income Tax (Tables)

9 Months Ended

Sep. 25, 2021

Income Tax Disclosure [Abstract]

Schedule Of Changes To Our Deferred Tax Assets

Changes to our deferred tax asset consisted of the following:

			Offset To
(in millions)	Deferred Tax Asset		Additional Paid-in Capital		Provision for Income Tax (Expense) Benefits		Income from Discontinued Operations
Release of valuation allowance on deferred tax assets	$	200	$	—	$	184	$	16
Exchanges and tax attributes in Fiscal 2021		167		167		—		—

Schedule Of Tax Receivable Agreement Balances And Changes

Our TRA balances and changes to them consisted of the following:

	TRA Liability				Offset To
(in millions)	Current Portion		Noncurrent Portion		Additional Paid-in Capital			Other Income			Income from Discontinued Operations
As of December 26, 2020	$	2	$	—
Exchanges and tax attributes that existed prior to divestiture		—		310	$	—		$	(306	)	$	(4	)
Exchanges and tax attributes that existed on or after divestiture		—		82		(82	)		—			—
As of September 25, 2021	$	2	$	392	$	(82	)	$	(306	)	$	(4	)

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Fair Value of Financial Instruments and Interest Rate Swaps (Tables)

9 Months Ended

Sep. 25, 2021

Fair Value Disclosures [Abstract]

Summary of Fair Value of Financial Instruments

The fair value of our financial instruments are as follows:

(in millions)	Level 1		Level 2			Level 3
As of September 25, 2021
Financial instruments not carried at fair value:
Long-term debt, gross of discounts and deferred    issuance costs (Note 11)	$	—	$	(2,970	)	$	—
Financial instruments carried at fair value:
Interest rate swaps	$	—	$	(75	)	$	—
As of December 26, 2020
Financial instruments not carried at fair value:
Long-term debt, gross of discounts and deferred    issuance costs (Note 11)	$	—	$	(4,033	)	$	—
Financial instruments carried at fair value:
Interest rate swaps	$	—	$	(119	)	$	—

Schedule of Interest Rate Outstanding Effective Arrangements

As of September 25, 2021, the outstanding effective arrangements were as follows:

Notional Value (in millions)	Effective Date	Expiration Date	Fixed Rate
$100	January 29, 2018	January 29, 2022	2.41%
$275	January 29, 2018	January 29, 2023	2.48%
$275	January 29, 2018	January 29, 2023	2.49%
$475	March 29, 2019	March 29, 2024	2.40%
$750	March 4, 2020	September 29, 2024	2.07%
$250	March 29, 2020	March 29, 2024	0.93%
$225	January 29, 2021	January 29, 2024	0.42%

Schedule of Gross Amounts of Interest Rate Swaps Subject to Master Netting Arrangements

The gross amounts of our interest rate swaps, which are subject to master netting arrangements, were as follows:

(in millions)	Gross amounts recognized			Gross amount offset in Balance Sheets			Net amounts presented in Balance Sheets
As of September 25, 2021
Other long-term assets	$	1		$	(1	)	$	—
Accounts payable and other current liabilities		(39	)		—			(39	)
Other long-term liabilities		(37	)		1			(36	)
As of December 26, 2020
Accounts payable and other current liabilities	$	(43	)	$	—		$	(43	)
Other long-term liabilities		(76	)		—			(76	)

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Redeemable Noncontrolling Interest (Tables)

9 Months Ended

Sep. 25, 2021

Noncontrolling Interest [Abstract]

Summary of the Ownership and Economic Interest in FTW LLC

The following table summarizes the ownership and economic interest in FTW LLC:

	September 25, 2021					December 26, 2020
(in millions except percentages)	Units Outstanding		Ownership %			Units Outstanding		Ownership %
Number of LLC Units held by McAfee Corp.		179.9		40.8	%		161.3		37.2	%
Number of LLC Units and vested MIUs held by RNCI		261.2		59.2	%		272.5		62.8	%
Total LLC Units and vested MIUs outstanding		441.1		100.0	%		433.8		100.0	%

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Earnings Per Share (Tables)

9 Months Ended

Sep. 25, 2021

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock for the three and nine months ended September 25, 2021, the periods wherein the Corporation had outstanding Class A common stock.

	Three Months Ended							Nine Months Ended
(in millions except per share data)	September 25, 2021							September 25, 2021
	Continuing Operations			Discontinued Operations		Total		Continuing Operations			Discontinued Operations		Total
Numerator:
Net income (loss) attributable to McAfee Corp., basic and diluted	$	(92	)	$	834	$	742	$	(40	)	$	848	$	808
Denominator:
Weighted average shares of Class A common stock outstanding, basic and diluted		170.3			170.3		170.3		165.9			165.9		165.9
Earnings per share attributable to McAfee Corp., basic and diluted
Earnings per share, basic and diluted(1)	$	(0.54	)	$	4.90	$	4.36	$	(0.24	)	$	5.11	$	4.87

(1)For the three and nine months ended September 25, 2021, 278.4 million and 274.6 million weighted average units were excluded from dilution, respectively. The excluded units consist primarily of RNCI that is excluded from dilution because its effects would have been anti-dilutive. 

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 25, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Schedule of Variable Interest Entities

The following table reflects the balance sheet of FTW that is consolidated within the condensed consolidated balance sheets, including Receivable from Parent, net and McAfee Corp.’s interest in the variable interest entity (“VIE”) that are eliminated upon consolidation.

(in millions)	September 25, 2021			December 26, 2020
Assets
Current assets:
Cash and cash equivalents	$	567		$	231
Accounts receivable, net		124			102
Deferred costs		171			137
Receivable from Enterprise Business		116			—
Other current assets		36			42
Held-for-sale assets		31			—
Current assets of discontinued operations		—			402
Total current assets		1,045			914
Property and equipment, net		55			98
Goodwill		1,018			1,018
Identified intangible assets, net		595			729
Deferred tax assets		44			24
Receivable from Parent, net		—			46
Other long-term assets		92			67
Long-term assets of discontinued operations		—			2,578
Total assets	$	2,849		$	5,474
Liabilities and deficit
Current liabilities:
Accounts payable and other current liabilities	$	276		$	219
Accrued compensation and benefits		66			179
Accrued marketing		101			118
Income taxes payable		44			14
Long-term debt, current portion		44			44
Liability to Parent, net		4			—
Deferred revenue		953			823
Payable to Enterprise Business		50			—
Current liabilities of discontinued operations		—			972
Total current liabilities		1,538			2,369
Long-term debt, net		2,889			3,943
Deferred tax liabilities		17			5
Other long-term liabilities		130			155
Deferred revenue, less current portion		91			80
Long-term liabilities of discontinued operations		—			660
Total liabilities		4,665			7,212
Members’ deficit:
Deficit attributable to Continuing LLC Owners		(1,075	)		(1,092	)
Deficit attributable to McAfee Corp.		(741	)		(646	)
Total deficit		(1,816	)		(1,738	)
Total liabilities and deficit	$	2,849		$	5,474

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Basis of Presentation - Additional Information (Details) $ / shares in Units, shares in Millions, $ in Millions			1 Months Ended	3 Months Ended		9 Months Ended			12 Months Ended
	Mar. 06, 2021 USD ($)	Oct. 21, 2020	Oct. 31, 2020 USD ($) $ / shares shares	Sep. 25, 2021 USD ($) $ / shares	Sep. 26, 2020 USD ($)	Sep. 25, 2021 USD ($) Segment $ / shares	Sep. 26, 2020 USD ($)	Sep. 26, 2020 USD ($)	Dec. 26, 2020 Segment $ / shares
Basis Of Presentation [Line Items]
Business, formation date						Jul. 19, 2019
Proceeds from issuance of common stock						$ 11	$ 2
Proceeds from divesture of businesses	$ 4,000
Number of reportable segments | Segment						1			2
Divestiture transaction expire date	Jul. 27, 2021
General and administrative				$ 51	$ 43	$ 143		$ 141
Class A Common Stock
Basis Of Presentation [Line Items]
Common Stock, par value | $ / shares				$ 0.001		$ 0.001			$ 0.001
Shares settlement, exchange ratio			1	1
Stock issued for exchange of ownership | shares			126.3
Class A Common Stock | RSUs
Basis Of Presentation [Line Items]
Settled restricted stock units | shares			5.7
Initial Public Offering
Basis Of Presentation [Line Items]
Common stock, shares, issued | shares			31.0
Proceeds from issuance of common stock			$ 586
Initial Public Offering | Class A Common Stock
Basis Of Presentation [Line Items]
Common stock, shares, issued | shares			37.0
Common Stock, par value | $ / shares			$ 0.001
Common stock per share | $ / shares			$ 20.00
Foundation Technology Worldwide L L C
Basis Of Presentation [Line Items]
Percentage of ownership after the reorganization transaction		100.00%				100.00%
LLC Units | Initial Public Offering
Basis Of Presentation [Line Items]
Purchase of issued and outstanding LLC units cost			$ 553
Continuing LLC Owners | Initial Public Offering
Basis Of Presentation [Line Items]
Purchase of issued and outstanding LLC units cost			$ 33

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Recent Accounting Standards - Additional Information (Details)	Sep. 25, 2021
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Change in accounting principle, accounting standards update, immaterial effect	true
ASU 2019-12
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Change in accounting principle, accounting standards update, adopted	true
Change in accounting principle, accounting standards update, adoption date	Dec. 27, 2020

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Discontinued Operations And Held For Sale Assets - Additional Information (Details) $ / shares in Units, $ in Millions					3 Months Ended		6 Months Ended		9 Months Ended
		Sep. 13, 2021 USD ($) ft²	Aug. 13, 2021 USD ($)	Mar. 06, 2021 USD ($)	Sep. 25, 2021 USD ($)	Sep. 26, 2020 USD ($)	Jun. 26, 2021 USD ($)	Jun. 26, 2020 USD ($)	Sep. 25, 2021 USD ($)	Sep. 26, 2020 USD ($)	Aug. 31, 2021 $ / shares	Dec. 26, 2020 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from divesture of businesses				$ 4,000
Income tax benefit in discontinued operations	[1]				$ (239)	$ (7)			$ (257)	$ (25)
Gain on disposal of discontinued operation, net of tax									2,251
Distribution amount			$ 2,800
Consulting and legal fees					16				77
Derivative notional amount terminated									150
Loss on extinguishment of debt					10
Notional Value					250				$ 250
Derivative notional expiration date									Jan. 29, 2022
Income from discontinued operations, net of taxes					2,420	$ 39			$ 2,467	$ 75
Income loss from discontinued operations net of tax decreased							$ 4	$ 4
Discontinued operation assets												$ 2,980
Total assets from discontinued assets increased												$ 18
TSA
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Other income					7
Commercial service agreement income					13
Commercial service agreement revenue					2
Commercial service agreement deferred revenue					$ 11				$ 11
Class A Common Stock
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Dividend per Share | $ / shares											$ 4.50
Plano Facility
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Land and office building area | ft²		170,000
Purchase Price of Sold Property		$ 31

[1] Income tax expense for the three and nine months ended September 25, 2021 includes $383 million of income tax expense on gain on divestiture of Enterprise Business. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW as it is recognized as result of the divestiture of Enterprise Business.

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Discontinued Operations And Held For Sale Assets - Schedule of Gain Before Income Taxes Associated With The Sale Disposal Group (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 25, 2021	Sep. 25, 2021
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gross purchase price		$ 4,000
Net assets sold		(1,283)
Transaction costs		(83)
Pre-tax gain on divestiture of Enterprise Business		2,634
Income tax expense on gain on divestiture of Enterprise Business	$ (383)	(383)
Total gain on Divestiture of Enterprise Business		$ 2,251

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Discontinued Operations And Held For Sale Assets - Schedule of Carrying Value of the Net Assets Sold (Details) $ in Millions	Sep. 25, 2021 USD ($)
Discontinued Operations and Disposal Groups [Abstract]
Accounts receivable, net	$ 155
Deferred costs	95
Other current assets	16
Property and equipment, net	55
Intangible assets, net	881
Goodwill	1,413
Other long-term assets	159
Accounts payable and other current liabilities	(57)
Accrued compensation and benefits	(20)
Accrued marketing	(9)
Deferred revenue	(1,345)
Other long-term liabilities	(60)
Total net assets sold	$ 1,283

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Discontinued Operations and Held-For-Sale Assets - Summary of Receivable From and Payable To Enterprise Business (Details) - USD ($) $ in Millions	Nov. 30, 2021	Sep. 25, 2021		Dec. 26, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds receivable	$ 56	$ 65	[1]
TSA Receivables and Misdirected Payments		51
Total		116		$ 290
Transaction costs		(26)
Misdirected payments		(24)
Total		$ (50)

[1] Amount primarily related to receivable due on delayed closing in certain non-U.S. jurisdictions. In November 2021, $56 million of this amount was received upon closing of certain of these jurisdictions.

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Discontinued Operations and Held-For-Sale Assets - Summary of Receivable From and Payable To Enterprise Business (Parenthetical) (Details) - USD ($) $ in Millions	Nov. 30, 2021	Sep. 25, 2021
Discontinued Operations and Disposal Groups [Abstract]
Proceeds receivable	$ 56	$ 65	[1]

[1] Amount primarily related to receivable due on delayed closing in certain non-U.S. jurisdictions. In November 2021, $56 million of this amount was received upon closing of certain of these jurisdictions.

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Discontinued Operations And Held For Sale Assets - Schedule of Assets and Liabilities to be Sold (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Assets:
Accounts receivable, net	$ 116	$ 290
Deferred costs		96
Other current assets		16
Total current assets of discontinued operations	0	402
Property and equipment, net		51
Intangible assets, net		915
Goodwill		1,413
Deferred tax assets		43
Other long-term assets		156
Total assets of discontinued operations		2,980
Liabilities:
Accounts payable and other current liabilities		56
Accrued compensation and benefits		18
Accrued marketing		6
Deferred revenue		892
Total current liabilities of discontinued operations	$ 0	972
Deferred tax liabilities		7
Other long-term liabilities		49
Deferred revenue, less current portion		604
Total liabilities of discontinued operations		$ 1,632

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Discontinued Operations And Held For Sale Assets - Summary of Components of Income (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Discontinued Operations and Disposal Groups [Abstract]
Net revenue		$ 104	$ 333	$ 781	$ 997
Operating income		26	46	95	100
Pre-tax gain on divestiture of Enterprise Business		2,634	0	2,634	0
Income before income taxes		2,659	46	2,724	100
Income tax expense	[1]	239	7	257	25
Income from discontinued operations, net of taxes		$ 2,420	$ 39	$ 2,467	$ 75

[1] Income tax expense for the three and nine months ended September 25, 2021 includes $383 million of income tax expense on gain on divestiture of Enterprise Business. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW as it is recognized as result of the divestiture of Enterprise Business.

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Discontinued Operations And Held For Sale Assets - Summary of Components of Income (Parenthetical) (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	Jul. 27, 2021	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Discontinued Operations and Disposal Groups [Abstract]
Income tax expense on gain on Divestiture of Enterprise Business		$ 383		$ 383
Income Tax Expense Benefit	$ 126	$ (166)	$ 5	$ (159)	$ 0

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Discontinued Operations And Held For Sale Assets - Summary of Significant Non-Cash Items and Capital Expenditures (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 26, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Equity-based compensation expense	$ 85	$ 25
Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Depreciation and amortization	43		$ 167
Equity-based compensation expense	36		4
Additions to property and equipment	$ 4		$ 6

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Revenue from Contract with Customers - Additional Information (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020
Revenue From Contract With Customers [Line Items]
Deferred revenue recognized	$ 721	$ 630
Estimated revenue expected to be recognized	$ 1,044

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Revenue from Contract with Customers - Additional Information (Details1)	Sep. 25, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-09-26
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	12 months
Revenue, remaining performance obligation, percentage	91.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-09-25
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction, period	24 months
Revenue, remaining performance obligation, percentage	9.00%

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Revenue from Contract with Customers - Schedule of Revenue by Geographic Region (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 491	$ 395	$ 1,400	$ 1,132
Percentage of total net revenue	100.00%	100.00%	100.00%	100.00%
Americas
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 327	$ 260	$ 928	$ 742
Percentage of total net revenue	66.60%	65.80%	66.30%	65.50%
EMEA
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 113	$ 93	$ 326	$ 268
Percentage of total net revenue	23.00%	23.50%	23.30%	23.70%
APJ
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 51	$ 42	$ 146	$ 122
Percentage of total net revenue	10.40%	10.60%	10.40%	10.80%

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Revenue from Contract with Customers - Schedule of Revenue by Channel (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 491	$ 395	$ 1,400	$ 1,132
Percentage of total net revenue	100.00%	100.00%	100.00%	100.00%
Direct to Consumer
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 356	$ 305	$ 1,029	$ 879
Percentage of total net revenue	72.50%	77.20%	73.50%	77.70%
Indirect
Revenue From Contract With Customers [Line Items]
Total net revenue	$ 135	$ 90	$ 371	$ 253
Percentage of total net revenue	27.50%	22.80%	26.50%	22.30%

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Leases - Schedule of Information Related to Leases (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 22	$ 29
Right-of-use assets obtained in exchange for lease obligations	33	16
Lease expense from continuing operations	8	11
Lease expense from discontinued operations	7	17
Total lease expense	$ 15	$ 28

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Leases - Schedule of Balance Sheet Information Related to Leases (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Leases [Abstract]
Other long-term assets	$ 29	$ 33
Accounts payable and other current liabilities	7	8
Other long-term liabilities	$ 35	$ 38
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	mcfe:OtherLongTermLiabilitiesMember	mcfe:OtherLongTermLiabilitiesMember
Total lease liabilities	$ 42	$ 46
Weighted Average Remaining Lease Term (in years)	7 years	8 years
Weighted Average Discount Rate (percentage)	6.30%	6.30%

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Leases - Schedule of Maturities of Lease Liabilities (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2021	$ 3
2022	8
2023	6
2024	5
2025	5
Thereafter	26
Total lease payments	53
Less imputed interest	(11)
Total lease liabilities	$ 42	$ 46

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Transactions with Members, Shareholders and Related Parties - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions			3 Months Ended		9 Months Ended		10 Months Ended
	Aug. 27, 2021	Aug. 13, 2021	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020	Oct. 31, 2021	Aug. 31, 2021	Feb. 29, 2020
Transactions With Members Shareholders And Related Parties [Line Items]
Estimated value of stock repurchase				$ 41		$ 41
Distribution amount		$ 2,800
Former President and Chief Executive Officer
Transactions With Members Shareholders And Related Parties [Line Items]
Estimated value of stock repurchase									$ 10
Class A Common Stock
Transactions With Members Shareholders And Related Parties [Line Items]
Dividend declared								$ 4.50
Dividend per Share								$ 4.50
Foundation Technology Worldwide L L C
Transactions With Members Shareholders And Related Parties [Line Items]
Tax and excess cash distributions declared			$ 1,726	70	$ 1,878	201
Foundation Technology Worldwide L L C | Accounts Payable and Other Current Liabilities
Transactions With Members Shareholders And Related Parties [Line Items]
Tax and excess cash distributions declared					66
McAfee Corp
Transactions With Members Shareholders And Related Parties [Line Items]
Tax and excess cash distributions declared			$ 1,052	$ 0	$ 1,142	$ 0
Distribution amount	$ 1,100
Special dividends	800
Special dividend declared date		Aug. 27, 2021
Continuing LLC Owners
Transactions With Members Shareholders And Related Parties [Line Items]
Distribution amount	$ 1,700
Subsequent Event | Foundation Technology Worldwide L L C
Transactions With Members Shareholders And Related Parties [Line Items]
Dividend paid in cash							$ 51

XML

Transactions with Members, Shareholders and Related Parties - Summary of Dividends Declared or Paid (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
FTW members including McAfee Corp
Dividends Payable [Line Items]
Tax and excess cash distributions declared	$ 2,778	$ 70	$ 3,020	$ 201
Amount	2,778	70	3,020	201
FTW members excluding McAfee Corp.
Dividends Payable [Line Items]
Tax and excess cash distributions declared	1,726	70	1,878	201
Amount	1,726	70	1,878	201
McAfee Corp
Dividends Payable [Line Items]
Tax and excess cash distributions declared	1,052	0	1,142	0
Amount	$ 1,052	$ 0	1,142	$ 0
Dividend Declared One [Member]
Dividends Payable [Line Items]
Tax and excess cash distributions declared			$ 14
Declaration Date			Dec. 09, 2020
Record Date			Dec. 24, 2020
Payment Date			Jan. 07, 2021
Dividend per Share	$ 0.087		$ 0.087
Amount			$ 14
Dividend Declared Two [Member]
Dividends Payable [Line Items]
Tax and excess cash distributions declared			$ 19
Declaration Date			Mar. 11, 2021
Record Date			Mar. 26, 2021
Payment Date			Apr. 09, 2021
Dividend per Share	0.115		$ 0.115
Amount			$ 19
Dividend Declared Three [Member]
Dividends Payable [Line Items]
Tax and excess cash distributions declared			$ 19
Declaration Date			Jun. 10, 2021
Record Date			Jun. 25, 2021
Payment Date			Jul. 09, 2021
Dividend per Share	0.115		$ 0.115
Amount			$ 19
Dividend Declared Four [Member]
Dividends Payable [Line Items]
Tax and excess cash distributions declared			$ 760
Declaration Date			Aug. 03, 2021
Record Date			Aug. 13, 2021
Payment Date			Aug. 27, 2021
Dividend per Share	4.500		$ 4.500
Amount			$ 760
Dividend Declared Five [Member]
Dividends Payable [Line Items]
Tax and excess cash distributions declared			$ 21
Declaration Date			Sep. 13, 2021
Record Date			Sep. 24, 2021
Payment Date			Oct. 08, 2021
Dividend per Share	$ 0.115		$ 0.115
Amount			$ 21

XML

Transactions with Members, Shareholders and Related Parties - Summary of Transactions with Related Parties (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Related Party Transaction [Line Items]
Sales with related parties	$ 0	$ 3	$ 1	$ 6
Payments to related parties	14	9	35	40
Intel
Related Party Transaction [Line Items]
Sales with related parties	0	1	0	1
Payments to related parties	0	0	1	2
TPG
Related Party Transaction [Line Items]
Sales with related parties	0	1	0	1
Payments to related parties	0	1	0	6
TPG Affiliates
Related Party Transaction [Line Items]
Sales with related parties	0	1	1	2
Payments to related parties	3	8	21	23
Other
Related Party Transaction [Line Items]
Sales with related parties	0	0	0	2
Payments to related parties	$ 11	$ 0	$ 13	$ 9

XML

Transactions with Members, Shareholders and Related Parties - Schedule of Receivable, Net (Details) - Intel - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Intel receivable
Tax indemnity	$ 9	$ 8
Total	9	8
Intel payable
Tax indemnity	(3)	(2)
Total	(3)	(2)
Total, net	$ 6	$ 6

XML

Transactions with Members, Shareholders and Related Parties - Schedule of Receivable, Net (Parenthetical) (Details) - Intel - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Related Party Transaction [Line Items]
Tax indemnity net	$ 6	$ 6
Other Long-term Assets
Related Party Transaction [Line Items]
Tax indemnity net	1	3
Other Current Assets
Related Party Transaction [Line Items]
Tax indemnity net	$ 5	$ 3

XML

Goodwill and Intangible Assets, Net - Additional Information (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Goodwill And Intangible Assets Disclosure [Abstract]
Goodwill	$ 1,018	$ 1,018

XML

Goodwill and Intangible Assets, Net - Schedule of Intangible Assets, Net (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Finite Lived Intangible Assets [Line Items]
Intangible Assets Subject to Amortization, Gross Assets	$ 1,275	$ 1,275
Intangible Assets Subject to Amortization, Accumulated Amortization	(1,091)	(957)
Intangible Assets Subject to Amortization, Net	184	318
Intangible Assets Not Subject to Amortization, Gross Assets	411	411
Intangible Assets Not Subject to Amortization, Accumulated Amortization	0	0
Intangible Assets Not Subject to Amortization, Net	411	411
Intangible Assets, Gross Assets	1,686	1,686
Intangible Assets, Accumulated Amortization	(1,091)	(957)
Intangible Assets, Gross Net	595	729
Brand
Finite Lived Intangible Assets [Line Items]
Intangible Assets Not Subject to Amortization, Gross Assets	411	411
Intangible Assets Not Subject to Amortization, Accumulated Amortization	0	0
Intangible Assets Not Subject to Amortization, Net	411	411
Customer Relationships and Other
Finite Lived Intangible Assets [Line Items]
Intangible Assets Subject to Amortization, Gross Assets	758	758
Intangible Assets Subject to Amortization, Accumulated Amortization	(619)	(556)
Intangible Assets Subject to Amortization, Net	139	202
Acquired and Developed Technology
Finite Lived Intangible Assets [Line Items]
Intangible Assets Subject to Amortization, Gross Assets	517	517
Intangible Assets Subject to Amortization, Accumulated Amortization	(472)	(401)
Intangible Assets Subject to Amortization, Net	$ 45	$ 116

XML

Goodwill and Intangible Assets, Net - Schedule of Amortization Expense For Purchased and Developed Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Finite Lived Intangible Assets [Line Items]
Amortization expense for purchased intangible assets	$ 35	$ 62	$ 134	$ 188
Customer Relationships and Other
Finite Lived Intangible Assets [Line Items]
Amortization expense for purchased intangible assets	13	36	63	108
Acquired and Developed Technology
Finite Lived Intangible Assets [Line Items]
Amortization expense for purchased intangible assets	$ 22	$ 26	$ 71	$ 80

XML

Goodwill and Intangible Assets, Net - Schedule of Future Amortization Expense (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Goodwill And Intangible Assets Disclosure [Abstract]
Remainder of 2021	$ 36
2022	76
2023	28
2024	20
2025	19
Thereafter	5
Intangible Assets Subject to Amortization, Net	$ 184	$ 318

XML

Segment and Geographic Information - Additional Information (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 25, 2021 Country	Sep. 26, 2020 Country	Sep. 25, 2021 Segment Country	Sep. 26, 2020 Country	Dec. 26, 2020 Segment
Segment Reporting Information [Line Items]
Number of operating segments					2
Number of reportable segments			1		2
Net Revenue
Segment Reporting Information [Line Items]
Number of individual country which exceeded 10% of net revenue and accounts | Country	0	0	0	0

XML

Segment and Geographic Information - Schedule of Revenue by Geographic Region (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Revenues from External Customers [Line Items]
Total net revenue		$ 491	$ 395	$ 1,400	$ 1,132
U.S.
Revenues from External Customers [Line Items]
Total net revenue		300	238	852	680
Other
Revenues from External Customers [Line Items]
Total net revenue	[1]	$ 191	$ 157	$ 548	$ 452

[1] No other individual country accounted for more than 10% of net revenue.

XML

Restructuring and Transition Charges - Schedule of Restructuring Charges (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Restructuring Cost And Reserve [Line Items]
Restructuring charges	$ 27	$ 0	$ 35	$ 1
Total restructuring and transition charges	28	0	61	9
Continuing Operations [Member]
Restructuring Cost And Reserve [Line Items]
Employee severance and benefits	0	0	8	1
Transition charges	27	0	27	0
Restructuring and transition charges	27	0	35	1
Discontinued Operations [Member]
Restructuring Cost And Reserve [Line Items]
Employee severance and benefits	1	0	25	8
Facility restructuring	0	0	1	0
Restructuring charges	$ 1	$ 0	$ 26	$ 8

XML

Restructuring and Transition Charges - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 25, 2021	Sep. 25, 2021	Sep. 26, 2020	Dec. 26, 2020
Restructuring Charges
Restructuring Cost And Reserve [Line Items]
Employee severance and benefits costs	$ 1	$ 34	$ 1	$ 16

XML

Restructuring And Transition Charges - Schedule of Balance of Restructuring Activities (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Restructuring Cost And Reserve [Line Items]
Additional accruals	$ 27	$ 0	$ 35	$ 1
Employee Severance and Benefits
Restructuring Cost And Reserve [Line Items]
Restructuring Reserve			16
Additional accruals			33
Cash payments			(46)
Restructuring Reserve	$ 3		$ 3

XML

Employee Incentives - Schedule of Equity Based Compensation Costs Recognized (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	$ 8	$ 6	$ 86	$ 25
Discontinued Operations
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	9	1	36	4
Continuing Operations
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	17	5	50	21
Continuing Operations | Cost of Sales
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	1	0	3	0
Continuing Operations | Sales and Marketing
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	2	0	9	1
Continuing Operations | Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	6	1	16	1
Continuing Operations | General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Equity-based compensation expense	$ 8	$ 4	$ 22	$ 19

XML

Employee Incentives - Additional Information (Details) $ / shares in Units, $ in Millions		9 Months Ended
	Aug. 13, 2021 $ / shares shares	Sep. 25, 2021 USD ($) shares
Compensation Related Costs [Line Items]
Shares issued | shares		4,900,000
Fair value of shares issued		$ 109
Vesting period		4 years
Unrecognized expense relating to deferred cash		$ 0
Increase in the outstanding number of units, shares | shares	2.2
Increase in the number of outstanding shares, percentage	0.17
Reduction in the strike price per share | $ / shares	$ 4.50
Replacement RSUs
Compensation Related Costs [Line Items]
Unrecognized equity-based compensation expense		$ 186
Unrecognized compensation expense, weighted average period for recognition		2 years 8 months 12 days
Performance Shares
Compensation Related Costs [Line Items]
Shares issued | shares		600,000
Fair value of shares issued		$ 13
Vesting period		3 years
Enterprise RSU Grant
Compensation Related Costs [Line Items]
Shares issued | shares		1,800,000
Fair value of shares issued		$ 42
Enterprise RSU Grant | Maximum
Compensation Related Costs [Line Items]
Vesting period		1 year

XML

Employee Incentives - Schedule of Management Incentive Units Activity (Details) shares in Millions	9 Months Ended
	Sep. 25, 2021 shares
Compensation Related Costs [Line Items]
Number of Units, Grants	4.9

XML

Employee Incentives - Schedule of Management Equity Participation Units Activity (Details) shares in Millions	9 Months Ended
	Sep. 25, 2021 shares
Compensation Related Costs [Line Items]
Number of Units, Grants	4.9

XML

Employee Incentives - Schedule of Cash Restricted Stock Units Activity (Details) shares in Millions	9 Months Ended
	Sep. 25, 2021 shares
Compensation Related Costs [Line Items]
Number of Units, Grants	4.9

XML

Employee Incentives - Schedule of Outstanding Deferred Cash and Equity Related to Acquisitions (Details) $ in Millions	9 Months Ended
	Sep. 25, 2021 USD ($)
Compensation Related Costs [Line Items]
Outstanding deferred cash and equity balance at December 26, 2020	$ 13
Accruals	6
Cash payment	(15)
Outstanding deferred cash and equity balance at June 26, 2021	$ 4

XML

Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Millions		Sep. 25, 2021	Dec. 26, 2020
Schedule Of Debts [Line Items]
Long-term debt, net of unamortized discounts		$ 2,940	$ 3,999
Unamortized deferred financing costs		(7)	12
Current installments of long-term debt		(44)	(44)
Total		2,889	3,943
1st Lien USD Term Loan
Schedule Of Debts [Line Items]
Long-term debt, net of unamortized discounts	[1]	2,355	2,701
1st Lien Euro Term Loan
Schedule Of Debts [Line Items]
Long-term debt, net of unamortized discounts	[2]	$ 585	$ 1,298

[1] During the nine months ended September 25, 2021, the weighted average interest rate was 3.9%

[2] During the nine months ended September 25, 2021, the weighted average interest rate was 3.5%

XML

Debt - Schedule of Long-term Debt (Parenthetical) (Details)	9 Months Ended
	Sep. 25, 2021
1st Lien USD Term Loan
Schedule Of Debts [Line Items]
Long term debt, weighted average interest rate	3.90%
1st Lien Euro Term Loan
Schedule Of Debts [Line Items]
Long term debt, weighted average interest rate	3.50%

XML

Debt - Additional Information (Details) € in Millions, $ in Millions			3 Months Ended	9 Months Ended	12 Months Ended
	Aug. 31, 2021 USD ($)	Aug. 31, 2021 EUR (€)	Sep. 25, 2021 USD ($)	Sep. 25, 2021 USD ($)	Dec. 26, 2020 USD ($)
Schedule Of Debts [Line Items]
Loss on extinguishment of debt			$ 10
Minimum additional prepayment percentage per quarter amortization			0.25%	0.25%
1st Lien USD Term Loan
Schedule Of Debts [Line Items]
Prepayment of debt	$ 332
1st Lien Euro Term Loan
Schedule Of Debts [Line Items]
Prepayment of debt | €		€ 563
Revolving Credit Facility
Schedule Of Debts [Line Items]
Letter of credit issued			$ 4	$ 4	$ 4
Amount of undrawn capacity under the Revolving Credit Facility			$ 660	$ 660	$ 660
Commitment fee percentage on the unused portion of the facility				0.25%	0.25%

XML

Income Tax - Additional Information (Details) - USD ($) $ in Millions			3 Months Ended		9 Months Ended
		Jul. 27, 2021	Sep. 25, 2021	Sep. 26, 2020	Sep. 25, 2021	Sep. 26, 2020	Dec. 26, 2020
Income Tax Contingency [Line Items]
Taxes recognized in discontinued operations	[1]		$ 239	$ 7	$ 257	$ 25
Income tax expense on gain on Divestiture of Enterprise Business			383		383
Income Tax Expense Benefit		$ 126	(166)	$ 5	(159)	$ 0
Deferred tax assets valuation allowance			200		200
Deferred Tax Assets, Net of Valuation Allowance							$ 213
Deferred Tax Assets Additional Valuation Allowance					11
Deferred Tax Assets Additional Valuation Allowance Related to State Net Operating Loss					2
Deferred Tax Assets, Equity Method Investments			167		167
Tax Receivable Agreement
Income Tax Contingency [Line Items]
Taxes recognized in discontinued operations					257
Income tax expense on gain on Divestiture of Enterprise Business		$ 383
Tax Receivable Agreement | McAfee Corp. Stockholders' Equity
Income Tax Contingency [Line Items]
Deferred Tax Liabilities Long Term Tax Receivable Agreement Liability			380
Equity, Fair Value Adjustment					82
Deferred tax liabilities, long-term tax receivable agreement liability and expense			298		298
Other Long-term Liabilities
Income Tax Contingency [Line Items]
Uncertain tax positions, including interest and penalties			$ 12		$ 12		$ 16

[1] Income tax expense for the three and nine months ended September 25, 2021 includes $383 million of income tax expense on gain on divestiture of Enterprise Business. The remaining $126 million of tax benefits is primarily attributable to the change in our investment in FTW as it is recognized as result of the divestiture of Enterprise Business.

XML

Income Tax - Schedule Of Changes To Our Deferred Tax Asset (Details) $ in Millions	9 Months Ended
	Sep. 25, 2021 USD ($)
Deferred Tax Assets [Member]
Release of valuation allowance on deferred tax assets	$ 200
Exchanges and tax attributes in Fiscal 2021	167
Additional Paid in Capital Offset To [Member]
Release of valuation allowance on deferred tax assets	0
Exchanges and tax attributes in Fiscal 2021	167
Provision for Income Tax (Expense) benefits offset To [Member]
Release of valuation allowance on deferred tax assets	184
Exchanges and tax attributes in Fiscal 2021	0
Income from Discontinued Operations offset To [Member]
Release of valuation allowance on deferred tax assets	16
Exchanges and tax attributes in Fiscal 2021	$ 0

XML

Income Tax - Schedule of TRA Balance And Changes (Details) $ in Millions	9 Months Ended
	Sep. 25, 2021 USD ($)
TRA Liability Current Portion [Member]
Exchanges and tax attributes	$ 2
Exchanges And Tax Attributes That Existed Prior To Divestiture	0
Exchanges And Tax Attributes That Existed On Or After Divestiture	0
Exchanges and tax attributes	2
TRA Liability Non Current Portion [Member]
Exchanges and tax attributes	0
Exchanges And Tax Attributes That Existed Prior To Divestiture	310
Exchanges And Tax Attributes That Existed On Or After Divestiture	82
Exchanges and tax attributes	392
Additional Paid in Capital Offset To [Member]
Exchanges And Tax Attributes That Existed Prior To Divestiture	0
Exchanges And Tax Attributes That Existed On Or After Divestiture	(82)
Exchanges and tax attributes	(82)
Other Income Offset To [Member]
Exchanges And Tax Attributes That Existed Prior To Divestiture	(306)
Exchanges And Tax Attributes That Existed On Or After Divestiture	0
Exchanges and tax attributes	(306)
Income from Discontinued Operations offset To [Member]
Exchanges And Tax Attributes That Existed Prior To Divestiture	(4)
Exchanges And Tax Attributes That Existed On Or After Divestiture	0
Exchanges and tax attributes	$ (4)

XML

Fair Value of Financial Instruments and Interest Rate Swaps - Summary of Fair Value of Financial Instruments (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Level 1 | Financial Instruments not Carried at Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, gross of discounts and deferred issuance costs (Note 11)	$ 0	$ 0
Level 1 | Financial Instruments Carried at Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps	0	0
Level 2 | Financial Instruments not Carried at Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, gross of discounts and deferred issuance costs (Note 11)	(2,970)	(4,033)
Level 2 | Financial Instruments Carried at Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps	(75)	(119)
Level 3 | Financial Instruments not Carried at Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt, gross of discounts and deferred issuance costs (Note 11)	0	0
Level 3 | Financial Instruments Carried at Fair Value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Interest rate swaps	$ 0	$ 0

XML

Fair Value of Financial Instruments and Interest Rate Swaps - Schedule of Interest Rate Swaps Outstanding Effective Arrangements (Details)	9 Months Ended
	Sep. 25, 2021 USD ($)
Derivative [Line Items]
Notional Value	$ 250,000,000
Interest Rate Swaps at 2.41% Fixed Rate
Derivative [Line Items]
Notional Value	$ 100,000,000
Effective Date	Jan. 29, 2018
Expiration Date	Jan. 29, 2022
Fixed Rate	2.41%
Interest Rate Swaps at 2.48% Fixed Rate
Derivative [Line Items]
Notional Value	$ 275,000,000
Effective Date	Jan. 29, 2018
Expiration Date	Jan. 29, 2023
Fixed Rate	2.48%
Interest Rate Swaps at 2.49% Fixed Rate
Derivative [Line Items]
Notional Value	$ 275,000,000
Effective Date	Jan. 29, 2018
Expiration Date	Jan. 29, 2023
Fixed Rate	2.49%
Interest Rate Swaps at 2.40% Fixed Rate
Derivative [Line Items]
Notional Value	$ 475,000,000
Effective Date	Mar. 29, 2019
Expiration Date	Mar. 29, 2024
Fixed Rate	2.40%
Interest Rate Swaps at 2.07% Fixed Rate
Derivative [Line Items]
Notional Value	$ 750,000,000
Effective Date	Mar. 04, 2020
Expiration Date	Sep. 29, 2024
Fixed Rate	2.07%
Interest Rate Swaps at 0.93% Fixed Rate
Derivative [Line Items]
Notional Value	$ 250,000,000
Effective Date	Mar. 29, 2020
Expiration Date	Mar. 29, 2024
Fixed Rate	0.93%
Interest Rate Swaps at 0.42% Fixed Rate
Derivative [Line Items]
Notional Value	$ 225,000,000
Effective Date	Jan. 29, 2021
Expiration Date	Jan. 29, 2024
Fixed Rate	0.42%

XML

Fair Value of Financial Instruments and Interest Rate Swaps - Schedule of Gross Amounts of Interest Rate Swaps Subject to Master Netting Arrangements (Details) - Interest Rate Swaps - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Other Long-term Assets
Derivatives, Fair Value [Line Items]
Gross amounts recognized	$ 1
Gross amount offset in Balance Sheets	(1)
Net amounts presented in Balance Sheets	0
Accounts Payable and Other Current Liabilities
Derivatives, Fair Value [Line Items]
Gross amounts recognized	(39)	$ (43)
Gross amount offset in Balance Sheets	0	0
Net amounts presented in Balance Sheets	(39)	(43)
Other Long-term Liabilities
Derivatives, Fair Value [Line Items]
Gross amounts recognized	(37)	(76)
Gross amount offset in Balance Sheets	1	0
Net amounts presented in Balance Sheets	$ (36)	$ (76)

XML

Fair Value of Financial Instruments and Interest Rate Swaps (Additional Information) (Details) $ in Millions	9 Months Ended
	Sep. 25, 2021 USD ($)
Derivative [Line Items]
Derivative notional amount terminated	$ 150
Notional Value	$ 250
Derivative notional expiration date	Jan. 29, 2022
Interest Rate Swaps
Derivative [Line Items]
Loss on swap termination and designation	$ 2

XML

Redeemable Noncontrolling Interests - Additional Information (Details)	9 Months Ended
	Sep. 25, 2021
Class A Common Stock | McAfee Corp.
Minority Interest [Line Items]
Stockholders' equity note, stock split, conversion ratio	1

XML

Redeemable Noncontrolling Interests - Summary of the Ownership and Economic Interest in FTW LLC (Details) - shares	Sep. 25, 2021	Dec. 26, 2020
Continuing LLC Owners And Management Owners
Minority Interest [Line Items]
Unit Outstanding	261.2	272.5
LLC Units and vested MIUs
Minority Interest [Line Items]
Unit Outstanding	441.1	433.8
Ownership percentage by noncontrolling owners	100.00%	100.00%
McAfee Corp.
Minority Interest [Line Items]
Unit Outstanding	179.9	161.3
McAfee Corp. | LLC Units
Minority Interest [Line Items]
Ownership percentage by noncontrolling owners	40.80%	37.20%
McAfee Corp. | Foundation Technology Worldwide L L C
Minority Interest [Line Items]
Ownership percentage by noncontrolling owners	59.20%	62.80%

XML

Earnings Per Share - Additional Information (Details)	1 Months Ended	3 Months Ended
	Oct. 31, 2020	Sep. 25, 2021
Class A Common Stock
Earnings Per Share Basic [Line Items]
Exchanged class A common stock	1	1

XML

Earnings Per Share - Schedule of Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended	9 Months Ended
	Sep. 25, 2021	Sep. 25, 2021
Earnings Per Share [Line Items]
Net income (loss) attributable to McAfee Corp., basic and diluted	$ 742	$ 808
Weighted average shares of Class A common stock outstanding, basic and diluted	170,300,000	165,900,000
Earnings per share attributable to McAfee Corp., basic and diluted
Earnings per share, basic and diluted	$ 4.36	$ 4.87
Class A Common Stock
Earnings Per Share [Line Items]
Weighted average shares of Class A common stock outstanding, basic and diluted	170,300,000	165,900,000
Weighted average shares of Class A common stock outstanding, basic	4.36	4.87
Continuing Operations
Earnings Per Share [Line Items]
Net income (loss) attributable to McAfee Corp., basic and diluted	$ (92)	$ (40)
Continuing Operations | Class A Common Stock
Earnings Per Share [Line Items]
Weighted average shares of Class A common stock outstanding, basic and diluted	170,300,000	165,900,000
Weighted average shares of Class A common stock outstanding, basic		0.24
Earnings per share attributable to McAfee Corp., basic and diluted
Earnings per share, basic and diluted	$ (0.54)
Discontinued Operations
Earnings Per Share [Line Items]
Net income (loss) attributable to McAfee Corp., basic and diluted	$ 834	$ 848
Discontinued Operations | Class A Common Stock
Earnings Per Share [Line Items]
Weighted average shares of Class A common stock outstanding, basic and diluted	170,300,000	165,900,000
Weighted average shares of Class A common stock outstanding, basic		5.11
Earnings per share attributable to McAfee Corp., basic and diluted
Earnings per share, basic and diluted	$ 4.90

XML

Earnings Per Share - Schedule of Net Loss Per Share (Parenthetical) (Details) - shares shares in Millions	3 Months Ended	9 Months Ended
	Sep. 25, 2021	Sep. 25, 2021
Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount, shares	278.4	274.6

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Variable Interest Entities - Additional Information (Details)		9 Months Ended
	Oct. 21, 2020	Sep. 25, 2021
Foundation Technology Worldwide L L C
Variable Interest Entity [Line Items]
Percentage of ownership after the reorganization transaction	100.00%	100.00%

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Variable Interest Entities - Schedule of Variable Interest Entities (Details) - USD ($) $ in Millions	Sep. 25, 2021	Dec. 26, 2020
Current assets:
Cash and cash equivalents	$ 848	$ 231
Accounts receivable, net	124	102
Deferred costs	171	137
Receivable from Enterprise Business	116	0
Other current assets	36	42
Held-for-sale assets	31	0
Current assets of discontinued operations	0	402
Total current assets	1,326	914
Property and equipment, net	55	98
Goodwill	1,018	1,018
Identified intangible assets, net	595	729
Deferred tax assets	398	24
Other long-term assets	92	67
Long-term assets of discontinued operations	0	2,578
Total assets	3,484	5,428
Current liabilities:
Accounts payable and other current liabilities	303	235
Accrued compensation and benefits	66	179
Accrued marketing	101	118
Income taxes payable	207	14
Long-term debt, current portion	44	44
Deferred revenue	953	823
Payable to Enterprise Business	50	0
Current liabilities of discontinued operations	0	972
Total current liabilities	1,724	2,385
Long-term debt, net	2,889	3,943
Deferred tax liabilities	17	5
Other long-term liabilities	136	155
Deferred revenue, less current portion	91	80
Long-term liabilities of discontinued operations	0	660
Total liabilities	5,249	7,228
Stockholders’ equity/members’ deficit:
Total deficit	(7,601)	(6,640)
Total liabilities, redeemable noncontrolling interests and deficit	3,484	5,428
Variable Interest Entity, Primary Beneficiary
Current assets:
Cash and cash equivalents	567	231
Accounts receivable, net	124	102
Deferred costs	171	137
Receivable from Enterprise Business	116	0
Other current assets	36	42
Held-for-sale assets	31	0
Current assets of discontinued operations	0	402
Total current assets	1,045	914
Property and equipment, net	55	98
Goodwill	1,018	1,018
Identified intangible assets, net	595	729
Deferred tax assets	44	24
Receivable from Parent, net	0	46
Other long-term assets	92	67
Long-term assets of discontinued operations	0	2,578
Total assets	2,849	5,474
Current liabilities:
Accounts payable and other current liabilities	276	219
Accrued compensation and benefits	66	179
Accrued marketing	101	118
Income taxes payable	44	14
Long-term debt, current portion	44	44
Liability to Parent, net	4	0
Deferred revenue	953	823
Payable to Enterprise Business	50	0
Current liabilities of discontinued operations	0	972
Total current liabilities	1,538	2,369
Long-term debt, net	2,889	3,943
Deferred tax liabilities	17	5
Other long-term liabilities	130	155
Deferred revenue, less current portion	91	80
Long-term liabilities of discontinued operations	0	660
Total liabilities	4,665	7,212
Stockholders’ equity/members’ deficit:
Total deficit	(1,816)	(1,738)
Total liabilities, redeemable noncontrolling interests and deficit	2,849	5,474
Variable Interest Entity, Primary Beneficiary | McAfee Corp
Stockholders’ equity/members’ deficit:
Members’ deficit	(741)	(646)
Variable Interest Entity, Not Primary Beneficiary | Continuing LLC Owners
Stockholders’ equity/members’ deficit:
Members’ deficit	$ (1,075)	$ (1,092)

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Commitments and Contingencies - Additional Information (Details) $ in Millions	9 Months Ended
	Sep. 25, 2021 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Unconditional purchase obligations	$ 420
Unconditional purchase obligations, expire	expire at various dates through 2026
Guarantees	$ 10
Guarantees, expire	expire at various dates through 2028

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Subsequent Events (Additional Information) (Details) - Subsequent Event [Member] $ / shares in Units, $ in Millions	Nov. 05, 2021 USD ($) $ / shares
Subsequent Event [Line Items]
Subsequent Event, Date	Nov. 05, 2021
Subsequent Event, Description	On November 5, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Condor BidCo, Inc., a Delaware corporation (“Parent”), and Condor Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company whereupon the separate corporate existence of Merger Subsidiary will cease and the Company will be the surviving corporation in the Merger (the “Surviving Corporation”) and will continue as a wholly owned subsidiary of Parent (the “Merger”).
Conversion of Shares into Rights for Cash Consideration per share | $ / shares	$ 26.00
Tax Receivable Agreement | McAfee Corp.
Subsequent Event [Line Items]
Deferred tax liabilities current, tax receivable agreement, accounts payable and other accrued liabilities | $	$ 2