Gen Board authorizes $3
billion share repurchase program
TEMPE,
Ariz. and PRAGUE,
May 9,
2024 /PRNewswire/ -- Gen Digital Inc. (NASDAQ: GEN),
a global leader dedicated to powering Digital Freedom, released its
results for its fiscal year 2024 fourth quarter and full year,
which ended March 29, 2024.
"This has been a pivotal year for Gen as we integrated our
portfolio and introduced innovative solutions that empower our
customers to take full advantage of the digital world with
confidence," said Vincent Pilette,
CEO of Gen. "Building upon our momentum, we know there is
tremendous opportunity that lies ahead in consumer Cyber Safety. In
this always-on world, we're committed to continuing to deliver
human-centric solutions that protect against the ever-evolving
threat landscape."
Fiscal Year 2024 Results
- Revenue of $3,812 million, up 14% in USD and 15% in
CC
- Bookings of $3,861 million, up
15% in USD and 14% in CC
- GAAP Operating Income of $1,122
million, down 9%
- Non-GAAP Operating Income of $2,221
million, up 21% in USD and 22% in CC
- GAAP Diluted EPS of $0.96, down 56%
- Non-GAAP Diluted EPS of $1.96, up 8% in USD and 11% in
CC
- Operating Cash Flow of $2,064
million
Q4 Fiscal Year 2024 Results
- Revenue of $967 million, up 2% in USD and 3% in CC
- Bookings of $1,044 million, up 2% in USD and 3% in CC
- GAAP Operating Income of $400
million, up 12%
- Non-GAAP Operating Income of $569
million, up 5% in USD and 6% in CC
- GAAP Diluted EPS of $0.21, down
85%
- Non-GAAP Diluted EPS of $0.53, up 15% in USD and 16% in
CC
- Operating Cash Flow of $1,398
million
"We closed our fiscal year 2024 delivering record revenue,
growing direct customer count, and increasing operating margin,"
said Natalie Derse, CFO of Gen. "As
we look forward, we'll continue to drive our growth strategy
through focused execution. We're confident that the disciplined
investments in our product innovation and go-to-market strategy
will drive further success and accelerate revenue growth."
Non-GAAP Q1 Fiscal Year 2025 Guidance
- Q1 FY25 Revenue expected to be in the range of $960
million to $970 million
- Q1 FY25 EPS expected to be in the range
of $0.52 to $0.54
Non-GAAP Fiscal Year 2025 Guidance
- FY25 Revenue expected to be in the range of $3,890
million to $3,930 million
- FY25 EPS expected to be in the range
of $2.17 to $2.23
Share Repurchase Authorization Raised to $3 Billion
Gen's Board of Directors has
approved the share repurchase authorization to $3 billion, inclusive of the current $429 million authorization remaining. The
authorization has no expiration date.
Quarterly Cash Dividend
Gen's Board of Directors has
approved a regular quarterly cash dividend of $0.125 per common share to be paid on
June 12, 2024, to all shareholders of
record as of the close of business on May
20, 2024.
Leadership Update
The Company today announced that
Ondřej Vlček is stepping down from his role as president following
the successful integration of the company. Vlček assumed his role
as president following the merger of Avast and NortonLifeLock in
2022. He will continue to be involved with the Company, maintaining
his position on the Gen Board of Directors.
Q4 Fiscal Year 2024 Earnings Call
May 9, 2024
2 p.m. PT / 5 p.m. ET
Webcast & Dial-in instructions at Investor.GenDigital.com. A
replay will be posted following the call. For additional
details regarding Gen's results and outlook, please see the
Financials section of the Investor Relations website
at Investor.GenDigital.com.
About Gen
Gen™ (NASDAQ: GEN) is a global company
dedicated to powering Digital Freedom through its trusted Cyber
Safety brands, Norton, Avast, LifeLock, Avira, AVG,
ReputationDefender and CCleaner. The Gen family of consumer brands
is rooted in providing safety for the first digital generations.
Now, Gen empowers people to live their digital lives safely,
privately, and confidently today and for generations to come. Gen
brings award-winning products and services in cybersecurity, online
privacy and identity protection to nearly 500 million users in more
than 150 countries. Learn more at GenDigital.com.
Forward-Looking Statements
This press release contains
statements which may be considered forward-looking within the
meaning of the U.S. federal securities laws. In some cases, you can
identify these forward-looking statements by the use of terms such
as "expect," "will," "continue," or similar expressions, and
variations or negatives of these words, but the absence of these
words does not mean that a statement is not forward-looking. All
statements other than statements of historical fact are statements
that could be deemed forward-looking statements, including, but not
limited to, the quotes under "Fiscal Year 2024 Results" and "Q4
Fiscal Year 2024 Results" including expectations relating to
achievement of long-term objectives, and the statements under
"Non-GAAP Q1 Fiscal Year 2025 Guidance" and "Non-GAAP Fiscal Year
2025 Guidance" including expectations relating to Q1 Fiscal Year
2025 and Fiscal Year 2025 non-GAAP revenue and non-GAAP EPS, and
any statements of assumptions underlying any of the foregoing.
These statements are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to differ
materially from results expressed or implied in this press release.
Such risk factors include, but are not limited to, those related
to: the consummation of or anticipated impacts of acquisitions
(including our ability to achieve synergies and associated cost
savings from the merger with Avast); divestitures, restructurings,
stock repurchases, financings, debt repayments and investment
activities; difficulties in executing the operating model for the
consumer Cyber Safety business; lower than anticipated returns from
our investments in direct customer acquisition; difficulties in
retaining our existing customers and converting existing non-paying
customers to paying customers; difficulties and delays in reducing
run rate expenses and monetizing underutilized assets; the
successful development of new products and upgrades and the degree
to which these new products and upgrades gain market acceptance;
our ability to maintain our customer and partner relationships; the
anticipated growth of certain market segments; fluctuations and
volatility in our stock price; our ability to successfully execute
strategic plans; the vulnerability of our solutions, systems,
websites and data to intentional disruption by third parties;
changes to existing accounting pronouncements or taxation rules or
practices; and general business and macroeconomic changes in
the U.S. and worldwide, including economic recessions, the impact
of inflation, fluctuations in foreign currency exchange rates,
changes in interest rates or tax rates, and conflicts including
Russia's invasion of Ukraine and the Israel-Hamas conflict.
Additional information concerning these and other risk factors is
contained in the Risk Factors sections of our most recent reports
on Form 10-K and Form 10-Q. We encourage you to read those sections
carefully. There may also be other factors that have not been
anticipated or are not described in our periodic filings, generally
because we did not believe them to be significant at the time,
which could cause actual results to differ materially from our
projections and expectations. All forward-looking statements should
be evaluated with the understanding of their inherent uncertainty.
We assume no obligation, and do not intend, to update these
forward-looking statements as a result of future events or
developments.
Use of Non-GAAP Financial Information
We use non-GAAP
measures of operating margin, operating income, net income and
earnings per share, which are adjusted from results based on GAAP
and exclude certain expenses, gains and losses. We also provide the
non-GAAP metrics of revenues, and constant currency revenues. These
non-GAAP financial measures are provided to enhance the user's
understanding of our past financial performance and our prospects
for the future. Our management team uses these non-GAAP financial
measures in assessing Gen's performance, as well as in planning and
forecasting future periods. These non-GAAP financial measures are
not computed according to GAAP and the methods we use to compute
them may differ from the methods used by other companies. Non-GAAP
financial measures are supplemental, should not be considered a
substitute for financial information presented in accordance with
GAAP and should be read only in conjunction with our condensed
consolidated financial statements prepared in accordance with GAAP.
Readers are encouraged to review the reconciliation of our non-GAAP
financial measures to the comparable GAAP results, which is
attached to our quarterly earnings release, and which can be found,
along with other financial information including the Earnings
Presentation, on the investor relations page of our website at
Investor.GenDigital.com. No reconciliation of the forecasted range
for non-GAAP revenues and EPS guidance is included in this release
because most non-GAAP adjustments pertain to events that have not
yet occurred. It would be unreasonably burdensome to forecast,
therefore we are unable to provide an accurate estimate.
GEN DIGITAL
INC.
|
Condensed
Consolidated Balance Sheets
|
(Unaudited, in
millions)
|
|
|
March 29, 2024
|
|
March 31, 2023
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
846
|
|
$
750
|
Accounts receivable,
net
|
163
|
|
168
|
Other current
assets
|
334
|
|
284
|
Assets held for
sale
|
15
|
|
31
|
Total current
assets
|
1,358
|
|
1,233
|
Property and equipment,
net
|
72
|
|
76
|
Intangible assets,
net
|
2,638
|
|
3,097
|
Goodwill
|
10,210
|
|
10,217
|
Other long-term
assets
|
1,494
|
|
1,324
|
Total
assets
|
$
15,772
|
|
$
15,947
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
66
|
|
$
77
|
Accrued compensation
and benefits
|
78
|
|
102
|
Current portion of
long-term debt
|
175
|
|
233
|
Contract
liabilities
|
1,730
|
|
1,708
|
Other current
liabilities
|
599
|
|
729
|
Total current
liabilities
|
2,648
|
|
2,849
|
Long-term
debt
|
8,429
|
|
9,529
|
Long-term contract
liabilities
|
76
|
|
80
|
Deferred income tax
liabilities
|
261
|
|
395
|
Long-term income taxes
payable
|
1,490
|
|
820
|
Other long-term
liabilities
|
671
|
|
74
|
Total
liabilities
|
13,575
|
|
13,747
|
Total stockholders'
equity (deficit)
|
2,197
|
|
2,200
|
Total liabilities and
stockholders' equity (deficit)
|
$
15,772
|
|
$
15,947
|
GEN DIGITAL
INC.
|
Condensed
Consolidated Statements of Operations
|
(Unaudited, in
millions, except per share amounts)
|
|
|
Three Months Ended
|
|
Year Ended
|
|
March 29, 2024
|
|
March 31, 2023
|
|
March 29, 2024
|
|
March 31, 2023
|
Net revenues
|
$
967
|
|
$
947
|
|
$
3,812
|
|
$
3,338
|
Cost of
revenues
|
190
|
|
190
|
|
731
|
|
589
|
Gross
profit
|
777
|
|
757
|
|
3,081
|
|
2,749
|
Operating
expenses:
|
|
|
|
|
|
|
|
Sales and
marketing
|
181
|
|
176
|
|
733
|
|
682
|
Research and
development
|
80
|
|
88
|
|
332
|
|
313
|
General and
administrative
|
45
|
|
61
|
|
604
|
|
286
|
Amortization of
intangible assets
|
50
|
|
61
|
|
233
|
|
172
|
Restructuring and
other costs
|
21
|
|
14
|
|
57
|
|
69
|
Total operating
expenses
|
377
|
|
400
|
|
1,959
|
|
1,522
|
Operating income
(loss)
|
400
|
|
357
|
|
1,122
|
|
1,227
|
Interest
expense
|
(161)
|
|
(168)
|
|
(669)
|
|
(401)
|
Other income
(expense), net
|
(24)
|
|
(25)
|
|
6
|
|
(22)
|
Income (loss) before
income taxes
|
215
|
|
164
|
|
459
|
|
804
|
Income tax expense
(benefit)
|
81
|
|
(751)
|
|
(157)
|
|
(545)
|
Net income
(loss)
|
$
134
|
|
$
915
|
|
$
616
|
|
$
1,349
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - basic
|
$
0.21
|
|
$
1.43
|
|
$
0.97
|
|
$
2.20
|
Net income (loss) per
share - diluted
|
$
0.21
|
|
$
1.42
|
|
$
0.96
|
|
$
2.16
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
630
|
|
639
|
|
637
|
|
614
|
Diluted
|
637
|
|
644
|
|
642
|
|
624
|
|
|
|
GEN DIGITAL
INC.
|
Condensed
Consolidated Statements of Cash Flows
|
(Unaudited, in
millions)
|
|
|
Three Months Ended
|
|
Year Ended
|
|
March 29, 2024
|
|
March 31, 2023
|
|
March 29, 2024
|
|
March 31, 2023
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
|
$
134
|
|
$
915
|
|
$
616
|
|
$
1,349
|
Adjustments:
|
|
|
|
|
|
|
|
Amortization and
depreciation
|
111
|
|
126
|
|
485
|
|
329
|
Impairments and
write-offs of current and long-lived assets
|
(2)
|
|
30
|
|
(3)
|
|
25
|
Stock-based
compensation expense
|
31
|
|
39
|
|
138
|
|
134
|
Deferred income
taxes
|
(21)
|
|
(95)
|
|
(991)
|
|
(145)
|
Loss (gain) on
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
9
|
Gain on sale of
properties
|
—
|
|
—
|
|
(9)
|
|
—
|
Non-cash operating
lease expense
|
3
|
|
6
|
|
18
|
|
23
|
Impairment on
non-marketable equity investments
|
40
|
|
—
|
|
40
|
|
—
|
Other
|
(3)
|
|
17
|
|
22
|
|
2
|
Changes in operating
assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
—
|
|
3
|
|
7
|
|
11
|
Accounts
payable
|
6
|
|
2
|
|
(12)
|
|
(8)
|
Accrued compensation
and benefits
|
14
|
|
(6)
|
|
(24)
|
|
(6)
|
Contract
liabilities
|
75
|
|
57
|
|
35
|
|
(5)
|
Income taxes
payable
|
105
|
|
(3)
|
|
446
|
|
(128)
|
Other
assets
|
906
|
|
(734)
|
|
864
|
|
(696)
|
Other
liabilities
|
(1)
|
|
(33)
|
|
432
|
|
(137)
|
Net cash provided by
(used in) operating activities
|
1,398
|
|
324
|
|
2,064
|
|
757
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(3)
|
|
(1)
|
|
(20)
|
|
(6)
|
Payments for
acquisitions, net of cash acquired
|
—
|
|
—
|
|
—
|
|
(6,547)
|
Proceeds from the
maturities and sales of short-term investments
|
—
|
|
—
|
|
—
|
|
4
|
Proceeds from the sale
of properties
|
—
|
|
—
|
|
25
|
|
—
|
Other
|
1
|
|
—
|
|
(3)
|
|
2
|
Net cash provided by
(used in) investing activities
|
(2)
|
|
(1)
|
|
2
|
|
(6,547)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Repayments of debt and
related equity component
|
(658)
|
|
(309)
|
|
(1,183)
|
|
(3,047)
|
Proceeds from issuance
of debt, net of issuance costs
|
—
|
|
—
|
|
—
|
|
8,954
|
Net proceeds from
sales of common stock
under employee stock incentive plans
|
6
|
|
6
|
|
12
|
|
12
|
Tax payments related
to vesting of stock units
|
(1)
|
|
—
|
|
(26)
|
|
(20)
|
Dividends and dividend
equivalents paid
|
(78)
|
|
(80)
|
|
(323)
|
|
(314)
|
Repurchases of common
stock
|
(300)
|
|
—
|
|
(441)
|
|
(904)
|
Net cash provided by
(used in) financing activities
|
(1,031)
|
|
(383)
|
|
(1,961)
|
|
4,681
|
Effect of exchange rate
fluctuations on cash and cash equivalents
|
(8)
|
|
(2)
|
|
(9)
|
|
(28)
|
Change in cash and cash
equivalents
|
356
|
|
(62)
|
|
96
|
|
(1,137)
|
Beginning cash and cash
equivalents
|
490
|
|
812
|
|
750
|
|
1,887
|
Ending cash and cash
equivalents
|
$
846
|
|
$
750
|
|
$
846
|
|
$
750
|
|
|
|
GEN DIGITAL
INC.
|
Reconciliation of
Selected GAAP Measures to Non-GAAP Measures (1)
(2)
|
(Unaudited, in
millions, except per share amounts)
|
|
|
Three Months Ended
|
|
Year Ended
|
|
March 29, 2024
|
|
March 31, 2023
|
|
March 29, 2024
|
|
March 31, 2023
|
Operating income (loss)
|
$
400
|
|
$
357
|
|
$
1,122
|
|
$
1,227
|
Contract liabilities
fair value adjustment
|
—
|
|
1
|
|
—
|
|
2
|
Stock-based
compensation
|
31
|
|
36
|
|
138
|
|
123
|
Amortization of
intangible assets
|
107
|
|
119
|
|
462
|
|
308
|
Restructuring and
other costs
|
21
|
|
14
|
|
57
|
|
69
|
Acquisition and
integration costs
|
4
|
|
6
|
|
24
|
|
77
|
Litigation
costs
|
6
|
|
8
|
|
418
|
|
29
|
Operating income (loss)
(Non-GAAP)
|
$
569
|
|
$
541
|
|
$
2,221
|
|
$
1,835
|
|
|
|
|
|
|
|
|
Operating margin
|
41.4 %
|
|
37.7 %
|
|
29.4 %
|
|
36.8 %
|
Operating margin (Non-GAAP)
|
58.8 %
|
|
57.1 %
|
|
58.3 %
|
|
54.9 %
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
134
|
|
$
915
|
|
$
616
|
|
$
1,349
|
Adjustments to net
income (loss)
|
|
|
|
|
|
|
|
Contract liabilities
fair value adjustment
|
—
|
|
1
|
|
—
|
|
2
|
Stock-based
compensation
|
31
|
|
36
|
|
138
|
|
123
|
Amortization of
intangible assets
|
107
|
|
119
|
|
462
|
|
308
|
Restructuring and
other costs
|
21
|
|
14
|
|
57
|
|
69
|
Acquisition and
integration costs
|
4
|
|
6
|
|
24
|
|
77
|
Litigation
costs
|
6
|
|
8
|
|
418
|
|
29
|
Other
|
(1)
|
|
22
|
|
—
|
|
11
|
Non-cash interest
expense
|
7
|
|
7
|
|
27
|
|
17
|
Loss (gain) on
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
9
|
Loss (gain) on equity
investments
|
40
|
|
7
|
|
40
|
|
7
|
Loss (gain) on sale of
properties
|
—
|
|
—
|
|
(9)
|
|
—
|
Total adjustments to
GAAP income (loss) before income taxes
|
215
|
|
220
|
|
1,157
|
|
652
|
Adjustment to GAAP
provision for income taxes
|
(13)
|
|
(839)
|
|
(512)
|
|
(880)
|
Total adjustment to
income (loss), net of taxes
|
202
|
|
(619)
|
|
645
|
|
(228)
|
Net income (loss) (Non-GAAP)
|
$
336
|
|
$
296
|
|
$
1,261
|
|
$
1,121
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per
share
|
$
0.21
|
|
$
1.42
|
|
$
0.96
|
|
$
2.16
|
Adjustments to diluted
net income (loss) per share:
|
|
|
|
|
|
|
|
Contract liabilities
fair value adjustment
|
—
|
|
0.00
|
|
—
|
|
—
|
Stock-based
compensation
|
0.05
|
|
0.06
|
|
0.21
|
|
0.20
|
Amortization of
intangible assets
|
0.17
|
|
0.18
|
|
0.72
|
|
0.49
|
Restructuring and
other costs
|
0.03
|
|
0.02
|
|
0.09
|
|
0.11
|
Acquisition and
integration costs
|
0.01
|
|
0.01
|
|
0.04
|
|
0.12
|
Litigation
costs
|
0.01
|
|
0.01
|
|
0.65
|
|
0.05
|
Other
|
(0.00)
|
|
0.03
|
|
—
|
|
0.02
|
Non-cash interest
expense
|
0.01
|
|
0.01
|
|
0.04
|
|
0.03
|
Loss (gain) on
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
0.01
|
Loss (gain) on equity
investments
|
0.06
|
|
0.01
|
|
0.06
|
|
0.01
|
Loss (gain) on sale of
properties
|
—
|
|
—
|
|
(0.01)
|
|
—
|
Total adjustments to
GAAP income (loss) before income taxes
|
0.34
|
|
0.34
|
|
1.80
|
|
1.04
|
Adjustment to GAAP
provision for income taxes
|
(0.02)
|
|
(1.30)
|
|
(0.80)
|
|
(1.41)
|
Total adjustment to
income (loss), net of taxes
|
0.32
|
|
(0.96)
|
|
1.00
|
|
(0.37)
|
Incremental dilution
effect
|
—
|
|
—
|
|
—
|
|
0.01
|
Diluted net income (loss) per share
(Non-GAAP)
|
$
0.53
|
|
$
0.46
|
|
$
1.96
|
|
$
1.81
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares
outstanding
|
637
|
|
644
|
|
642
|
|
624
|
Incremental dilution
impact of ASU 2020-06 (3)
|
—
|
|
—
|
|
—
|
|
(5)
|
Diluted weighted-average shares outstanding
(Non-GAAP)
|
637
|
|
644
|
|
642
|
|
619
|
________________________
|
(1)
|
This presentation
includes non-GAAP measures. Non-GAAP financial measures are
supplemental and should not be considered a substitute for
financial information presented in accordance with GAAP. For
a detailed explanation of these non-GAAP measures, see Appendix
A.
|
(2)
|
Amounts may not add due
to rounding.
|
(3)
|
Excludes the dilutive
impact of ASU 2020-06 (Debt with Conversion and Other
Options) under GAAP. For a detailed explanation of this adopted
guidance, see Appendix A.
|
|
|
GEN DIGITAL INC.
|
Revenues and Cyber Safety
Metrics
|
(Unaudited, in millions, except per user data and
percentages)
|
|
Revenues (Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
March 29,
2024
|
|
March 31,
2023
|
|
Variance in %
|
|
March 29,
2024
|
|
March 31,
2023
|
|
Variance in %
|
Revenues
|
$
967
|
|
$
947
|
|
2 %
|
|
$
3,812
|
|
$
3,338
|
|
14 %
|
Contract liabilities
fair value adjustment (1)
|
—
|
|
1
|
|
|
|
—
|
|
2
|
|
|
Revenues
(Non-GAAP)
|
967
|
|
948
|
|
2 %
|
|
3,812
|
|
3,340
|
|
14 %
|
Exclude foreign
exchange impact (2)
|
7
|
|
—
|
|
|
|
25
|
|
—
|
|
|
Constant currency
adjusted revenues (Non-GAAP)
|
$
974
|
|
$
948
|
|
3 %
|
|
$
3,837
|
|
$
3,340
|
|
15 %
|
Cyber Safety Metrics
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
March 29, 2024
|
|
December 29,
2023
|
|
March 31, 2023
|
|
March 29, 2024
|
|
March 31, 2023
|
Direct customer
revenues
|
$
847
|
|
$
837
|
|
$
831
|
|
$
3,353
|
|
$
2,933
|
Partner
revenues
|
$
105
|
|
$
99
|
|
$
100
|
|
$
396
|
|
$
341
|
Total Cyber Safety
revenues
|
$
952
|
|
$
936
|
|
$
931
|
|
$
3,749
|
|
$
3,274
|
Legacy revenues
(3)
|
$
15
|
|
$
15
|
|
$
17
|
|
$
63
|
|
$
66
|
Direct customer count
(at quarter end)
|
39.1
|
|
38.9
|
|
38.2
|
|
39.1
|
|
38.2
|
Direct average revenue
per user (ARPU) (4)
|
$
7.24
|
|
$
7.21
|
|
$
7.24
|
|
$
7.25
|
|
$
7.10
|
Retention
rate
|
77 %
|
|
77 %
|
|
76 %
|
|
77 %
|
|
76 %
|
__________________________
|
(1)
|
Contract liabilities
fair value adjustment represents the Avira deferred revenue
haircut amortization recognized.
|
(2)
|
Calculated using year
ago foreign exchange rates.
|
(3)
|
Legacy revenues
includes revenues from products or solutions from markets that we
have exited and in which we no longer operate, have been
discontinued or identified to be discontinued, or remain in
maintenance mode as a result of integration and product portfolio
decisions.
|
(4)
|
Due to the timing of
the close of the acquisition in the second quarter of fiscal 2023,
the fiscal 2023 ARPU is based on the average ARPU for second,
third, and fourth quarter of fiscal 2023, but excludes the first
quarter of fiscal 2023.
|
|
|
GEN DIGITAL INC.
Appendix
A
Explanation of Non-GAAP Measures and Other
Items
Objective of non-GAAP measures: We believe our presentation of
non-GAAP financial measures, when taken together with corresponding
GAAP financial measures, provides meaningful supplemental
information regarding the Company's operating performance for the
reasons discussed below. Our management team uses these non-GAAP
financial measures in assessing our performance, as well as in
planning and forecasting future periods. Due to the importance of
these measures in managing the business, we use non-GAAP measures
in the evaluation of management's compensation. These non-GAAP
financial measures are not computed according to GAAP and the
methods we use to compute them may differ from the methods used by
other companies. Non-GAAP financial measures are supplemental and
should not be considered a substitute for financial information
presented in accordance with GAAP and should be read only in
conjunction with our consolidated financial statements prepared in
accordance with GAAP.
Contract liabilities adjustment: Our non-GAAP net revenues
eliminate the impact of contract liabilities purchase accounting
adjustments. Prior to our adoption of ASU 2021-08 in fiscal 2022,
GAAP required an adjustment to the liability for acquired contract
liabilities such that the liability approximates how much we, the
acquirer, would have to pay a third party to assume the liability.
We believe that eliminating the impact of this adjustment improves
the comparability of revenues between periods. Also, although the
adjustment amounts will never be recognized in our GAAP financial
statements, we do not expect the acquisitions to affect the future
renewal rates of revenues excluded by the adjustments. In addition,
our management uses non-GAAP net revenues, adjusted for the impact
of purchase accounting adjustments to assess our operating
performance and overall revenue trends. Nevertheless, non-GAAP net
revenues has limitations as an analytical tool and should not be
considered in isolation or as a substitute for GAAP net revenues.
We believe these adjustments are useful to investors as an
additional means to reflect revenue trends of our business.
However, other companies in our industry may not calculate these
measures in the same manner which may limit their usefulness for
comparative purposes. Our acquisition of Avira during the fourth
quarter of fiscal 2021 was the last acquisition pre-adoption of the
new literature.
Stock-based compensation: This consists of expenses for employee
restricted stock units, performance-based awards, stock options and
our employee stock purchase plan, determined in accordance with
GAAP. We evaluate our performance both with and without these
measures because stock-based compensation is a non-cash expense and
can vary significantly over time based on the timing, size, nature
and design of the awards granted, and is influenced in part by
certain factors that are generally beyond our control, such as the
volatility of the market value of our common stock. In addition,
for comparability purposes, we believe it is useful to provide a
non-GAAP financial measure that excludes stock-based compensation
to facilitate the comparison of our results to those of other
companies in our industry.
Amortization of intangible assets: Amortization of intangible
assets consists of amortization of acquisition-related intangibles
assets such as developed technology, customer relationships and
trade names acquired in connection with business combinations. We
record charges relating to the amortization of these intangibles
within both cost of revenues and operating expenses in our GAAP
financial statements. Under purchase accounting, we are required to
allocate a portion of the purchase price to intangible assets
acquired and amortize this amount over the estimated useful lives
of the acquired intangible assets. However, the purchase price
allocated to these assets is not necessarily reflective of the cost
we would incur to internally develop the intangible asset. Further,
amortization charges for our acquired intangible assets are
inconsistent in size and are significantly impacted by the timing
and valuation of our acquisitions. We eliminate these charges from
our non-GAAP operating results to facilitate an evaluation of our
current operating performance and provide better comparability to
our past operating performance.
Restructuring and other costs: Restructuring charges are costs
associated with a formal restructuring plan and are primarily
related to employee severance and benefit arrangements, contract
termination costs, and assets write-offs, as well as other exit and
disposal costs. Included in other exit and disposal costs are costs
to exit and consolidate facilities in connection with restructuring
events. We exclude restructuring and other costs from our non-GAAP
results as we believe that these costs are incremental to core
activities that arise in the ordinary course of our business and do
not reflect our current operating performance, and that excluding
these charges facilitates a more meaningful evaluation of our
current operating performance and comparisons to our past operating
performance.
Acquisition-related and integration costs: These represent the
transaction and business integration costs related to significant
acquisitions that are charged to operating expense in our GAAP
financial statements. These costs include incremental expenses
incurred to affect these business combinations such as advisory,
legal, accounting, valuation, and other professional or consulting
fees. We exclude these costs from our non-GAAP results as they have
no direct correlation to the operation of our business, and because
we believe that the non-GAAP financial measures excluding these
costs provide meaningful supplemental information regarding the
spending trends of our business. In addition, these costs vary,
depending on the size and complexity of the acquisitions, and are
not indicative of costs of future acquisitions.
Litigation costs: We may periodically incur charges or
benefits related to litigation settlements, legal contingency
accruals and third-party legal costs related to certain legal
matters. We exclude these charges and benefits when
associated with a significant matter because we do not believe they
are reflective of ongoing business and operating results.
Non-cash interest expense and amortization of debt issuance
costs: In accordance with GAAP, we separately account for the value
of the conversion feature on our convertible notes as a debt
discount that reflects our assumed non-convertible debt borrowing
rates. We amortize the discount and debt issuance costs over the
term of the related debt. We exclude the difference between the
imputed interest expense, which includes the amortization of the
conversion feature and of the issuance costs, and the coupon
interest payments. We extinguished our remaining convertible debt
on August 15, 2022. During fiscal
2023, we also started amortizing the debt issuance costs associated
with our senior credit facilities, which were secured upon close of
the acquisition with Avast. We believe that excluding these costs
provides meaningful supplemental information regarding the cash
cost of our debt instruments and enhance investors' ability to view
the Company's results from management's perspective.
Gain (loss) on extinguishment of debt: We record gains or losses
on extinguishment of debt. Gains or losses represent the difference
between the fair value of the exchange consideration and the
carrying value of the liability component of the debt at the date
of extinguishment. We exclude the gain or loss on debt
extinguishment in our non-GAAP results because they are not
reflective of our ongoing business.
Gain (loss) on equity investments: We record gains or
losses, unrealized and realized, on equity investments in
privately-held companies. We exclude the net gains or losses
because we do not believe they are reflective of our ongoing
business.
Gain (loss) on sale of properties: We periodically recognize
gains or losses from the disposition of land and buildings. We
exclude such gains or losses because they are not reflective of our
ongoing business and operating results.
Income tax effects and adjustments: We use a non-GAAP tax rate
that excludes (1) the discrete impacts of changes in tax
legislation, (2) most other significant discrete items, (3)
unrealized gains or losses from remeasurement of foreign currency
denominated deferred tax items and uncertain tax benefits, and (4)
the income tax effects of the non-GAAP adjustment to our operating
results described above. We believe making these adjustments
facilitates a better evaluation of our current operating
performance and comparisons to past operating results. Our tax rate
is subject to change for a variety of reasons, such as significant
changes in the geographic earnings mix due to acquisition and
divestiture activities or fundamental tax law changes in major
jurisdictions where we operate.
Diluted GAAP and non-GAAP weighted-average shares outstanding:
Diluted GAAP and non-GAAP weighted-average shares outstanding are
generally the same, except in periods when there is a GAAP loss
from continuing operations. In accordance with GAAP, we do not
present dilution for GAAP in periods in which there is a loss from
continuing operations. However, if there is non-GAAP net income, we
present dilution for non-GAAP weighted-average shares outstanding
in an amount equal to the dilution that would have been presented
had there been GAAP income from continuing operations for the
period.
Additionally, on April 2, 2022, we
adopted ASU 2020-06, Debt with Conversion and Other Options. Under
GAAP, we are required to apply the if-converted method to our
calculation of diluted earnings per share. As such, our GAAP
calculation adjusts for the dilutive effect of the maximum number
of potential shares to be issued upon settlement of our outstanding
convertible notes. For our Non-GAAP measure, we exclude the impact
of this adoption, which is consistent with our intent to settle in
cash and consistent with our prior maturing convertible note
transactions. As of July 5, 2022, we
communicated our intent to the convertible note holders to settle
the principal and conversion rights in cash upon maturity in
August 2022. We believe it is
reasonable to exclude the potential shares as these adjustments
provide useful supplemental information to investors and
facilitates the analysis of our operating results and comparison of
operating results across reporting periods. Additionally, it is
consistent with our past practice of cash settling these
instruments.
Bookings: Bookings are defined as customer orders received that
are expected to generate net revenues in the future. We present the
operational metric of bookings because it reflects customers'
demand for our products and services and to assist readers in
analyzing our performance in future periods.
Free cash flow: Free cash flow is defined as cash flows from
operating activities less purchases of property and equipment. Free
cash flow is not a measure of financial condition under GAAP and
does not reflect our future contractual commitments and the total
increase or decrease of our cash balance for a given period, and
thus should not be considered as an alternative to cash flows from
operating activities or as a measure of liquidity.
(Unlevered) Free cash flow: Free cash flow is defined as cash
flows from operating activities less purchases of property and
equipment. Unlevered free cash flow excludes cash interest expense
payments. Free cash flow is not a measure of financial condition
under GAAP and does not reflect our future contractual commitments
and the total increase or decrease of our cash balance for a given
period, and thus should not be considered as an alternative to cash
flows from operating activities or as a measure of liquidity.
Constant currency adjusted revenues (Non-GAAP): Non-GAAP
constant currency adjusted revenues are defined as revenues
adjusted for the fair value of acquired contract liabilities and
foreign exchange impact, calculated by translating current period
revenue using the year ago currency conversion rate.
Revenues (Non-GAAP): Revenues (Non-GAAP) excludes the Avira
deferred revenue haircut amortization recognized during the
quarter. We are presenting revenues (Non-GAAP) to provide readers
with a better understanding of the impact from the Avira deferred
revenue haircut on our historical results and to assist readers in
analyzing results in future periods.
Direct customer count: Direct customers is a metric designed to
represent active paid users of our products and solutions who have
a direct billing and/or registration relationship with us at the
end of the reported period. Average direct customer count presents
the average of the total number of direct customers at the
beginning and end of the applicable period. We exclude users on
free trials from our direct customer count. Users who have
indirectly purchased and/or registered for our products or
solutions through partners are excluded unless such users convert
or renew their subscription directly with us or sign up for a paid
membership through our web stores or third-party app stores. While
these numbers are based on what we believe to be reasonable
estimates of our user base for the applicable period of
measurement, there are inherent challenges in measuring usage of
our products and solutions across brands, platforms, regions, and
internal systems, and therefore, calculation methodologies may
differ. The methodologies used to measure these metrics require
judgment and are also susceptible to algorithms or other technical
errors. We continually seek to improve our estimates of our user
base, and these estimates are subject to change due to improvements
or revisions to our methodology. From time to time, we review our
metrics and may discover inaccuracies or make adjustments to
improve their accuracy, which can result in adjustments to our
historical metrics. Our ability to recalculate our historical
metrics may be impacted by data limitations or other factors that
require us to apply different methodologies for such adjustments.
We generally do not intend to update previously disclosed metrics
for any such inaccuracies or adjustments that are deemed not
material.
Direct average revenues per user (ARPU): ARPU is calculated as
estimated direct customer revenues for the period divided by the
average direct customer count for the same period, expressed as a
monthly figure. We monitor ARPU because it helps us understand the
rate at which we are monetizing our consumer customer base.
Retention rate: Retention rate is defined as the percentage of
direct customers as of the end of the period from one year ago who
are still active as of the most recently completed fiscal period.
We monitor the retention rate to evaluate the effectiveness of our
strategies to improve renewals of subscriptions.
CONTACTS
Investor
Contact
Jason Starr
|
|
Media
Contact
Audra
Proctor
|
Gen
|
|
Gen
|
IR@GenDigital.com
|
|
Press@GenDigital.com
|
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SOURCE Gen Digital Inc.