Gen hosts first investor update sharing a
detailed outlook into the business
TEMPE,
Ariz. and PRAGUE,
Nov. 7,
2023 /PRNewswire/ -- Gen Digital Inc. (NASDAQ: GEN),
a global leader dedicated to powering Digital Freedom, released its
results for its fiscal year 2024 second quarter, which ended
September 29, 2023.
"We created Gen just one year ago, knowing that NortonLifeLock
and Avast together would be the company to deliver Cyber Safety to
everyone. Our digital lives keep expanding and, unfortunately,
cyber threats do too. With our integrated platform and technology,
our global reach directly or through partners, and our commitment
to serve and win, Gen is best positioned to lead this dynamic and
expanding market," said Vincent
Pilette, CEO of Gen. "Every day we focus on meeting the
needs of consumers, executing with discipline, and we won't rest
until we deliver Digital Freedom to everyone."
Q2 Financial Highlights and Commentary YoY
Q2 GAAP revenue was $948 million,
up 27%. Q2 GAAP diluted EPS was $0.23, compared to $0.12 a year ago. Q2 GAAP operating margin was
2.6%, down 30 points. Q2 operating cash flow was $125 million.
Q2 Non-GAAP YoY
- Revenue of $948 million, up 27% in USD and 28% in CC
- Bookings of $923 million, up 28%
in USD and 27% in CC
- Operating Income of $549 million,
up 41% in USD and 43% in CC
- Operating Margin of 57.9%, up 600 basis points
- Diluted EPS of $0.47, up 4% in
USD and up 9% in CC
"Our Q2 results demonstrate the Gen team's consistent commitment
to driving sustainable and profitable growth," said Natalie Derse, CFO of Gen. "In Q2 we returned to
sequential customer count growth up 380,000 while we also grew ARPU
and improved retention. We see a great opportunity to continue this
momentum, further extending our market leadership in Cyber Safety
and driving significant value for our customers and
shareholders."
Q3 FY24 Non-GAAP Guidance
- Q3 FY24 Revenue expected to be in the range of $950 to $960
million
- Q3 FY24 EPS expected to be in the range of $0.49 to $0.51
Fiscal Year 2024 Non-GAAP Annual Guidance
- FY24 Revenue expected to be in the range of $3.810 to $3.835
billion
- FY24 EPS expected to be in the range of $1.95 to $2.00
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 December 13, 2023, to all
shareholders of record as of the close of business on November
20, 2023.
For additional details regarding Gen's results and outlook, as
well as the company's FY24 Q2 Investor Letter, please visit
Investor.GenDigital.com.
Gen's 1st Anniversary Investor Update
On its first
anniversary as Gen, Company will host an Investor Update today,
November 7, 2023, from 10:30 a.m. to 1:00 p.m. EST. Gen leadership will
offer a detailed look into the business, review the company's
market opportunity and priorities and its long-term model. The FY24
Q2 Results Q&A session will be held in combination with the
Investor Update Q&A.
A live video webcast of the presentation and Q&A can be
accessed at Investor.GenDigital.com in the Events section. A replay
of this event and presentation materials will be posted following
the event's conclusion.
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 "Q2 Non-GAAP YoY" including
expectations relating to achievement of long-term objectives, and
the statements under "Q3 FY24 Non-GAAP Guidance" and "Fiscal Year
2024 Non-GAAP Annual Guidance" including expectations relating to
Q3 FY24 and FY24 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. 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.
Investor
Contact
Jason Starr
|
|
Media
Contact
Jenna
Torluemke
|
Gen
|
|
Gen
|
IR@GenDigital.com
|
|
Press@GenDigital.com
|
|
GEN DIGITAL
INC. Condensed Consolidated Balance
Sheets (Unaudited, in millions)
|
|
|
|
|
|
|
|
|
September 29,
2023
|
|
March 31, 2023
|
|
ASSETS
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
$
629
|
|
$
750
|
|
Accounts receivable,
net
|
|
|
|
|
147
|
|
168
|
|
Other current
assets
|
|
|
|
|
278
|
|
284
|
|
Assets held for
sale
|
|
|
|
|
22
|
|
31
|
|
Total current
assets
|
|
|
|
|
1,076
|
|
1,233
|
|
Property and equipment,
net
|
|
|
|
|
75
|
|
76
|
|
Operating lease
assets
|
|
|
|
|
39
|
|
43
|
|
Intangible assets,
net
|
|
|
|
|
2,859
|
|
3,097
|
|
Goodwill
|
|
|
|
|
10,199
|
|
10,217
|
|
Other long-term
assets
|
|
|
|
|
2,163
|
|
1,281
|
|
Total
assets
|
|
|
|
|
$
16,411
|
|
$
15,947
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
|
|
$
66
|
|
$
77
|
|
Accrued compensation
and benefits
|
|
|
|
|
61
|
|
102
|
|
Current portion of
long-term debt
|
|
|
|
|
175
|
|
233
|
|
Contract
liabilities
|
|
|
|
|
1,599
|
|
1,708
|
|
Current operating
lease liabilities
|
|
|
|
|
19
|
|
26
|
|
Other current
liabilities
|
|
|
|
|
540
|
|
703
|
|
Total current
liabilities
|
|
|
|
|
2,460
|
|
2,849
|
|
Long-term
debt
|
|
|
|
|
9,333
|
|
9,529
|
|
Long-term contract
liabilities
|
|
|
|
|
73
|
|
80
|
|
Deferred income tax
liabilities
|
|
|
|
|
256
|
|
395
|
|
Long-term income taxes
payable
|
|
|
|
|
1,213
|
|
820
|
|
Long-term operating
lease liabilities
|
|
|
|
|
31
|
|
31
|
|
Other long-term
liabilities
|
|
|
|
|
631
|
|
43
|
|
Total
liabilities
|
|
|
|
|
13,997
|
|
13,747
|
|
Total stockholders'
equity (deficit)
|
|
|
|
|
2,414
|
|
2,200
|
|
Total liabilities and
stockholders' equity (deficit)
|
|
|
|
|
$
16,411
|
|
$
15,947
|
|
|
|
|
|
|
|
GEN DIGITAL
INC. Condensed Consolidated Statements of
Operations (Unaudited, in millions, except per share
amounts)
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
September 29,
2023
|
|
September 30,
2022
|
|
September 29,
2023
|
|
September 30,
2022
|
|
Net revenues
|
$
948
|
|
$
748
|
|
$
1,894
|
|
$
1,455
|
|
Cost of
revenues
|
180
|
|
119
|
|
359
|
|
221
|
|
Gross
profit
|
768
|
|
629
|
|
1,535
|
|
1,234
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
187
|
|
167
|
|
368
|
|
323
|
|
Research and
development
|
85
|
|
73
|
|
175
|
|
134
|
|
General and
administrative
|
393
|
|
110
|
|
449
|
|
214
|
|
Amortization of
intangible assets
|
61
|
|
29
|
|
122
|
|
50
|
|
Restructuring and
other costs
|
17
|
|
9
|
|
34
|
|
11
|
|
Total operating
expenses
|
743
|
|
388
|
|
1,148
|
|
732
|
|
Operating income
(loss)
|
25
|
|
241
|
|
387
|
|
502
|
|
Interest
expense
|
(173)
|
|
(48)
|
|
(343)
|
|
(79)
|
|
Other income
(expense), net
|
7
|
|
2
|
|
19
|
|
1
|
|
Income (loss) before
income taxes
|
(141)
|
|
195
|
|
63
|
|
424
|
|
Income tax expense
(benefit)
|
(290)
|
|
126
|
|
(275)
|
|
155
|
|
Net income
(loss)
|
$
149
|
|
$
69
|
|
$
338
|
|
$
269
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share - basic
|
$
0.23
|
|
$
0.12
|
|
$
0.53
|
|
$
0.46
|
|
Net income (loss) per
share - diluted
|
$
0.23
|
|
$
0.12
|
|
$
0.52
|
|
$
0.45
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
640
|
|
590
|
|
640
|
|
583
|
|
Diluted
|
644
|
|
595
|
|
644
|
|
599
|
|
|
|
|
|
|
|
GEN DIGITAL
INC. Condensed Consolidated Statements of Cash
Flows (Unaudited, in millions)
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
September 29,
2023
|
|
September 30,
2022
|
|
September 29,
2023
|
|
September 30,
2022
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
149
|
|
$
69
|
|
$
338
|
|
$
269
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization and
depreciation
|
125
|
|
49
|
|
250
|
|
78
|
|
Impairments and
write-offs of current and long-lived assets
|
—
|
|
(5)
|
|
—
|
|
(5)
|
|
Stock-based
compensation expense
|
35
|
|
29
|
|
72
|
|
53
|
|
Deferred income
taxes
|
(917)
|
|
(19)
|
|
(976)
|
|
(51)
|
|
Loss (gain) on
extinguishment of debt
|
—
|
|
9
|
|
—
|
|
9
|
|
Gain on sale of
property
|
—
|
|
—
|
|
(4)
|
|
—
|
|
Non-cash operating
lease expense
|
5
|
|
7
|
|
11
|
|
11
|
|
Other
|
(1)
|
|
(19)
|
|
17
|
|
(45)
|
|
Changes in operating
assets and liabilities, net of
acquisitions:
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
(4)
|
|
4
|
|
16
|
|
17
|
|
Accounts
payable
|
(3)
|
|
(27)
|
|
(15)
|
|
(18)
|
|
Accrued compensation
and benefits
|
1
|
|
35
|
|
(41)
|
|
3
|
|
Contract
liabilities
|
(31)
|
|
(32)
|
|
(99)
|
|
(85)
|
|
Income taxes
payable
|
389
|
|
(151)
|
|
417
|
|
(91)
|
|
Other
assets
|
6
|
|
9
|
|
(21)
|
|
9
|
|
Other
liabilities
|
371
|
|
(46)
|
|
386
|
|
(27)
|
|
Net cash provided by
(used in) operating activities
|
125
|
|
(88)
|
|
351
|
|
127
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
(5)
|
|
(2)
|
|
(9)
|
|
(4)
|
|
Payments for
acquisitions, net of cash acquired
|
—
|
|
(6,550)
|
|
—
|
|
(6,550)
|
|
Proceeds from the
maturities and sales of short-term
investments
|
—
|
|
—
|
|
—
|
|
4
|
|
Proceeds from the sale
of property
|
13
|
|
—
|
|
13
|
|
—
|
|
Other
|
1
|
|
2
|
|
(1)
|
|
4
|
|
Net cash provided by
(used in) investing activities
|
9
|
|
(6,550)
|
|
3
|
|
(6,546)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayments of
debt
|
(58)
|
|
(2,328)
|
|
(266)
|
|
(2,738)
|
|
Proceeds from issuance
of debt, net of issuance costs
|
—
|
|
8,954
|
|
—
|
|
8,954
|
|
Net proceeds from
sales of common stock under employee
stock incentive plans
|
6
|
|
6
|
|
6
|
|
6
|
|
Tax payments related
to vesting of stock units
|
(2)
|
|
—
|
|
(20)
|
|
(16)
|
|
Dividends and dividend
equivalents paid
|
(81)
|
|
(72)
|
|
(164)
|
|
(153)
|
|
Repurchases of common
stock
|
—
|
|
(104)
|
|
(41)
|
|
(404)
|
|
Net cash provided by
(used in) financing activities
|
(135)
|
|
6,456
|
|
(485)
|
|
5,649
|
|
Effect of exchange rate
fluctuations on cash and cash
equivalents
|
7
|
|
(14)
|
|
10
|
|
(22)
|
|
Change in cash and cash
equivalents
|
6
|
|
(196)
|
|
(121)
|
|
(792)
|
|
Beginning cash and cash
equivalents
|
623
|
|
1,291
|
|
750
|
|
1,887
|
|
Ending cash and cash
equivalents
|
$
629
|
|
$
1,095
|
|
$
629
|
|
$
1,095
|
|
|
|
|
|
|
|
GEN DIGITAL
INC. Reconciliation of Selected GAAP Measures to Non-GAAP
Measures (1) (2) (Unaudited, in
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
September 29,
2023
|
|
September 30,
2022
|
|
Operating income (loss)
|
|
|
|
|
$
25
|
|
$
241
|
|
Stock-based
compensation
|
|
|
|
|
35
|
|
29
|
|
Amortization of
intangible assets
|
|
|
|
|
119
|
|
45
|
|
Restructuring and
other costs
|
|
|
|
|
17
|
|
9
|
|
Acquisition and
integration costs
|
|
|
|
|
6
|
|
58
|
|
Litigation
costs
|
|
|
|
|
347
|
|
7
|
|
Other
|
|
|
|
|
—
|
|
(1)
|
|
Operating income (loss)
(Non-GAAP)
|
|
|
|
|
$
549
|
|
$
388
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
|
|
|
|
2.6 %
|
|
32.2 %
|
|
Operating margin (Non-GAAP)
|
|
|
|
|
57.9 %
|
|
51.9 %
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
$
149
|
|
$
69
|
|
Adjustments to net
income (loss):
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
35
|
|
29
|
|
Amortization of
intangible assets
|
|
|
|
|
119
|
|
45
|
|
Restructuring and
other costs
|
|
|
|
|
17
|
|
9
|
|
Acquisition and
integration costs
|
|
|
|
|
6
|
|
58
|
|
Litigation
costs
|
|
|
|
|
347
|
|
7
|
|
Other
|
|
|
|
|
(1)
|
|
(10)
|
|
Non-cash interest
expense
|
|
|
|
|
6
|
|
3
|
|
Loss (gain) on
extinguishment of debt
|
|
|
|
|
—
|
|
9
|
|
Total adjustments to
GAAP income (loss) before income taxes
|
|
|
|
|
529
|
|
150
|
|
Adjustment to GAAP
provision for income taxes
|
|
|
|
|
(375)
|
|
50
|
|
Total adjustment to
income (loss), net of taxes
|
|
|
|
|
154
|
|
200
|
|
Net income (loss) (Non-GAAP)
|
|
|
|
|
$
303
|
|
$
269
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per
share
|
|
|
|
|
$
0.23
|
|
$
0.12
|
|
Adjustments to diluted
net income (loss) per share:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
0.05
|
|
0.05
|
|
Amortization of
intangible assets
|
|
|
|
|
0.18
|
|
0.08
|
|
Restructuring and
other costs
|
|
|
|
|
0.03
|
|
0.02
|
|
Acquisition and
integration costs
|
|
|
|
|
0.01
|
|
0.10
|
|
Litigation
costs
|
|
|
|
|
0.54
|
|
0.01
|
|
Other
|
|
|
|
|
(0.00)
|
|
(0.02)
|
|
Non-cash interest
expense
|
|
|
|
|
0.01
|
|
0.01
|
|
Loss (gain) on
extinguishment of debt
|
|
|
|
|
—
|
|
0.02
|
|
Total adjustments to
GAAP income (loss) before income taxes
|
|
|
|
|
0.82
|
|
0.25
|
|
Adjustment to GAAP
provision for income taxes
|
|
|
|
|
(0.58)
|
|
0.08
|
|
Total adjustment to
income (loss), net of taxes
|
|
|
|
|
0.24
|
|
0.34
|
|
Diluted net income (loss) per share
(Non-GAAP)
|
|
|
|
|
$
0.47
|
|
$
0.45
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted-average shares
outstanding
|
|
|
|
|
644
|
|
595
|
|
Diluted weighted-average shares outstanding
(Non-GAAP)
|
|
|
|
|
644
|
|
595
|
|
_____________________
|
(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.
|
|
|
|
|
|
|
|
GEN DIGITAL
INC. Constant Currency Adjusted Revenues and Cyber Safety
Metrics (Unaudited, in millions, except per user
data)
|
|
|
|
Constant Currency Adjusted Revenues
(Non-GAAP)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
September 29,
2023
|
|
September 30,
2022
|
|
Variance in %
|
|
Revenues
|
|
|
$
948
|
|
$
748
|
|
27 %
|
|
Exclude foreign
exchange impact (1)
|
|
|
7
|
|
|
|
|
|
Constant currency
adjusted revenues (Non-GAAP)
|
|
|
$
955
|
|
$
748
|
|
28 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cyber Safety Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
(2)
|
|
|
|
|
|
|
September 29,
2023 (3)
|
|
September 30,
2022 (3)
|
|
Direct customer
revenues
|
|
|
|
|
$
837
|
|
$
660
|
|
Partner
revenues
|
|
|
|
|
$
95
|
|
$
74
|
|
Total Cyber Safety
revenues
|
|
|
|
|
$
932
|
|
$
734
|
|
Legacy
revenues
|
|
|
|
|
$
16
|
|
$
14
|
|
Direct customer count
(at quarter end)
|
|
|
|
|
38.5
|
|
38.6
|
|
Direct average revenue
per user (ARPU)
|
|
|
|
|
$
7.28
|
|
$
6.98
|
|
__________________
|
(1)
|
Calculated using year
ago foreign exchange rates.
|
(2)
|
From time to time,
changes in our product hierarchy cause changes to the revenue
channels above. When changes occur, we recast historical
amounts to match the current revenue channels. Direct revenues
currently includes Mobile App Store customers, and legacy revenues
includes
revenues from products or solutions that are no longer in
operations in exited markets, have been discontinued or identified
to be discontinued, or
remain in maintenance mode as a result of integration and product
portfolio decisions. As such, the changes to historical revenue
amounts and the
other performance metrics, including direct customer count
and ARPU, are reflected for all periods presented
above.
|
(3)
|
The performance metrics
for the three months ended September 29, 2023 and September 30,
2022 include the revenues earned and customers
acquired through our acquisition with Avast. ARPU is
based on average customer count and assumes full quarter of revenue
for both companies.
|
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.
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 Merger 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 a foreign currency
denominated deferred tax asset with no cash tax impact 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.
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.
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.
Annual retention rate: Annual retention rate is defined as the
number of direct customers who have more than a one-year tenure as
of the end of the most recently completed fiscal period divided by
the total number of direct customers as of the end of the period
from one year ago. We monitor annual retention rate to evaluate the
effectiveness of our strategies to improve renewals of
subscriptions.
GenDigital.com
View original content to download
multimedia:https://www.prnewswire.com/news-releases/gen-reports-q2-fy24-results-and-confirms-annual-guidance-within-range-301979287.html
SOURCE Gen Digital Inc.