Direct Customers up 2M Q/Q and 2.8M Y/Y, with
Reported Billings up Double Digits
NortonLifeLock Inc. (NASDAQ: NLOK), a global leader in consumer
Cyber Safety, today reported results for its fiscal year 2021
fourth quarter which ended April 2, 2021.
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the full release here:
https://www.businesswire.com/news/home/20210510005931/en/
Q4 GAAP Financial Results YoY
Q4 GAAP revenue was $672 million, up 9% in USD. Q4 GAAP
operating margin was 39.6%, up 32 points. Q4 GAAP diluted EPS from
continuing operations was $0.35, up 52%. Q4 operating cash flow was
$356 million.
Q4 Non-GAAP Financial Highlights and Commentary YoY
- Record revenue of $677 million, up 11% in USD
- Record diluted EPS of $0.40, up 54%
- Operating margin was 50.5%, up 900 bps
- Consumer reported billings was $748 million, up 17% in USD
- Direct customer count of 23 million, up 2.8 million
“We’re on a mission to bring Cyber Safety to everyone,” said
Vincent Pilette, CEO of NortonLifeLock. “I’m proud of what the team
achieved in our first fiscal year. We accelerated growth, expanded
our international footprint, and added freemium capability. In the
fourth quarter alone, we added 2 million new customers, and
achieved record revenue and profit. This is possible because we are
all driven by our vision to protect and empower people to live
their digital lives safely. We are just getting started.”
Fiscal 2022 Q1 Guidance
- Non-GAAP Revenue is expected to be in the range of $680 to $690
million, translating to approximately 10 to 12% growth YoY
- Non-GAAP EPS is expected to be in the range of $0.40 to
$0.42
Quarterly Cash Dividend
NortonLifeLock’s Board of Directors has declared a quarterly
cash dividend of $0.125 per common share to be paid on June 23,
2021, to all shareholders of record as of the close of business on
June 09, 2021.
Share Repurchase Authorization Raised by $1.5 Billion
NortonLifeLock’s Board of Directors has approved an incremental
share repurchase authorization of $1.5 billion. Along with the
current $274 million authorization remaining, this new
authorization increases the total share repurchase remaining to
approximately $1.8 billion. The authorization has no expiration
date. As of April 2, 2021, the Company has returned $1.33 billion
to shareholders through the repurchase of 58 million common shares
since becoming a standalone company in November 2019.
Amended Existing Credit Facilities Agreement
On May 7, 2021, NortonLifeLock entered into the first amendment
of the Company’s existing credit agreement, which provides a credit
facility of up to $1.0 billion and a term loan facility of up to
$1.75 billion. The new credit facility increases borrowing capacity
by $516 million. The credit facilities will remain senior secured
and mature in May 2026. Following the amendment, the Company’s
leverage ratio remains at 2.0x net debt to adjusted EBITDA.
2021 Investor Day: Transforming for Growth
NortonLifeLock will host its first annual Investor Day today,
May 10, 2021.
Virtual event details Investor.NortonLifeLock.com
- May 10, 2021: Watch-on-Demand presentations available after
market close at 2 p.m. PT / 5 p.m. ET.
- May 11, 2021: Live video Q&A webcast with leadership team
at 9 a.m. PT / 12 p.m. ET.
For additional details regarding NortonLifeLock’s results and
outlook, please see the Earnings Presentation and the Supplemental
Information on the investor relations page of our website at
Investor.NortonLifeLock.com.
About NortonLifeLock Inc.
NortonLifeLock Inc. (NASDAQ: NLOK) is a global leader in
consumer Cyber Safety, protecting and empowering people to live
their digital lives safely. We are the consumer’s trusted ally in
an increasingly complex and connected world. Learn more about how
we’re transforming Cyber Safety at www.NortonLifeLock.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
statements under “Fiscal 2022 Q1 Guidance,” including expectations
relating to first quarter non-GAAP revenue, non-GAAP revenue growth
and non-GAAP EPS; the statements contained in the quotations; 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 current and future impact of the COVID-19 pandemic on the
Company’s business and industry; the effect of the sale of
substantially all of the Enterprise Security assets on
NortonLifeLock’s retained businesses and products; retention of
executive leadership team members; difficulties in improving sales
and product development during leadership transitions; difficulties
in executing the operating model for the consumer cyber safety
business; lower than anticipated returns from the Company's
investments in direct customer acquisition; difficulties and delays
in reducing run rate expenses and monetizing underutilized assets;
general business and economic conditions; matters arising out of
our completed Audit Committee investigation and the ongoing U.S.
Securities and Exchange Commission investigation; fluctuations and
volatility in NortonLifeLock’s stock price; the ability of
NortonLifeLock to successfully execute strategic plans; the ability
to maintain customer and partner relationships; the ability of
NortonLifeLock to achieve its cost and operating efficiency goals;
the anticipated growth of certain market segments; NortonLifeLock’s
sales and business strategy; fluctuations in tax rates and foreign
currency exchange rates; the potential for corporate tax increases
under the new Biden Administration; the timing and market
acceptance of new product releases and upgrades; and the successful
development of new products and the degree to which these products
gain market acceptance. Additional information concerning these and
other risk factors is contained in the Risk Factors sections of
NortonLifeLock’s most recent reports on Form 10-K and Form 10-Q.
NortonLifeLock assumes no obligation, and does 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, 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 Consumer revenues, constant currency revenues
and Consumer reported billings, which exclude revenues from our
divested ID Analytics solutions, and free cash flow, which is
defined as cash flows from operating activities less purchases of
property and equipment. 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
NortonLifeLock’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 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 Supplemental Information, on
the investor relations page of our website at
Investor.NortonLifeLock.com. No reconciliation of the forecasted
range for non-GAAP 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.
NORTONLIFELOCK INC.
Condensed Consolidated Balance
Sheets
(In millions,
unaudited)
April 2, 2021
April 3, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
933
$
2,177
Short-term investments
18
86
Accounts receivable, net
117
111
Other current assets
237
435
Assets held for sale
233
270
Total current assets
1,538
3,079
Property and equipment, net
78
238
Operating lease assets
76
88
Intangible assets, net
1,116
1,067
Goodwill
2,867
2,585
Other long-term assets
686
678
Total assets
$
6,361
$
7,735
LIABILITIES AND STOCKHOLDERS’
EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$
52
$
87
Accrued compensation and benefits
107
115
Current portion of long-term debt
313
756
Contract liabilities
1,210
1,049
Current operating lease liabilities
26
28
Other current liabilities
428
587
Total current liabilities
2,136
2,622
Long-term debt
3,288
3,465
Long-term contract liabilities
55
27
Deferred income tax liabilities
137
149
Long-term income taxes payable
1,119
1,310
Long-term operating lease liabilities
66
73
Other long-term liabilities
60
79
Total liabilities
6,861
7,725
Total stockholders’ equity (deficit)
(500
)
10
Total liabilities and stockholders’ equity
(deficit)
$
6,361
$
7,735
NORTONLIFELOCK INC.
Condensed Consolidated
Statements of Operations (1)
(In millions, except per share
data, unaudited)
Three Months Ended
Year Ended
April 2, 2021
April 3, 2020
April 2, 2021
April 3, 2020
Net revenues
$
672
$
614
$
2,551
$
2,490
Cost of revenues
99
97
362
393
Gross profit
573
517
2,189
2,097
Operating expenses:
Sales and marketing
148
150
576
701
Research and development
68
70
267
328
General and administrative
52
97
215
368
Amortization of intangible assets
20
18
74
79
Restructuring and other costs
19
138
161
266
Total operating expenses
307
473
1,293
1,742
Operating income
266
44
896
355
Interest expense
(35
)
(50
)
(144
)
(196
)
Other income, net
58
263
120
660
Income from continuing operations before
income taxes
289
257
872
819
Income tax expense
81
108
176
241
Income from continuing operations
208
149
696
578
Income (loss) from discontinued
operations
(14
)
82
(142
)
3,309
Net income
$
194
$
231
$
554
$
3,887
Income (loss) per share - basic:
Continuing operations
$
0.36
$
0.25
$
1.18
$
0.94
Discontinued operations
$
(0.02
)
$
0.14
$
(0.24
)
$
5.38
Net income per share - basic (2)
$
0.33
$
0.39
$
0.94
$
6.32
Income (loss) per share - diluted:
Continuing operations
$
0.35
$
0.23
$
1.16
$
0.90
Discontinued operations
$
(0.02
)
$
0.13
$
(0.24
)
$
5.15
Net income per share - diluted (2)
$
0.33
$
0.36
$
0.92
$
6.05
Weighted-average shares outstanding:
Basic
582
599
589
615
Diluted
587
639
600
643
__________________
(1)
The year ended April 2, 2021 consisted of
52 weeks, whereas the year ended April 3, 2020 consisted of 53
weeks. The impact of the extra week on revenues in the year ended
April 3, 2020 is estimated to be approximately $44 million.
(2)
Net income per share amounts may not add
due to rounding.
NORTONLIFELOCK INC.
Condensed Consolidated
Statements of Cash Flows
(In millions,
unaudited)
Three Months Ended
Year Ended
April 2, 2021
April 3, 2020
April 2, 2021
April 3, 2020
OPERATING ACTIVITIES:
Net income
$
194
$
231
$
554
$
3,887
Adjustments:
Amortization and depreciation
37
54
150
361
Impairments of current and long-lived
assets
2
42
90
74
Stock-based compensation expense
15
42
81
312
Deferred income taxes
(5
)
2
42
16
Gain on extinguishment of debt
—
—
(20
)
—
Loss from equity interest
—
—
—
31
Gain on divestitures
—
(262
)
—
(5,684
)
Gain on sale of equity method
investment
—
—
—
(379
)
Gain on sale of properties
(63
)
—
(98
)
—
Non-cash operating lease expense
5
8
22
40
Other
(2
)
(31
)
52
(4
)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net
2
46
3
583
Accounts payable
(21
)
(40
)
(44
)
(61
)
Accrued compensation and benefits
15
(18
)
(10
)
(117
)
Contract liabilities
97
42
118
(121
)
Income taxes payable
49
(1,713
)
(299
)
383
Other assets
108
13
144
(81
)
Other liabilities
(77
)
(182
)
(79
)
(101
)
Net cash provided by (used in) operating
activities
356
(1,766
)
706
(861
)
INVESTING ACTIVITIES:
Purchases of property and equipment
(1
)
(3
)
(6
)
(89
)
Payments for acquisitions, net of cash
acquired
(344
)
—
(344
)
—
Proceeds from divestitures, net of cash
contributed and transaction costs
—
346
—
10,918
Proceeds from the maturities and sales of
short-term investments
8
32
68
167
Proceeds from sales of properties
100
—
218
—
Proceeds from sale of equity method
investment
—
2
—
380
Other
4
11
(5
)
3
Net cash provided by (used in) investing
activities
(233
)
388
(69
)
11,379
FINANCING ACTIVITIES:
Repayments of debt and related equity
component
(12
)
(566
)
(1,941
)
(868
)
Proceeds from issuance of debt, net of
issuance costs
—
—
750
300
Net proceeds from sales of common stock
under employee stock incentive plans
8
14
24
123
Tax payments related to restricted stock
units
(1
)
(7
)
(58
)
(78
)
Dividends and dividend equivalents
paid
(73
)
(7,304
)
(373
)
(7,481
)
Repurchase of common stock
(166
)
(677
)
(304
)
(1,581
)
Cash consideration paid in exchange of
convertible debt
—
(546
)
—
(546
)
Short-swing profit disgorgement
—
—
—
9
Other
(1
)
—
(1
)
(1
)
Net cash used in financing
activities
(245
)
(9,086
)
(1,903
)
(10,123
)
Effect of exchange rate fluctuations on
cash and cash equivalents
9
(8
)
22
(9
)
Change in cash and cash equivalents
(113
)
(10,472
)
(1,244
)
386
Beginning cash and cash equivalents
1,046
12,649
2,177
1,791
Ending cash and cash equivalents
$
933
$
2,177
$
933
$
2,177
NORTONLIFELOCK INC.
Reconciliation of Selected
GAAP Measures to Non-GAAP Measures (1) (2)
(In millions, except per share
data, unaudited)
Three Months Ended
Year Ended
April 2, 2021
April 3, 2020
April 2, 2021
April 3, 2020
Operating income
$
266
$
44
$
896
$
355
Contract liabilities fair value
adjustment
5
—
5
—
Stock-based compensation
13
28
71
119
Amortization of intangible assets
31
25
105
109
Restructuring and other costs
19
138
161
266
Acquisition and integration costs
3
—
4
—
Litigation settlement charges
4
20
29
20
Other
1
—
—
—
Operating income (Non-GAAP)
$
342
$
255
$
1,271
$
869
Operating margin
39.6
%
7.2
%
35.1
%
14.3
%
Operating margin (Non-GAAP)
50.5
%
41.5
%
49.7
%
34.9
%
Net income
$
194
$
231
$
554
$
3,887
Adjustments to income from continuing
operations:
Contract liabilities fair value
adjustment
5
—
5
—
Stock-based compensation
13
26
70
120
Amortization of intangible assets
31
25
105
109
Restructuring and other costs
19
138
161
266
Acquisition and integration costs
3
—
4
—
Litigation settlement charges
4
20
29
20
Other
5
(1
)
2
(1
)
Non-cash interest expense
2
5
9
23
Gain on divestitures and sale of equity
method investment
—
(250
)
—
(629
)
Gain on extinguishment of debt
—
—
(20
)
—
Loss from equity method investment
—
—
—
31
Gain on sale of properties
(63
)
—
(98
)
—
Total adjustments to GAAP income from
continuing operations before income taxes
19
(38
)
267
(61
)
Adjustment to GAAP provision for income
taxes
7
56
(97
)
59
Total adjustment to continuing operations,
net of taxes
26
18
170
(2
)
Discontinued operations
14
(82
)
142
(3,309
)
Net income (Non-GAAP)
$
234
$
167
$
866
$
576
Diluted net income per share
$
0.33
$
0.36
$
0.92
$
6.05
Adjustments to diluted net income per
share:
Contract liabilities fair value
adjustment
0.01
—
0.01
—
Stock-based compensation
0.02
0.04
0.12
0.19
Amortization of intangible assets
0.05
0.04
0.18
0.17
Restructuring and other costs
0.03
0.22
0.27
0.41
Acquisition and integration costs
0.01
—
0.01
—
Litigation settlement charges
0.01
0.03
0.05
0.03
Other
0.01
—
—
—
Non-cash interest expense
—
0.01
0.02
0.04
Gain on divestitures and sale of equity
method investment
—
(0.39
)
—
(0.98
)
Gain on extinguishment of debt
—
—
(0.03
)
—
Loss from equity method investment
—
—
—
0.05
Gain on sale of properties
(0.11
)
—
(0.16
)
—
Total adjustments to GAAP income from
continuing operations before income taxes
0.03
(0.06
)
0.45
(0.09
)
Adjustment to GAAP provision for income
taxes
0.01
0.09
(0.16
)
0.09
Total adjustment to continuing operations,
net of taxes
0.04
0.03
0.28
(0.00
)
Discontinued operations
0.02
(0.13
)
0.24
(5.15
)
Incremental dilution effect
—
—
—
—
Diluted net income per share
(Non-GAAP)
$
0.40
$
0.26
$
1.44
$
0.90
Diluted weighted-average shares
outstanding
587
639
600
643
Incremental dilution
—
—
—
—
Diluted weighted-average shares
outstanding (Non-GAAP)
587
639
600
643
__________________
(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.
NORTONLIFELOCK INC.
Consumer Revenues, Consumer
Reported Billings and Consumer Cyber Safety Metrics
(In millions, except per user
data, unaudited)
Consumer Revenues (Non-GAAP)
Three Months Ended
Year Ended
April 2, 2021
April 3, 2020
Variance in %
April 2, 2021
April 3, 2020
Variance in %
Revenues (1)
$
672
$
614
9
%
$
2,551
$
2,490
2
%
Contract liabilities fair value adjustment
(2)
5
—
5
—
Exclude revenues from ID Analytics (3)
—
(4
)
—
(46
)
Consumer revenues (Non-GAAP)
677
610
11
%
2,556
2,444
5
%
Exclude foreign exchange impact (4)
(14
)
—
(28
)
—
Constant currency adjusted consumer
revenues (Non-GAAP)
663
610
9
%
2,528
2,444
3
%
Exclude extra week impact (1)
—
—
—
(44
)
Constant currency and extra week adjusted
consumer revenues (Non-GAAP)
$
663
$
610
9
%
$
2,528
$
2,400
5
%
Consumer Reported Billings (Non-GAAP)
Three Months Ended
Year Ended
April 2, 2021
April 3, 2020
Variance in %
April 2, 2021
April 3, 2020
Variance in %
Revenues (1)
$
672
$
614
9
%
$
2,551
$
2,490
2
%
Add: Contract liabilities (end of
period)
1,265
1,076
1,265
1,076
Less: Contract liabilities (beginning of
period)
(1,135
)
(1,047
)
(1,076
)
(1,059
)
Add: Other contract liabilities adjustment
(5)
(54
)
—
(54
)
5
Reported billings (Non-GAAP)
748
643
16
%
2,686
2,512
7
%
Exclude revenue from ID Analytics (3)
—
(4
)
—
(46
)
Consumer reported billings (Non-GAAP)
748
639
17
%
2,686
2,466
9
%
Exclude extra week impact (1)
—
—
—
(44
)
Consumer reported billings excluding extra
week impact (Non-GAAP)
$
748
$
639
17
%
$
2,686
$
2,422
11
%
Consumer Cyber Safety Metrics
Three Months Ended
Year Ended
April 2, 2021
January 1, 2021
April 3, 2020
April 2, 2021
April 3, 2020
Direct customer revenues
$
602
$
569
$
549
$
2,286
$
2,204
Partner revenues
$
75
$
70
$
61
$
270
$
240
Revenues from ID Analytics
$
—
$
—
$
4
$
—
$
46
Average direct customer count (6)
22.8
20.8
20.2
21.2
20.2
Direct customer count (at quarter end)
23.0
21.0
20.2
23.0
20.2
Direct average revenue per user (ARPU)
(7)
$
8.80
$
9.10
$
9.07
$
9.01
$
8.90
Consumer Cyber Safety annual retention
rate
85
%
85
%
__________________
(1)
The year ended April 2, 2021 consisted of
52 weeks, whereas the year ended April 3, 2020 consisted of 53
weeks. The impact of the extra week on revenues in the year ended
April 3, 2020 is estimated to be approximately $44 million.
(2)
Contract liabilities fair value adjustment
represents the deferred revenue haircut recognized due to the
acquisition of Avira during the fourth quarter of fiscal 2021.
(3)
In the three months ended April 3, 2020,
we divested our ID Analytics solutions and are presenting consumer
reported billings and consumer revenues to enhance comparability of
the reported billings and revenues of our remaining solutions to
the year ago period.
(4)
Calculated using year ago foreign exchange
rates.
(5)
Other
contract liabilities adjustment for the year ended April 3, 2020
represents the change in contract liabilities related to Veritas
discontinued operations of $5 million. Other contract liabilities
adjustment for the three months and year ended April 2, 2021
represents the acquired $54 million of contract liabilities from
Avira. We present an adjusted consumer reported billings to enhance
comparability of the reported billings of our remaining solutions
to the year ago period.
(6)
Average
direct customer count calculation for the three months ended April
2, 2021 was pro-rated to include 1.6 million customers from the
Avira acquisition. Average direct customer count for the year ended
April 2, 2021 is calculated as an average of the fiscal
quarters.
(7)
ARPU in
the year ended April 3, 2020 was normalized to exclude the impact
of the extra week on direct revenue, which we estimate to be
approximately $41 million.
NORTONLIFELOCK 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
NortonLifeLock’s 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 required by GAAP. GAAP
requires 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.
Stock-based compensation: This
consists of expenses for employee restricted stock units,
performance-based awards, bonus share programs, 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 advisory fees incurred in
connection with restructuring events and facilities exit costs.
Separation costs primarily consist of consulting costs incurred in
connection with the divestiture of our Enterprise Security business
(the Broadcom sale). 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 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 settlement: We may
periodically incur charges or benefits related to litigation
settlements. We exclude these charges and benefits when associated
with a significant settlement 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 because we believe that
excluding these costs provides meaningful supplemental information
regarding the cash cost of our convertible debt and enhance
investors’ ability to view the Company’s results from management’s
perspective.
Gains on divestiture and sale of equity
method investment: We periodically recognize gains on
divestitures. In the third quarter of fiscal 2020, we recognized a
gain of $379 million related to the sale of our DigiCert equity
interest. In the fourth quarter of fiscal 2020, we recognized a
gain of $250 million related to the divestiture of our ID Analytics
solutions. We have excluded these gains for purposes of calculating
our non-GAAP results. We believe making these adjustments
facilitates a better evaluation of our current operating
performance and comparisons to past operating results.
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) from equity method
investment: We record gains or losses in equity method
investments representing net income or loss attributable to our
noncontrolling interest in companies over which we have limited
control and visibility. We exclude such gains and losses in full
because we lack control over the operations of the investee and the
related gains and losses are not indicative of our ongoing core
results.
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. In June 2019, the
U.S. Court of Appeals for the Ninth Circuit Court issued an opinion
in Altera Corp. v. Commissioner which reversed a United States Tax
Court decision regarding the treatment of share-based compensation
expense in a cost sharing arrangement. As a result, we recorded a
cumulative income tax expense of $23 million for continuing
operation in fiscal 2020, which has been excluded from our non-GAAP
tax provision.
Discontinued operations: On
November 4, 2019, we completed the Broadcom sale. The results of
our divested operations that were subject to these divestitures are
presented as discontinued operations in our statements of
operations and thus have been excluded from non-GAAP net income for
all reported periods.
Diluted GAAP and non-GAAP weighted-average
shares outstanding: Diluted GAAP and non-GAAP
weighted-average shares outstanding are the same, except in periods
that 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.
Reported billings: We define
reported billings as total revenue plus the change in adjusted
contract liabilities. The change in contract liabilities excludes
the change related to discontinued operations that does not
amortize to revenue from continuing operations. We consider
reported billings to be a useful metric for management and
investors because it facilitates an analysis of changes in contract
liabilities balances that are an indicator of the health and
visibility of our business. There are several limitations related
to the use of reported billings versus revenue calculated in
accordance with GAAP. First, reported billings include amounts that
have not yet been recognized as revenue. Second, our calculation of
reported billings may be different from other companies in our
industry, some of which may not use reported billings, may
calculate reported billings differently, may have different
reported billing frequencies, or may use other financial measures
to evaluate their performance, all of which could reduce the
usefulness of reported billings as a comparative measure. We
compensate for these limitations by providing specific information
regarding GAAP revenue and evaluating reported billings together
with revenue calculated in accordance with GAAP.
Consumer reported billings: We
define consumer reported billings as total revenue plus the change
in adjusted contract liabilities excluding amounts related to our
ID Analytics solutions. ID Analytics solutions were divested in the
fourth quarter of fiscal 2020. We are presenting consumer reported
billings to provide readers with a better understanding of the
impact from the divestiture of ID Analytics solutions on the
historical performance of our consumer business and to assist
readers in analyzing our performance in future periods. This metric
is subject to the same limitations as reported billings discussed
above.
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.
Non-GAAP constant currency adjusted
revenues: 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.
Consumer revenues: Consumer
revenues exclude revenues from our ID Analytics solutions, which
was divested in the fourth quarter of fiscal 2020. We are
presenting consumer revenues to provide readers with a better
understanding of the impact from the divestiture of ID Analytics
solutions on our historical results and to assist readers in
analyzing results in future periods.
Consumer Cyber Safety direct customer
count: Direct customers are defined as active paid users of
our consumer solutions who have a direct billing relationship with
us at the end of the reported period. Users with multiple products
or entitlements are counted for based on which solutions they are
subscribed. We exclude users on free trials and promotions and
users who have indirectly purchased our product or services through
partners unless such users convert or renew their subscription
directly with us. Average direct customer count presents the
average of the total number of direct customers at the beginning
and end of the fiscal quarter. Full year average direct customer
count is calculated as an average across the quarters.
Consumer Cyber Safety 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210510005931/en/
Investor Contact Mary Lai NortonLifeLock Inc.
IR@NortonLifeLock.com Media Contact Spring Harris NortonLifeLock
Inc. Press@NortonLifeLock.com
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