Gen Digital (GEN) 5 Nov 202021 Q2 Earnings call transcript

Good afternoon everyone, thank you for standing by. My name is Paul, and I will be your conference operator today. I would like to welcome everyone to the NortonLifeLock Fiscal 2021 Second Quarter Earnings Call. [Operator Instructions] At this time for opening remarks, I would like to pass the call over to Ms. Mary Lai, Head of Investor Relations. begin. may you Ms.,

and second everyone. quarter Paul NortonLifeLock to fiscal XXXX earnings good you, Welcome afternoon the Thank call.

Derse, Joining QX me Natalie results our CFO. are Vincent today Pilette, CEO; to review and

year-over-year Investor a reminder, regarding a this of on financial remind risks with and press the industry statements our from date. our references all operations, expectations all there to including during the results earnings be supplemental ongoing and the only otherwise that finding metrics Relations As metrics. which our involve are reconciliation forward-looking assumptions replay materials I'd call along and non-GAAP business, our website and at IR is are may which like contains that of non-GAAP to on may and GAAP statements growth website Those rates business will call available of posted slides, of release final our to unless the A impact uncertainties press on beliefs, our stated. measures performance this actual everyone is based to and pandemic Investor.NortonLifeLock.com. current included the COVID-XX expectations. are on Today's our release as considered cause non-GAAP and and be current such materially speak differ statements to call in statements

now and turn the XXXX, on quarterly fiscal over particular in our will the please to in recently Form April in factors refer press the XX-Q. risk on information, ended CEO, Form X, for more call release filings statement year XX-K For report And reports SEC filed with I cautionary our annual to the our Vincent. and and the our

afternoon Thank everyone, and are well. hope safe I you, you all Good Mary.

to We our vision for and to your everyone. that everyday And million us of to more delivered are employees out growing safety our cyber move to our portion secure online. taking design trusting customers, and advantage as protect work the for support continuing hard shift of want our our know activities. and XX X%, first of half a and the year you reported lives begin, growth thank and team of of In of QX, closing for EPS X%, to of we that 'XX. and our growth proud loyal features partners growth digital billings of help revenue this XXX%, I dedication release consumers a strong we of fiscal Before thank more criminals I'm for cyber products

Our revenue quarters to solid revenue growth, now we together operating billion exceeds strong beginning while annualized same where and in rate time target of string mid-single are our leverage. the $X.X meet delivering digit run at we

a the little unpack me Let topline. bit on

manager assistant of represents such Norton Our products to portfolio. was entire over a our X% the either on business and across continue with base web direct-to-consumer half which standalone privacy in We monitoring, add-on release have dark or our business, installed up growth of will as product. new QX XX% we features XXX, as broad-based now

to is constantly globe goal safe growing digital the cyber value around subscribers to keep activities. and Our the them bring new across our

telcos grew and offering includes in slightly benefits, than countries relationships XX% opportunity in many broaden and such our We remain QX. and internationally our of many we X% ahead Partner us and Australia countries the and relatively employee Japan and our of underpenetrated revenues retailers America, reach. brokers in also international Direct to outside in as just few. a represents less XX% revenue, name double-digits with expand an to North which in business with Spain, acquisition continue to growth, EPG, Italy the invest grew Europe of With Americas. U.K.,

this continue during and double-digit develop broad program strong weak Overall, growth in to rates all retention our reach with we new of remained across period, employers sectors. employee to retail increase consumers. the strong we solutions our delivered partner signings benefits While to of the relationships

rolling announced and part We win Japan. had currently Canada. long-term time in of we to key some growth Internationally they take on solutions relationships expanding and telco ARP the but of our in working like our in U.S. more our opportunity. build, are partners this TELUS an signed important These with also out are Europe or a quarter, in recently retail deal

$XX.X a you know, focus of As direct which on all put our million. totals lot we've count, now growing customer

net Since we quarter year our second consumer net quarter the company standalone customers. new a consecutive This of welcomed consecutive ago, over quarter marks have $X.X of we became customer and sequentially, adds million year-over-year. Xth adds, a

know the is it just bucket we a While bring Symantec. drop customer part compared a everyone, of change to from years the opportunity to to meaningful were Cyber count when the this we of in is Safety declining

our unit strong and average a revenue user over metric stable at remain rates, monthly at retention $X. customer Our retention remained XX%, per

and digital Our with to Norton protection well resonates platform the challenges integrated comprehensive plans. who lives prefer multiple face XXX consumers

through We more product and customer importantly, investments, will to continue innovation. drive acquisition marketing and engagement partnerships,

we focused are an socialize online. to work, learn, cyber consumers both and great provide We platform safety on bringing developing shop integrated products to while or

goods. their of opportunity at on not gamers and worrying and XXX Norton control gaming NortonLifeLock. We gamers the to accounts, For by criminals. prefer personal the develop we and focus about an rise eSports, help fellow gamers customized playing saw know digital We gamers to their protect solution cyber designed example, with

gaming safety world. So real we bring a to comprehensive was felt there cyber need the to

web, of IDs While if With goods expect further industry. for first this the and will our new firewall, your feature, gone we game attacks a features detection, passwords personal protecting game notify we've attacks, information virtual acquired new for user in you including and monitor dark we or manager, on the the games. find included dark and like threat password delivers monitoring web you would many solution

it other educational more learn online. done or school now much be so this our in has is activities dramatic change lives been Another in of our for everyday how kids whether

as new fee. devices, LifeLock to Our half that recent all-in-one learning risks managing Norton includes the on parents to called families certain plan pandemic family, by XXX accept with the now study family also for privacy rocketed entire time, through the focused and of and which life their children a plan parents, one This while for help helps web. screened help the introduced a online they've easier school remote get just said protect bit access stay over feature sky time during majority child's quarter, they parents identities, work school subscription COVID-XX the broader to online To make unfortunately, shows that of and safety. say this we

during sorry So no kids, gaming to hours. school

security August, of safe. of innovation consumer months of And plan. is just keeping Recently, personal build defend control information ahead we our monitor with we And personal as are and offering for While and execution by building the test. have social examples with the the such we as all of everyone. But automate continued information more for few sharing threat we as we've Privacy the want data of from that DNA. and Growth removed stranded are guesswork removing to our out more Symantec is Internet. threat privacy easier This related your come Data of identity as cyber as engines innovation software and number, privacy our the well profit noting of lives profiles. for online and address, our with media of collect sales and enterprise end brokers primary the there you by all transition assistant our was a as from and into and the important definitely how costs now their licensing made phone business. our transition behind worth more focus. not of thank cyber helps to shift making personal These against to safety reaffirmed information, the availability information and I partnership your take home four our monitor operational it employment they expanded as new, assistant to team telemetry posed ever. analytics. are Enterprise makes of few the Broadcom reclaim it's our online possible had privacy consumers compiled us, and

well We the for very are future. positioned

and recognized commitment communities. stakeholders to our were named support Forbes JUST and to and and Those one most accountability. it sustainable future. for with just to and an just all a Capital. want we encourage be our of honor integrity It Before you month Yesterday, last recognized report is how JUST efforts Natalie, I view America's I recognize pass to corporate corporate safe we create help responsibility our the to first and to NortonLifeLock. about released We responsibility learn responsibility be read our serve as report companies by

more and to much this know cyber let the can Natalie? so we financial also We and safe call building to corporate more responsibility we over results. the a contributing me do we to now in world. will And for Natalie turn details committed on have stay area

and Vincent hello you, Thank everyone.

and financials For We our growth QX with today's than QX quarter-over-quarter focus I our and metrics. provide then expected. will better year-over-year discussion, QX. many outlook non-GAAP starting delivered was on performance results on key for

balance. FX million, year-over-year, contract was was X% in two point ID including $XXX X% year-over-year QX Analytics. Our a QX ending up from up impact billings liability reported revenue excluding positive our

quarter-over-quarter security business. and correlated momentum This mid-single-digit go-to-market customer customer is marketing We as consistent our our to sustainable growth in expansion investment. increased million continue our record was track identity. another Xth customers adding billings to including standalone count Overall, our count customer product year-over-year. partner and consecutive We adding XXX,XXX key in total within a categories company. direct We sequentially growth customers our regions our with of and direct step XXX,XXX efforts $XX.X across highly gain and building our increased quarter and both our saw a

seen customer Our growth couple sustainable and quarters. past acquisition priority for invest these is of we have record to

innings as for early so committed we continue the to in changes in of marketing still growth. the cohort long are our dynamics, We customer opportunity we investments, remain our to see but evaluating

foot gas pedal. our take not will We the off

and to and driven our momentum our year-over-year, invest channels. grew product offering sales partner portfolio continue revenue channel earlier. business, X% efficiency in alluded continued the employee awareness largely drive and Vincent by will In benefits marketing through our that in We demand to developing our

some more of progress to continued our also on recently are partnerships. announced make We

the relationships XX% approximately including These with $XX operating that potential grow we scale meaningfully margin costs. taking total foster is across Columbia. and years starting TELUS are much Remember, longer example, sales realize. nationally of provinces or to partner Canada cycles out two these with our to operations of QX as million the roll our the ones expanding was we For company beyond long-term partners. over continuing to Alberta are more one British to solutions from stranded

cost stranded consumer XXXX. was Excluding above below head count and was margin QX the business, XX%

While target been met at XX% we we costs this XX% stranded total first our quarter basis. a have operating of divestiture, margin long-term company on have marked excluding the time the since

continue disciplined will to operate forward. maintain We going levels to manner and a expect in similar

are stranded the at $X eliminated fully we the billion we have right-size costs to have a the company. We that eliminated end Since and divestiture, pleased of QX, report all costs. of

with Broadcom. This claims including we into and we licensing closed agreement also Vincent quarter entered mentioned as activities have with a TSA out and outstanding payments all Broadcom,

solid XXX% final our up Diluted growth, up million, items. QX income forward, EPS $XXX and stranded of year-over-year on related our was favorable of clean driven stranded year-over-year. financials Looking of million, and XX% and removal up was $X.XX the transition will than by FX. top cost be line $XXX costs better expected, execution almost net

to goal efforts underutilized initial million of our is sale We to the target. turning cash cash remain assets. up in an the our from proceeds, Before $XXX of on flow, you give me $X.X total update billion remaining reach let confident which

including So $XXX Culver estate the $XXX total July realized in approximately for of of our far, million. million City real proceeds we cash have sale

Dublin, Our in real assets remaining and our View. assets underutilized comprised Mountain estate are of Tucson,

million Impacting and those We of cash the to Adjusting in cash $XXX out in continues our annualized licensing stranded were cash remain continue the $XXX the transition disciplined costs, Broadcom usage quarter to close this a the these operating be approach last value. million properties and in the an agreement business basis. payments. level with non-recurring operate parties Net for fair quarter. achieve the interested discussion of will items, at with timing in the certain to active flow tax flow free items, for of on related was of

billion approximately Turning to of another quarter undrawn liquidity we $X to a a strong $X have our and $X in billion the total balance continue of balance We with position. cash sheet, second revolver liquidity over with billion ended capacity.

capital returned form Let shareholders, a in $XX our few predominantly In to quarterly we million spend allocation. dividend. minutes regular of the me on QX, approximately

our $X.X million have deploy $XXX share will opportunistically. we remaining buyback authorization, We of billion which

release, approved on of addition, to XX, shareholders common Directors of record as Board cash press as XXXX. per November all of $XX.X quarterly the close In in of described December the a be dividend XXXX share regular XX, paid of on business the for

Looking unchanged. deliver ahead, shareholder our to value commitment remains long-term

highly when investing be flexibility for nimble, and business us comes the to resilient recurring Our to will model growth. it afford

We are entering channel continuously adjacent sustainable opportunities and or product technology it's to profitable expansion consolidation. whether evaluating or growth, innovation. and markets, drive geographic through

with have well will approach with our capital a disciplined our as investments. as We and strategic allocation

QX our to turning Now outlook.

EPS share the normalizing anticipate assuming for back to non-GAAP translates now $XXX margin non-GAAP $X.XX ID We million, approximately which turn take $X.XX to currency to and divestiture. after operator to be approximately I expect X% be the count non-GAAP X% range operating the Analytics expect per QX rates revenue questions. sequentially. of We and growth the XX% to Operator? to the in range to the stable share to in of $XXX will call your

Instructions] of Saket from The Barclays. [Operator question is Kalia first

Your open. is line

with to see first is renewals. I to of start next quarter Natalie that start the going we for cohorts be up maybe subscribers think you, just growing to time

question and for you the as even ARPU that what can churn time? And start just is we so of in talk really terms impact are first you see about qualitatively, to the expecting perhaps rates

question. the for thanks Yes,

increased that as indicators very So back step for as very seen into growth few five million about now level consistent. to are $XXX look let's to I annualized million seeing we now annualizing spending look we’re that of annualized million ago about and now, spend customer the quarters to roughly when we've up marketing decision from we that pertains marketing the quarters it at level When made a and quarter. increase early about spend, talk the $XXX to $XX level, the positive,

expand cohorts what ongoing we But customer that. attributes a and doing from the used been more and up on We As spend in ramped have at and the more would further spend efficient our have international channels, expectation we and reaches differ that the way we've look less we would how spent in expansion harder TV to along and lot to will on we behavior for reallocate move had less only historically invest affiliates not the spend more digital, more to deployed will customer now really for saying saw into as expect, acquisition today We what bookings of us. to you radio. lot of spend time a we with which call now fully fund to be exchange say the work anniversaried continue and basis. our that they here in an we time forward, growth I obviously even spend would we're units spend, the but will in and level, it's for dollars and that you're growth that even internationally as in

funnel. on new customers and markers way, that to along have products new assess solutions got, much acquiring can that the navigate and customers experience the the costs mile the we in our attracting and have those acquire how in of we those will customers cohorts focus to markets, we definitely through we our how We those it to will

for you, public follow-up being my for McAfee Vincent company with a now. the

faster. see what it their in indeed and performance growth but Unlock course and I is accelerated think growth, Now of all we has business faster consumer Unlock competing the than is

can I'm so on you talk bridge about that do makes curious help Does gap sense? if just Unlock, to that can what growth. And you think

it makes no still sense. Yes, a

PC with of new with actually in realize more can everyone positive lives that and user-centric growing driven their their this the more is we I were more have news maybe view from think that very market is as realization McAfee to It centric. Up and now, we a user I growing protecting and LifeLock, unique public start applications the but making one market. a market. into digital numbers that the is maybe is there vast that that and they think still move so the consumer very more address think are technology I coming and a to we're conception there that environment, we of world

for If digital a that's you lives safety have consumers in pay cyber get of $XXX sum-up the the the today market. that growing than less we leave using Yet, Internet stand-alone the to industry, you X billion and million. people

think a us as if I the momentum was activities transitioning out you this you've we as are busy call, focus growing changing So Enterprise the the market positioning with of the want. right seen

dedicated to look our we and forward the in to fully now invest We’re growth for growth market that accelerate long-term.

to I reach Our as everyone. goal - mentioned is

[Operator Instructions] is The question Gregg Mizuho. Moskowitz with next from

Your line open. is

up a So of you sustainable average of follow-up you bit LifeLock gone both online offices about that, earlier, devices with an has Vincent. and to an that? more on work gone because Norton but environment, to I on How to there increasing a the for these basis. the is Saket's guess question, opportunity alluded And for as growth has of you do home devices a from generate activity up, per think family number

No, all opportunities just fact as challenges not advantage shopping, moving I criminals large the the gaming, and data those address not linked education. the basic It's mentioned assets. your take set new recognize cyber are on socializing, it's virtual to about as about your of of for of you and activities the all the whole devices, again I is it's of that think it's the of to absolutely, not to number move our activities just opportunity of online, creating

building which opportunity solely opportunity. a investment sold when good doubled rate, capabilities, although as it innovation, had investments, those launching to business, are So increasing we us products we of huge frequent is new year thesis as to we're focus the continue we recall on you learnings, at a tweak that's the on portfolio ago address our more seen the a consumer always to opportunities. We're aspect. velocity huge our the that enterprise you've some We growing the and

I long growth. to a to move we focusing really, growth. run, returned focused think frankly digit maximizing division on confident, was we the now mid-single on feel We that cash from really in

repeat if Internet. really a build - I'll then people sustainable cyber it connected everyone the to of to provide to machine Let's want be safety again rights, you to billion able

standalone safety. paying million On the XXX cyber people for

as new just the these improvement really then last improvement COVID, have Do execution? how your And impressive, follow-up, is high sense few a couple. on of quarters expanding over to in any the and opposed level marketing focus increased net subscribers much program perhaps as attributable especially this last you in of your very to

and it's kind I from growing. would unit of positive platform balanced now the customer you've a to going and ARPU the cross-sell a And reaching be the and introduction more XXX new that subscribers, basis if then new improve you say a leaving going And - come is turning Norton as mid-single-digit, the of want, those cyber and you then back and we retention step umbrella balanced rate very up-sell XX% improved on to solid integrated coming continue customer retention sort Yes. then seen opportunities if new also results and said grow is to making to combined. one going safety year we're a Look, reality. be protection approach, first of ago,

your think that more always moving in change was growth activities and mid-single-digit but the achieving boost life rate definitely fast online. opportunities everybody's underlying we last, quarter, and is structural too COVID-XX, from realize and your fear to cyber more balanced online Last in a steal protected had view. data, that find they of to I steak need and you our reality structurally as assets, I adapt be mind to a know, they’re people we'll think new need a criminals when

Fatima comes question Boolani UBS. with next Our from

open. Your line is

you're the follow-up considerations Natalie, seasonality through wondering have on if I'm or be any for one that respect I we headwinds you first mindful metric? with of you tailwinds and walk the should guidance, considering, my can that to ARPU quick either a Just us

the question. for thanks Yes,

a as gifting historically, ups head bit protected. look So I from to into in are especially wanting electronics and if I seasonality that it some to pertains then and a we perspective, with the little season, they're make think downs folks back the holiday there sure as

had bump from a perspective, Of with got has would and seasonality we tax muted see the COVID business and kind with muted due seasonality speaking, out tax combination of honestly revenue of the a say an income course, but as look some guide very perspective, breaches in the I usually we are annual we've for of back a that perspective. largely now when fact model ratable the with we've been the it's from that

the continue excuse of just fact wanted I lower the And in the mix with to be I to growth ASP into there. just on - the the parse spite impressed ARPU side, strength that Ignite to year-over-year some me, through sequential products introduced subscriber growth. in you've

that upward the So of I'm really NortonLifeLock SG can Thank of that's feature of that you. you've creating lower wondering the some me. what's parse kind again in ARPU spite into rolled and it ASP of on family if introduction from tension functionality through the you

year the mentioned value. you get take guys price the as is I’ll the And price to one to and first second promotional I and Yes. renewal price a that also full year

and driving growing metric, seen marketing promotion, that and with overall but when customer retention, count retention testimony so a that's this you ARPU solid we're that which the disciplined And year to almost the broad-based so membership, quarter you've on identity, and team, fact and result maintain ARPU. value headwind we’re a able with you of that and your across also is Despite of deliver angle seen also our very as so the good not consumers across message the definitely a first the more normally have we been we've overall. marketing we're grow at We've security to growth, growth ARPU. that's on very despite solid very every coming ARPU strong the

us really that I for want that do is product. innovative focus with to the build Now to say said,

much not price umbrella. We we in product relationship We looked to at are at to single a how that overall value to add basket for the the customers safety looking cyber can the ARPU. build

Our Walter from Citi. question Instructions] with next is [Operator Pritchard

Your line is open.

And Question of initial seems talk in have how you here. where you of additional the and about most of terms on international you like XX% can your the that it sort efficiencies the efforts are internationally and been for on you think driving spend you subscribers? about around Can mentioned marketing the or you subscribers get allocating to spend, momentum try start in drive marketing deploying some that and having help to domestically.

in as active under-penetrated opportunity. XXX I'll definitely the a first and marketing, monitoring that Japan our to web so need We very pass those do feel global are Natalie? markets. across want Australia. huge in but definitely We've for is we all it also to Norton Yet Natalie say countries. in we platform international I rolling launched and we needs integrated safety cyber on the dark

we us a can with last opportunity new product U.S. I what into We those to and deploy deploying offering into bullish for solution to that feel and as We marketing. customers. payback international definitely When very perspective an marketing proposition clear. our started strong by we over do and look the very is incrementality funds space a about marketing is XX/XX our the split, continue the from and the and introduce and that is you then value new opportunity under-penetrated at invest marketing those there. when to diversify at about and it there. even you you is really, It when just look - huge enter can from on into said a very, our think markets a perspective, really it international business for right we a basis, Incrementality what indicator Vincent marketing few of just perspective quarters just more your to in really would extend

international, do offering and deploy as of on subscribers that internationally. markets? have drive given that what's LifeLock on ARPU type follow-up just expect don't just many And you being update lower seen have your then question to international a of And able the do in a a and on you you that service

Yes, maybe, last outputs start in ARPU your is the part which but I'll again, as of question, retention metrics you with know.

focusing We it's that a it's How unit we consumers, or lower not should input. on incremental incremental to do the which value. are per value, whether be protection bring cyber

So When family. overall umbrella securities. privacy angle. it basic that's includes your also how includes it cyber you identity the our and that look at family you it of focus. and you include today protect the But with you connect safety, restoration, protection, includes It

global at So we important are on do around look we and locally value level. reach do X our How at consumers, business different we pillars the doors local two add we really and across to and How pillars, all message deliver X that we while model a we're to levers. model and looking do how business do sure have almost we make we have. at the retain drive go and

view way provide that's the consumer think the overall an safety. as I international so reach to growth We And this view. angle opportunity to every we cyber incremental

no there remarks. the closing At time, I more back turn call Pilette, CEO will this questions. for are Vincent to

Paul. you, Thank

we and We are I We now year digital future. into accelerating also tell as but consumer. and NortonLifeLock, ongoing And journey control mission. how a day few and those Relentlessly a will that activity believe are not safer, back your only pursue data, company, to every lines. is our one the of an of assets the team positioned transformation a to the sit about as as daily in as can't all make perfectly middle excited we identity, online deliver a team, you your we to our you

Thank look So, your thanks forward today. and for you very for to our connecting joining soon. support call we

Thank This joining. call. conference concludes the for you