Gen Digital Inc. · NASDAQ:GEN
Gen Digital — Q3 FY2023 Earnings Presentation
31 slides from Gen Digital's earnings presentation, Feb 2, 2023
Slide 1: FY23 Q3 Earnings
FY23 Q3 Earnings Feb 2, 2023 Copyright © 2023 Gen Digital Inc. All rights reserved.
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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 expre
Slide 3: Powering Digital Freedom
Purpose Powering Digital Freedom Mission We create technology solutions for people to take full advantage of the digital world, safely, privately, and confidently – so together, we can build a better tomorrow. Copyright © 2022 Gen Digital Inc. All rights reserved. 3
Slide 4: Product & Tech Highlights
Product & Tech Highlights Copyright © 2023 Gen Digital Inc. All rights reserved. 4
Slide 5: 2023 Cyber Safety Predictions
2023 Cyber Safety Predictions We predict the pressures associated with economic uncertainty and Increasing vulnerabilities are driving rising costs will create the perfect environment for scammers to take demand for new products and advantage of people when they are more vulnerable. identity protect
Slide 6: Global Expansion of Identity Solutions
Global Expansion of Identity Solutions Q3 Launch Highlights: • Launched Avast Secure Identity, featuring solutions including identity theft protection, 24/7 specialist, and alerts. • Launched Utility Account Alerts for U.S. LifeLock and Norton 360 members with credit monitoring. • Launched credit mo
Slide 7: Extending Our Global Reach in Privacy Solutions
Extending Our Global Reach in Privacy Solutions Q3 Launch Highlights: • Launched Norton Anti-Track to iOS native app • Launched Norton Privacy Monitor Assistant in Canada For more product information and other terms and conditions, visit GenDigital.com. Features may differ depending on your chosen p
Slide 8: New C-Suite Executive Benefit Program: Identity and Privacy Protection
New C-Suite Executive Benefit Program: Identity and Privacy Protection Protection Features: • All-in-one protection for peace of mind: comprehensive identity, device and online privacy protection against cyberthreats • Dedicated privacy concierge services: our ReputationDefender concierge service fe
Slide 9: Gen Consumer Brands Awarded AV-Comparatives Awards
Gen Consumer Brands Awarded AV-Comparatives Awards Gen’s family of brands are recognized for the following: Gold Award for the Malware Protection Test and four Advanced+ awards. Top-Rated Product Award for 2022, and six Advanced+ level awards. Silver Awards for the Real-World Protection Test and Mal
Slide 10: Gen Portfolio Positioned for Growth and Expansion
Gen Portfolio Positioned for Growth and Expansion Extending Reach Leveraging omni-channel strategy and building partnerships to broaden privacy and identity protection internationally Increasing Value Cross-sell and expand identity & privacy following consumers’ evolving needs Growing Loyalty Increa
Slide 11: FY23 Q3 Results
FY23 Q3 Results Copyright © 2023 Gen Digital Inc. All rights reserved. 11
Slide 12: Q3 Non-GAAP Business Highlights
Q3 Non-GAAP Business Highlights • 14th consecutive quarter of growth, broad-based performance including a full quarter of Avast • Cyber Safety Bookings and Revenue up 4% when including Avast historical results • Operating margin reached 56%, up 4 pts Q/Q, reflects strong execution of Avast integrati
Slide 13: Consistent Execution
Consistent Execution Revenue - Up 33% Y/Y in USD & Up 38% in CC Q3 Q2 Q3 Y/Y % Non-GAAP P&L FY22 FY23 FY23 USD • Cyber Safety Revenue up 4% (CC) including Avast historical results ($mil), except per share amounts As Reported • Mid-single digit growth in Identity and Privacy Protection, accelerating
Slide 14: Q3 Gen Performance Metrics
Q3 Gen Performance Metrics Y/Y % Direct Cyber Safety Customers Acquired Q3 USD Comments Qtr-ending customer count, millions Avast Revenue ($mil) FY23 As Reported (Y/Y% CC, incl. Avast historical results) (1) Direct $818 31% 3% Y/Y 38.6 38.4 + Partners $95 40% 11% Y/Y Acquired = Cyber Safety $913 32%
Slide 15: Accelerated Cost Synergies Drive Margin Expansion
Accelerated Cost Synergies Drive Margin Expansion Q2 Q3 Future (2) ● Annual cost synergies run rate identified: $300M+ (1) % of FY23 FY23 with 100% Revenue Before Synergies Reported Synergies ● Integration timeline: 18 months COGS 13% 12.8% 10 - 12% ● Progress of cost synergies: ~one-third achieved
Slide 16: Balance Sheet & Cash Flow
Balance Sheet & Cash Flow Key Balance Sheet, FY23 Year-to-Date Q3 Q2 Q3 Cash Flow, & Other Metrics FY22 FY23 FY23 Dollars in millions Balance Sheet $428M $1B+ Cash, Cash Equivalents and STI $1,781 $1,095 $812 Free Cash Flow (1) Capital Returned Contract Liabilities $1,257 $1,684 $1,729 to Shareholde
Slide 17: Q4 FY23 & Long-Term Non-GAAP Guidance
Q4 FY23 & Long-Term Non-GAAP Guidance LONG-TERM Q4 REVENUE Q4 EPS $3 Annualized EPS Exiting FY25 $935M - $945M $0.44 - $0.46 Low-to-Mid Single Digit growth Cost synergies partially offset Key Assumptions: in Cyber Safety (adjusted for Avast by increased historical results in CC) • Cyber Safety mid-s
Slide 18: Supplemental Information
Supplemental Information Copyright © 2023 Gen Digital Inc. All rights reserved. 18
Slide 19: Go Forward Capital Structure
As of Jan 19, 2023 Go Forward Capital Structure Facility Principal ($ mil) Maturity Coupon Debt Maturities in $mil (Initial Principal Amounts) Revolver (RCF) – undrawn at Q3 qtr-end $1,500 2027 If drawn: SOFR+CSA+1.75% As of Jan 19, 2023 Term Loan A (TLA) $3,910 2027 SOFR+CSA+1.75% Revolver Term Loa
Slide 20: Foreign Currency Update
Foreign Currency Update Revenue Mix by Geo Non-GAAP, Q3 FY23 Actual Q1 Q2 Q1 Q2 Q3 Euro FY22 FY22 FY23 FY23 FY23 APJ €/$ Weighted Avg. 1.21 1.18 1.06 1.01 1.02 10% End of Period 1.18 1.16 1.04 0.98 1.07 EMEA Americas 24% 66% Q1 Q2 Q1 Q2 Q3 Yen FY22 FY22 FY23 FY23 FY23 ¥/$ Weighted Avg. 0.0091 0.0091
Slide 21: Trended Non-GAAP Quarterly Results
Trended Non-GAAP Quarterly Results Non-GAAP P&L FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 ($M), except per share amounts TOTAL REVENUE $691 $695 $704 $717 $2,807 $708 $748 $936 Gross Profit 599 607 610 624 2,440 $612 646 816 Gross Margin 86.7% 87.3% 86.6% 87.0% 86.9% 86.4% 86.4% 8
Slide 22: Reconciliation to Non-GAAP Gross Profit
Reconciliation to Non-GAAP Gross Profit GAAP to Non-GAAP Gross Profit ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Q2 FY23 Q3 FY23 GAAP Results of Operation Gross profit (GAAP) $584 $592 $597 $615 $2,388 $605 $629 $758 Non-GAAP Gross Profit Adjustments Net revenues • Contract liabilities fair v
Slide 23: Reconciliation to Non-GAAP Operating Income
Reconciliation to Non-GAAP Operating Income GAAP to Non-GAAP Operating Income ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Q2 FY23 Q3 FY23 GAAP Results of Operation Operating income (GAAP) $287 $287 $302 $129 $1,005 $261 $241 $368 Total Non-GAAP gross profit adjustment 15 15 13 9 52 7 17 58 Non
Slide 24: Reconciliation to Non-GAAP Net Income
Reconciliation to Non-GAAP Net Income GAAP to Non-GAAP Net Income ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Q2 FY23 Q3 FY23 GAAP Results of Operation Net income (GAAP) $181 $333 $202 $120 $836 $200 $69 $165 • Total Non-GAAP gross profit adjustment 15 15 13 9 52 7 17 58 • Total Non-GAAP opera
Slide 25: Reconciliation to Non-GAAP EPS and Net Income
Reconciliation to Non-GAAP EPS and Net Income Q3 FY23 GAAP to Non-GAAP EPS and Net Income (1) ($M), except per share amounts EPS Net Income GAAP EPS / Net Income $0.25 $165 • Stock based compensation 0.05 34 • Amortization of intangible assets 0.18 118 • Restructuring and other costs 0.07 44 • Acqui
Slide 26: Trended Share Count
Trended Share Count Diluted Share Count FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Shares in millions Basic Share Count Weighted Average 580 582 582 582 581 578 590 647 Dilutive Potentially Issuable Shares: • From Employee Equity Awards 4 2 3 4 3 4 3 4 • From Convertible Debt 7 7 6
Slide 27: Trended Stock Based Compensation
Trended Stock Based Compensation Stock Based Compensation ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Cost of revenues $- $1 $- $1 $2 $1 $1 $1 Sales and marketing 5 3 5 6 19 7 8 9 Research and development 6 3 5 5 19 6 6 9 General and administrative 9 6 8 7 30 10 14 15 Restructu
Slide 28: Trended EBITDA (Non-GAAP)
Trended EBITDA (Non-GAAP) Reported EBITDA (Non-GAAP) (1) ($M) Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Net income $181 $333 $202 $120 $836 $200 $69 $165 Adjustments: • Net interest expense 32 31 32 31 126 29 45 149 • Income tax expense (benefit) 71 100 59 (24) 206 29 126 51 • Dep
Slide 29: Use of GAAP and Non-GAAP Financial Information
Use of GAAP and 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 revenues, constant currency revenues,
Slide 30: Explanation of Non-GAAP Measures and Other Items
Explanation of Non-GAAP Measures and Other Items 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 reader
Slide 31: Thank you
Thank you Web: Investor.GenDigital.com Email: IR@GenDigital.com Copyright © 2023 Gen Digital Inc. All rights reserved. 31