Gen Digital Inc. · NASDAQ:GEN
Gen Digital — NortonLifeLock — Q2 FY2020 Earnings Presentation
17 slides from Gen Digital's earnings presentation, Nov 7, 2019
Slide 1: Q2 Fiscal 2020 Earnings Investor Presentation
NOVEMBER 7, 2019 Q2 FISCAL 2020 EARNINGS INVESTOR PRESENTATION Copyright © 2019 NortonLifeLock Inc. All rights reserved.
Slide 2: Forward Looking Statements
Forward Looking Statements This supplemental information 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 s
Slide 3: Change in Reporting Convention
Change in Reporting Convention Q2 Results Under Previous Reporting Convention Q2 Results Under Go Forward Reporting Convention (Dollars in millions, except per share amounts) (Dollars in millions, except per share amounts) Non-GAAP Q2 FY20 Q2 FY19 Y/Y Change Non-GAAP Q2 FY20 Q2 FY19 Y/Y Change Reven
Slide 4: Q2 Combined Results Demonstrates Focused Execution
Q2 Combined Results Demonstrates Focused Execution • Combined Revenue of $1,187M, up 1% Y/Y in constant currency and within guidance range of $1,155M to $1,205M, with both segments performing in-line with expectations • Combined Operating Margin is 34%, exceeding guidance of 31% to 33% and up 2 poin
Slide 5: Reported Results
Reported Results Q2 Non-GAAP P&L (Dollars in millions, except per share amounts) • Revenue of $608M is flat Y/Y in constant currency and includes revenues from consumer solutions Non-GAAP Q2 FY20 Q2 FY19 Y/Y Change and IDA (formerly reported under Enterprise Revenue (1) $608 $612 0% Security segment
Slide 6: Cost Structure
Cost Structure Q2 Non-GAAP Cost Breakdown (Dollars in millions) As Informational (1) • Spend in Q2 from our former Consumer Cyber Safety Non-GAAP Reported Stranded Consumer segment, plus IDA, is approximately $300M, which equates Cost of Revenue $92 to approximately 50% operating margin % of Revenue
Slide 7: Stranded Costs
Stranded Costs Stranded Costs will be reported in Continuing Operations, • Annualized Stranded Costs: Revised Discontinued Operations and GAAP Restructuring Accounts down estimate to $1.3B vs previous estimate of $1.5B Cumulative (Next 12 Months) 600 Over Time (Next 12 Months) includes Stranded Opex
Slide 8: Introducing NortonLifeLock!
Introducing NortonLifeLock! ~50 Million consumers ~20 Million direct users #1 Share in Consumer Software Security Revenue(1) ~85% $8.88 #1 Share in Consumer direct retention direct monthly NASDAQ: NLOK rate ARPU Identity Theft Protection Service Revenue(1) The Pure-Play Leader in Consumer Cyber Safe
Slide 9: Compelling Economic Value
Compelling Economic Value Average Direct • Ending direct customer count stabilizing Direct Partner Revenue = Customer x + Q/Q as a result of renewed focus on ARPU(1) Revenue Count direct customer acquisition $595M (2) 20.1M $8.88/mo (2) $59M (2) • Increased investment in direct Q2FY20 QoQ 1% = QoQ 0
Slide 10: Balance Sheet, Cash Flow and Other Metrics
Balance Sheet, Cash Flow and Other Metrics Select Balance Sheet & Cash Flow Items (Dollars in millions) • Ending Cash, Cash Equivalents and Short Term Investments Q2FY20 Q4FY19 balance of $1,831M Balance Sheet • Contract Liabilities balance of $1,016M reflects go-forward Cash, Cash Equivalents and S
Slide 11: Capital Allocation Updates
Capital Allocation Updates • Board confirms intent to return 100% of the after-tax proceeds of approximately $8.2B to shareholders in the form of a $12 per share special dividend, to be declared and paid in Q4 after funds have been repatriated • Increase in regular dividend by 67% from $0.075 per sh
Slide 12: Q3FY20 Guidance
Q3FY20 Guidance • Over the next few quarters, the quarterly Q3 Guidance breakdown of our forecast spend will be more dynamic due to: Revenue $602 - $612 • The timing and scope of the transition Y/Y Change (2%) - 0% service agreements • The complicated accounting treatment of Non-GAAP EPS $0.05 - $0.
Slide 13: Marching towards the Long Term Model
Marching towards the Long Term Model Growth Drivers… Post-Transition Long Term Model Model • Drive adoption of membership offering Revenue Low Single Mid Single Digit Growth Digit Growth • Increase investment in customer acquisition Operating ~50% Margin >50% Margin Income • Convert partner subscrib
Slide 14: Appendix
Appendix Copyright © 2019 NortonLifeLock. All rights reserved. 14
Slide 15: Summary of Key Figures
Summary of Key Figures Transaction Related • Gross Deal Proceeds: $10.7B • Estimated Net Deal Proceeds: $8.2B Stranded Costs • Annualized Stranded Costs: $1.3B • Cumulative Stranded Opex and Restructuring: $1.2B • Of which Cash: $0.9B • Of which Non-Cash: $0.3B • Proceeds from Monetized Assets: Over
Slide 16: GAAP to Non-GAAP Diluted EPS Reconciliation
GAAP to Non-GAAP Diluted EPS Reconciliation Bridge from GAAP EPS to Non-GAAP EPS from ContOps (Dollars per Share) Q2 FY20 GAAP EPS $1.22 Less: GAAP EPS from DiscOps (1.16) GAAP EPS from ContOps $0.05 Stock Based Compensation 0.05 Amortization of Intangible Assets 0.05 Restructuring, Transition and O
Slide 17: Use of GAAP and Non-GAAP Financial Information
Use of GAAP and Non-GAAP Financial Information To assist our readers understand our past financial performance and our projected future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures.