Gen Digital Inc. · NASDAQ:GEN
Gen Digital — NortonLifeLock — Q4 FY2020 Earnings Presentation
30 slides from Gen Digital's earnings presentation, May 14, 2020
Slide 1: Q4 Fiscal Year 2020 Earnings Investor Presentation
MAY 14, 2020 Q4 FISCAL YEAR 2020 EARNINGS INVESTOR PRESENTATION Copyright © 2020 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: Business Highlights
Business Highlights • Customers need NortonLifeLock products now more than ever to secure their online transactions and activities, driven by: • Work from home and virtual meetings • Online gaming and streaming • Shopping • Telemedicine • And more . . . • Disciplined execution with better-than-expec
Slide 4: What's New
What’s New Copyright © 2019 NortonLifeLock Inc. All rights reserved.
Slide 5: COVID-19: Cyber Safety More Relevant Than Ever
COVID-19: Cyber Safety More Relevant Than Ever WORKING FROM HOME Providing the right cyber safety solutions and tips as people adapt to working from home COVID-19 CYBER SCAMS Increasing awareness and providing solutions about the increase in COVID related cyber scams STIMULUS CHECK FRAUD Driving awa
Slide 6: Norton 360: Unparalleled Scale and Reach
Norton 360: Unparalleled Scale and Reach Now Available in 43 Countries Copyright © 2020 NortonLifeLock Inc. All rights reserved. 6
Slide 7: Home and Family: Six Month Free Trial of Norton Family
Home and Family: Six Month Free Trial of Norton Family We’re giving away 6 months of Norton Family to help protect families Supervise your kids’ online activities, protect them from unsuitable websites and content, and more We invite everyone to sign up on our website at https://family.norton.com Co
Slide 8: Privacy: Two Strong Brands to Expand our Market Presence
Privacy: Two Strong Brands to Expand our Market Presence When working remotely, NortonLifeLock advises using a VPN to encrypt the traffic going into and out of your device Our Norton 360 membership offers end-to-end capabilities, including VPN with most subscription levels SurfEasy is available as a
Slide 9: Identity: Full-Service Identity Protection Now Available in Canada
Identity: Full-Service Identity Protection Now Available in Canada Bringing Norton 360 + LifeLock to Canada through TELUS, including full-service identity theft protection Our first offering of identity theft protection and identity restoration services outside the United States Copyright © 2020 Nor
Slide 10: Security: Award Winning Protection for All Your Devices
Security: Award Winning Protection for All Your Devices Winner of three AV-TEST Institute awards for 2019: ✓ Best Protection for Windows Home User 5th Consecutive Win ✓ Best Performance for Windows Home User 2nd Consecutive Win ✓ Best Android Protection 3rd Consecutive Win Copyright © 2020 NortonLif
Slide 11: Financial Results
Financial Results Copyright © 2019 NortonLifeLock Inc. All rights reserved.
Slide 12: Better-than-Expected Q4 Results
Better-than-Expected Q4 Results • Consumer bookings growth of 4% • Reported Billings up 3% Y/Y, impacted by FX headwinds reducing contract liabilities reported on our balance sheet • Revenue excluding ID Analytics of $610M, above guidance and up 1% Y/Y in constant currency • Second quarter of sequen
Slide 13: Q4 Billings, Revenue and EPS Growth
Q4 Billings, Revenue and EPS Growth Q4 Non-GAAP P&L (Continuing Operations) (Dollars in millions, except per share amounts) • Revenue excluding ID Analytics of $610M, up 1% Y/Y in Non-GAAP Q4 FY20 Q4 FY19 Y/Y Change constant currency (1) (1) Consumer Revenue 610 605 1% IDA Revenue 4 12 n.m. Revenue
Slide 14: Stranded Cost Elimination Nearly Complete
Stranded Cost Elimination Nearly Complete Cumulative Stranded Costs (Directional) • As of May 14, all TSAs have been serviced and Includes Stranded Opex in ContOps, DiscOps & Restructuring operational headcount right-sized to ~2,500(2) % Complete • Cumulative stranded costs estimated to be <$1.0B, ~
Slide 15: Delivering ~$1B More Cash vs August Estimate
Delivering ~$1B More Cash vs August Estimate Cash / Total Stranded Costs Sale of Underutilized % % Completed Through Transition Period (1) Assets Realized (Deal Close Nov 4) (Deal Close Nov 4) $1B / $1.4B $800M August 2019 August 2019 $900M / $1.2B $1.1B 0% ~25% November 2019 November 2019 $750M / $
Slide 16: Another Quarter of Sequential Customer Growth
Another Quarter of Sequential Customer Growth Average Direct Indirect Revenue = Direct Customer x + ARPU(1) Revenue • Net customer adds +46K Q/Q, second Count consecutive quarter of sequential customer count growth Q4FY20 $610M 20.2M $9.07/mo $61M QoQ +1% = QoQ +0% x QoQ +1% + QoQ +0% (2) YoY +1% Yo
Slide 17: Returned $9B Cash with Significant Cash/Liquidity Remaining
Returned $9B Cash with Significant Cash/Liquidity Remaining • Returned $9B to investors in Q4, including the special Post-Transition Ending Cash(1) (Dollars in billions) dividend, regular dividend, share buybacks, and convertible note retirement Directional Q3 Ending Cash $12.8 • Opportunistically r
Slide 18: Strong Balance Sheet and Cash Flow
Strong Balance Sheet and Cash Flow Key Balance Sheet, Cash Flow & Other Metrics • Ending Cash balance was $2.3B, with post-transition cash (Dollars in millions) expected to be $2.9B+ (see previous page for cash detail) Q4FY20 Q3FY20 • Debt decreased to $4.25B with the retirement of $250M in Balance
Slide 19: High Financial Flexibility
High Financial Flexibility • EBITDA supported by 50%+ operating profit margin and 40%+ variable cost Gross Leverage Net Leverage structure • Strong profitability to support the business, shareholders and debt holders Gross Adj Net Adj $4.28B Debt(1) $2.01B Debt(1) TTM Adj TTM Adj • Operating well wi
Slide 20: No Debt Maturities Until April 2022
No Debt Maturities Until April 2022 Calendar Year (Dollars in millions) • Upcoming maturity of September 2020 Note will be addressed with the Delayed Draw Term (1) Loan as part of our November 2019 refinancing L+1.50% Undrawn 2.0% Revolver $1,000 Convert Notes $625 • Extended our convertible notes m
Slide 21: 95%+ Recurring Revenue
95%+ Recurring Revenue Revenue Composition • All direct-to-consumer revenues are recurring subscriptions • Majority of the direct revenues are annual subscriptions, paid upfront with revenue recognized ~5% ratably each quarter Non-Recurring ~90%+ • Approximately half of indirect revenue ~95%+ is als
Slide 22: Q1 FY21 Guidance
Q1 FY21 Guidance (Dollars in millions, except per share amounts) Non-GAAP Q1 Guidance Revenue $590 - $605 Y/Y Change (Adj for IDA and Q1'20 Extra Week) 0% - 2% Non-GAAP EPS $0.18 - $0.22 • Growth rate excludes IDA ($14M impact) and adjusts for the extra week in Q1 FY20 ($44M impact) • Expecting low
Slide 23: Appendix
Appendix
Slide 24: Trended Quarterly Results
Trended Quarterly Results Non-GAAP P&L (Continuing Operations) (Dollars in millions, except per share amounts) Non-GAAP Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Revenue 600 601 602 605 2,408 636 595 603 610 2,444 ID Analytics 12 11 13 12 48 14 13 15 4 46 Total Revenu
Slide 25: Trended Share Count
Trended Share Count Diluted Share Count (Shares in millions) Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Basic Share Count Weighted Average 624 630 637 637 632 619 620 621 599 615 Dilutive Potentially Issuable Shares: From Employee Equity Awards 29 22 11 15 19 13 8 6 6
Slide 26: Trended Contract Liabilities and Reported Billings
Trended Contract Liabilities and Reported Billings Contract Liabilities and Reported Billings (Dollars in millions) Non-GAAP Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 FY19 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 (1) Contract Liabilities $1,070 $1,040 $1,046 $1,059 $1,059 $1,011 $1,016 $1,047 $1,076 $1,076 Y/Y Gr
Slide 27: Q4 Stranded Costs
Q4 Stranded Costs Q4 Stranded Cost Breakdown (Dollars in millions) Informational Non-GAAP Q4 FY20 Stranded • Total Stranded Costs in Q4 of ~$270M consists of the following: Revenue $614 • ~$60M in operating expenses of continuing operations Cost of Revenue 90 Sales & Marketing 143 • ~$70M in TSA exp
Slide 28: FY20 Billings, Revenue and EPS Growth
FY20 Billings, Revenue and EPS Growth FY20 Non-GAAP P&L (Continuing Operations) (Dollars in millions, except per share amounts) • Consumer Revenue of $2,444M, flat Y/Y excluding Non-GAAP FY20 FY19 Y/Y Change (1) (1) benefit of extra week in Q1 ($44M impact) Consumer Revenue 2,444 2,408 0% IDA Revenu
Slide 29: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Bridge from GAAP to Non-GAAP EPS and Net Income from ContOps (Dollars in millions, except per share amounts) EPS Net Income Q4 FY20 FY20 Q4 FY20 FY20 GAAP EPS / Net Income $0.36 $6.05 $231 $3,887 GAAP EPS / Net Income from DiscOps (0.13) (5.15) (82) (3,309) GAAP EPS /
Slide 30: 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.