Slide 1: FY24 Q2 Earnings
FY24 Q2 Earnings November 7, 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: Purpose and Mission: 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: Business & Portfolio Highlights
Business & Portfolio Highlights Copyright © 2023 Gen Digital Inc. All rights reserved. 4
Slide 5: Norton Cyber Safety Pulse Report and Avast Q2 Threat Report
Norton Cyber Avast Q2 Threat Report: Safety Pulse Cyberthreat Risks Reach Report: Three-Year High Avast telemetry shows phishing and scams focused on human Scams in the manipulation account for over 75% of all desktop detections digital age Social engineering, the use of psychologically manipulating
Slide 6: Norton Small Business makes cybersecurity easy
Norton Small Business makes cybersecurity easy New Small Business Solution with 24/7 Triple-Lock Cybersecurity for Small Teams. Let us help you protect your business, wherever you are. Stay safer online during day-to-day tasks and feel confident knowing your employees’ devices and customer data are
Slide 7: Private Email now available in Norton AntiTrack
Private Email now available in Norton AntiTrack Tracker-free email address Create unlimited email aliases and block hidden email trackers, all without changing your current provider. Private Email improves email privacy by masking your personal email addresses so they're unrecognizable, and removes
Slide 8: Norton Secure Browser
Norton Secure Browser Introducing an advanced web browser with built-in security and privacy tools that can be personalized and easily adjusted to suit individual needs Safer and private browsing — for free Browse, message, and shop in peace while we help block online threats and phishing attempts w
Slide 9: Expanding identity offerings with AVG Secure Identity
Expanding identity offerings with AVG Secure Identity AVG Secure Identity continuously monitors important data sources to help you keep your personal information safe, provides expert assistance 24/7 to resolve issues, and reimbursement coverage if your identity is stolen. https://www.avg.com/secure
Slide 10: Q2 FY24 Financial Results
Q2 FY24 Financial Results Copyright © 2023 Gen Digital Inc. All rights reserved. 10
Slide 11: Q2 Non-GAAP Business Highlights
Q2 Non-GAAP Business Highlights • 17th consecutive quarter of growth: Cyber Safety Bookings up 4% and Revenue up 3%, including Avast historical results • Sequential direct customer count growth of 380k with acceleration in mobile and international markets • Continued operating margin expansion, up 3
Slide 12: Consistent Execution
Consistent Execution Y/Y % Non-GAAP P&L Q2 Q1 Q2 USD • Broad-based growth: Q2 Revenue of $948M ($mil), except per share amounts FY23 FY24 FY24 As Reported Revenue $748 $946 $948 27% • Cyber Safety revenue up 3% in constant currency when Y/Y % (CC) 12% 35% 28% -- including Avast historical results Gr
Slide 13: Gen Performance Metrics
Gen Performance Metrics REVENUE CYBER SAFETY METRICS Q2 Y/Y % Y/Y % FY23 Q1 Q2 USD CC Incl. partial FY24 FY24 As Reported Incl. Avast Q2 Q1 Q2 historical Y/Y Avast results FY23 FY24 FY24 (1) Direct $660 $832 $837 27% 3% Direct Customers 38.6M 38.2M 38.5M (0.1M) (Q/Q change) (252K) (29K) +380K (51K)
Slide 14: Healthy customer base returns to growth, up 380K Q/Q
Healthy customer base returns Q2 customer growth driven by both acquisition and retention improvement, stabilized post-Covid to growth, up 380K Q/Q • New customers: growing high single digits Y/Y • Growth across all regions and several channels, Q/Q: (252K) (219K) (183K) (29K) 380K despite macro hea
Slide 15: Cost synergies 90%+ completed
Cost synergies 90%+ completed Annual Gross Cost Synergies (run-rate) Q2 Q1 Q2 % of FY23 (1) FY24 FY24 $300M+ 90%+ Revenue Pre-Synergies Reported Reported Commitment Achieved COGS 13% 13% 13% S&M 21% Expected One-Off Costs $150M 18% 18% to Achieve Synergies ~75% Cash R&D 9% 8% 8% G&A 5% 3% 3% ● Accel
Slide 16: Balance Sheet & Cash Flow
Balance Sheet & Cash Flow LTM Key Balance Sheet, Q2 Q1 Q2 Cash Flow, & Other Metrics FY23 FY24 FY24 Dollars in millions Balance Sheet $970M (1) $866M Free Cash Flow Capital Returned Ca s h, Cash Equivalents and STI $1,095 $623 $629 to Shareholders Contra ct Li abilities $1,684 $1,709 $1,672 $1.6B uF
Slide 17: Non-GAAP Guidance
Non-GAAP Guidance Key Assumptions: Q3 FY24 FY24: • Cyber Safety low-to-mid single digit growth Confirming within Range • Continued progress towards 60% margin • Stable SOFR rates and currency vs. Q2 ending • Free cash flow deployed for debt paydown & share buyback in H2 REVENUE REVENUE $950M to $960
Slide 18: Supplemental Information
Supplemental Information Copyright © 2023 Gen Digital Inc. All rights reserved. 18
Slide 19: Foreign Currency Update
Foreign Currency Update Q2 Q3 Q4 Q1 Q2 Euro € / $ Weighted Avg. FY23 1.01 FY23 1.02 FY23 1.07 FY24 1.09 FY24 1.10 End of Period 0.98 1.07 1.09 1.09 1.06 Q2 Q3 Q4 Q1 Q2 Yen ¥/$ Weighted Avg. FY23 0.0072 FY23 0.0071 FY23 0.0076 FY24 0.0073 FY24 0.0070 5% of revenue JPY denominated End of Period 0.0069
Slide 20: Go Forward Capital Structure
As of November 7, 2023 Go Forward Capital Structure Facility Principal ($ mil) Maturity Coupon Debt Maturities in $mil (Initial Principal Amounts) Revolver (RCF) – undrawn at Q2 qtr-end $1,500 2027 If drawn: SOFR+CSA+1.75% As of November 7, 2023 Term Loan A (TLA) $3,764 2027 SOFR+CSA+1.75% Term Loan
Slide 21: Trended Non-GAAP Quarterly Results
Trended Non-GAAP Quarterly Results Non-GAAP P&L Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY23 Q1 FY24 Q2 FY24 ($M), except per share amounts Direct Customer Revenues 624 660 818 831 2,933 832 837 Partner Revenues 72 74 95 100 341 97 95 TOTAL CYBER SAFETY REVENUE $696 $734 $913 $931 $3,274 $929 $932 Legacy Re
Slide 22: Reconciliation to Non-GAAP Gross Profit
Reconciliation to Non-GAAP Gross Profit GAAP to Non-GAAP Gross Profit ($M) Q1 FY23 Q2 FY23 Q3 FY23 QQ4 FY23 FY23 Q1 FY24 Q2 FY24 GAAP Results of Operation Gross profit (GAAP) $605 $629 $758 $757 $2,749 $767 $768 Non-GAAP Gross Profit Adjustments Net revenues • Contract liabilities fair value 1 - - 1
Slide 23: Reconciliation to Non-GAAP Operating Income
Reconciliation to Non-GAAP Operating Income GAAP to Non-GAAP Operating Income Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY23 Q1 FY24 Q2 FY24 ($M) GAAP Results of Operation Operating income (GAAP) $261 $241 $368 $357 $1,227 $362 $25 Total Non-GAAP gross profit 7 17 58 59 141 58 59 adjustment Non-GAAP Operating
Slide 24: Reconciliation to Non-GAAP Net Income
Reconciliation to Non-GAAP Net Income GAAP to Non-GAAP Net Income ($M) Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY23 Q1 FY24 Q2 FY24 GAAP Results of Operation Net income (GAAP) $200 $69 $165 $915 $1,349 $189 $149 Total Non-GAAP gross profit adjustment 7 17 58 59 141 58 59 Total Non-GAAP operating expense adj
Slide 25: Reconciliation to Non-GAAP EPS and Net Income
Reconciliation to Non-GAAP EPS and Net Income Q2 FY24 GAAP to Non-GAAP EPS and Net Income (1) ($M), except per share amounts EPS Net Income GAAP EPS / Net Income $0.23 $149 • Stock based compensation 0.05 35 • Amortization of intangible assets 0.18 119 • Restructuring and other costs 0.03 17 • Acqui
Slide 26: Reconciliation to Non-GAAP Unlevered Free Cash Flow
Reconciliation to Non-GAAP Unlevered Free Cash Flow Unlevered Free Cash Flow Reconciliation ($M) Q2 FY24 Net Cash Flow from Operating Activities $125 Adjustments: • Capital Expenditures (5) Free Cash Flow $120 Adjustments: • Cash paid for interest expense, net of interest rate hedges $124 Unlevered
Slide 27: Trended Share Count and Stock-Based Compensation
Trended Share Count Diluted Share Count Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 FY23 Q1 FY24 Q2 FY24 Shares in millions Basic Share Count Weighted 578 590 647 639 614 640 640 Average Dilutive Potentially Issuable Shares: From Employee Equity 4 3 4 5 4 3 4 Awards From Convertible Debt 22 2 - - 6 - - Diluted
Slide 28: Trended EBITDA (Non-GAAP)
Trended EBITDA (Non-GAAP) Reported EBITDA (Non-GAAP) (1) ($M) Q1 FY23 Q2 FY23 Q3 FY23 QQ4 FY23 FY23 Q1 FY24 Q2 FY24 Net income $200 $69 $165 $915 $1,349 $189 $149 Adjustments: • Net interest expense 29 45 149 163 386 164 167 • Income tax expense (benefit) 29 126 51 (751) (545) 15 (290) • Depreciatio
Slide 29: Debt Covenant EBITDA (Non-GAAP)
Debt Covenant EBITDA (Non-GAAP) Debt Covenant EBITDA (Non-GAAP) (1) ($M) LTM (3) Net income $1,418 Adjustments: • Net interest expense 643 • Income tax expense (benefit) (975) • Depreciation and amortization 501 EBITDA (Non-GAAP) 1,587 Adjustments to EBITDA: • Contract liabilities fair value adjustm
Slide 30: Use of GAAP and Non-GAAP Financial Information
Use of GAAP and Non-GAAP Financial Information We use non-GAAP measures of operating margin, operating income, net income, results of operations, 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
Slide 31: 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 32: Thank you
Thank you Web: Investor.GenDigital.com Email: IR@GenDigital.com Copyright © 2023 Gen Digital Inc. All rights reserved. 32