Gen Digital Inc.

Welcome to Norton LifeLock's fiscal third quarter 2020 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. At that time, if you'd like to ask a question, you may do so by pressing star 1 to enter the queue. If you'd like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to the head of investor relations, Suhwan Kim. Thank you. You may begin.

Thank you. I'm pleased to welcome you to our call to discuss our third quarter fiscal year 2020 earnings results. We've posted the earnings material and slides to our investor relations events webpage. Speakers on today's call are Vincent Pellet, Norton LifeLock CEO, Sameer Kapuri, our president, and Matt Brown, interim CFO. This call will be available for replay via webcast on our website. As a reminder, in connection with the sale of certain assets of our enterprise security business to Broadcom on November 4th, 2019, We changed our corporate name from Symantec to Norton LifeLock. The results of our enterprise security business were classified as discontinued operations and are condensed consolidated statements of operations and thus excluded from both continuing operations and segment results for all periods presented. Starting in the second quarter of fiscal 2020, we operate in one reportable segment. Revenues and associated costs of our IDA analytics solutions, which were formerly included in the enterprise security segment, are now included in our remaining reportable segment. On January 31st, 2020, we completed the sale of our ID and Relic Solutions. I'd like to remind everyone that all references to financial metrics are non-GAAP, unless otherwise stated. Please refer to the supplemental materials posted on the Investor Relations website for further definitions of our non-GAAP metrics. Please note, non-GAAP financial measures referenced during this call are reconciled to their comparable GAAP financial measures in the press release and supplemental materials posted on our website. We believe our presentation of non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our operating performance for reasons discussed below. Our management team uses these non-GAAP financial measures in assessing our operating results as well as planning and forecasting future periods. We believe our non-GAAP financial measures also facilitate comparisons of our performance to prior periods and that investors benefit from understanding our non-GAAP financial measures. Non-GAAP financial measures are supplemental and should not be considered as a substitute for financial information presented in accordance with GAAP. Today's call contains forward-looking statements based on conditions we currently see. Those statements are based on current beliefs, assumptions, and expectations, speak only as of the current date, and as such involve risks and uncertainties that may cause actual results to differ materially from our current expectations. In particular, our statements regarding our sale of our enterprise security assets to Broadcom, and any anticipated benefits from such sale and cost reductions associated with this transaction are subject to a variety of risks. Please refer to the cautionary statement in our press release for more information. You will also find a detailed discussion about our risk factors in our filings with the SEC, and in particular, in our annual report on Form 10-K for the fiscal year ended March 29, 2019, and recently filed quarterly reports on Form 10-Q. Let me now turn the call over to Vincent.

Thank you, Siwan, and good afternoon, everyone. I'm very pleased to report that we delivered better than expected results in Q3, the first quarter of Norton LifeLock as a standalone company. We delivered revenue above the high end of the range, supported by bookings growth of 4%. EPS was 25 cents, up 9 cents from a year ago and well above our guidance, driven by strong execution and lower stranded costs. We have accelerated our transition to become the pure-play leader in consumer cyber safety, and we are driving towards our annual target of $1.50 EPS. We have delivered on our commitment of returning more than 100% of the net proceeds from the sales of our enterprise business to Broadcom by paying a $12 per share special dividend on January 31st and starting our $1.6 billion share repurchase program in December. Before I go into more detail, I would like to thank all of our employees. Achieving these results in a quarter in which we completed the sales of our enterprise business is another testament to the operational discipline and the dedication of our team. These encouraging results speak for themselves, but let me give you a few more details. Since the close of the sales of our enterprise business on November 4th, we have been removing stranded costs at an accelerated pace. Previously, our estimated cumulative stranded costs post-close were $1.2 billion, with cash costs of $900 million to remove these stranded activities. We have accelerated our transition to be done in Q2 fiscal year 21, three months ahead of plan. Cumulative stranded costs post-close are now tracking to less than $1 billion in total, of which $750 million are in cash. We are making good strides towards exiting or rightsizing the cost base to achieve target operating margin of 50% for the total company by the end of the transition period. In addition, we made significant progress towards our goal to monetize and dispose of underutilized assets to more than offset the stranded cash costs. We recently closed the sales of our idea analytics business for $375 million in cash. In addition, we received the first round of bids for the sales of our soon-to-be vacated properties, including our Mountain View campus. We now project the cash proceeds from the underutilized assets to be approximately $1.5 billion, significantly higher than the $1.1 billion we previously estimated on our last earnings call. When you combine the $10.7 billion sales of the enterprise business with the $1.5 billion in monetization of assets less than $750 million in stranded costs, we project to generate roughly $11.5 billion in gross proceeds directly or indirectly related to the sales of our enterprise assets. Wow, I know Rick would be very proud. Even after taxes, which are now lower than initially expected, and the return of a substantial amount of cash to our shareholders in the form of dividends and stock buybacks, we are left with meaningful capacity to invest and sustainably grow our consumer business. When I started as CEO, I talked about some key priorities for us in the short term. First, establish credibility by consistently delivering on what we say. Secondly, accelerate the transition to quickly get to a long-term business model with 50% profitability for the company. And lastly, and more importantly, free up investment capacity to return the company to sustainable growth, delivering on the full potential of a standalone consumer business. I also said that it would take time to reach our full potential. I think it goes without saying that we have delivered on our commitments in terms of executing on the sales of the enterprise business, accelerating the elimination of stranded costs, and maximizing the value of our underutilized assets. As for the ongoing consumer cyber safety business, this quarter, We delivered bookings growth of 4% year-over-year and increased net subscribers by 66,000 sequentially, while maintaining our operating margin over 50% when you exclude the impact of stranded costs. It is the first positive quarter of net customer ads in a long time. But to be fair, one quarter does not make a trend. While customer count is stabilizing, our focused execution and reprioritized investments have us on the right path to deliver long-term sustainable growth. Our strategy is working. I will pass now the call over to my business partner, Samir, for more details on our product initiatives and selling motions.