Gen Digital Inc.

Good afternoon, everyone. Thank you for standing by. My name is Anne, and I will be your conference operator today. I would like to welcome everyone to the Norton LifeLock Fiscal 2021 Third Quarter Earnings Call. Today's call is being recorded, and 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 this time for opening remarks, I would now like to pass the call over to Ms. Mary Lai, Head, Investor Relations. Nice to meet you again.

Thank you, Anne, and good afternoon, everyone. Welcome to the Norton LifeLock Fiscal 2021 Third Quarter Earnings Call. Joining me today to review our results are Vincent Pellet, CEO, and Natalie Dursey, CFO. As a reminder, there will be a replay of this call posted on the IR website, along with our earnings slides, press release, and supplemental materials defining our non-GAAP metrics. I'd like to remind everyone that during this call, all references to the final metrics are non-GAAP and all growth rates are year-over-year unless otherwise stated. A reconciliation of non-GAAP to GAAP measures is included in our press release, which is available on our IR website at investor.nornlifelock.com. Today's call contains statements regarding our business, financial performance, and operations, including the impact of the ongoing COVID-19 pandemic on our business and industry, which may be considered a forward-looking statement, and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those statements are based on current beliefs, assumptions, and expectations and speak only as of the current date. For more information, please refer to the cautionary statement in our press release and the risk factors in our filings with the SEC and in particular, our annual report on Form 10-K for the fiscal year ended April 3, 2020, and recently filed quarterly reports on Form 10-Q. And now, I will turn the call over to our CEO, Vincent.

Thank you, Mary, and good afternoon, everyone. I hope you are all safe and well. As we embark on 2021, I think it's important to recognize the sense of uncertainty and the ongoing challenges that we all face as individual or as a society. Despite the social, economic, and health issues we are facing, I'm hopeful that collectively we will emerge stronger and more united. At Northern LifeLock, the safety and well-being of our employees is our utmost priority, and I want to thank each and every one of them for facing all those challenges while continuing to show a deep commitment to drive our vision protecting and empowering people to live their digital life safely. A lot has happened since our last earnings. On top of delivering another solid quarter, accelerating our growth, and adding some exceptional talent to our team and our board, we also are proud to have been recognized by the Human Rights Campaign Foundation for earning a top score on the 2021 Equality Index. We are proud of the diverse backgrounds represented by our entire team at Northern LifeLog, and we remain committed to building an inclusive company. We know that delivering on our vision cannot happen without a committed, talented, and diverse team. In December, we announced LifeLog's first acquisition. Now that the deal has closed, we are excited to welcome Avira's employees, customers, and partners to the Northern family. We are really excited by the opportunity to provide Avira's 30 million users and over 1.5 million paid customers the benefit of the Nolan plus Avira offering. Together, we are now privileged to help protect over 80 million consumers globally as we embrace the important responsibility we have in securing their digital lives. We are also quickly working to leverage Avira's strong presence in Europe, which now also includes BullGuard, a UK-based cybersecurity company that Avira added to their business last year. On top of extending our reach deeper into EMEA, we look forward to adding Avira's and Bullgard's capabilities to our portfolio. Before I dive into Q3 results, I want to revisit two key post-transition commitments we previously set as a standalone Northern LifeLock company. From returning to a growing customer base, a first since 2014, to delivering over $1.5 annualized EPS, I am proud to say that we have established the company on the trajectory of sustainable and profitable growth. We are the strongest cyber safety company today, 100% focused on protecting and empowering consumers to live their digital lives safely. While we are proud of these achievements, we know we have a tremendous responsibility to deliver a portfolio that stays ahead of cyber criminals. We don't take this lightly. As we innovate and work to keep our customers safe, we know that we will be transforming our company for a richer portfolio and expanded consumer reach. And we're just getting started. In Q3, we delivered solid growth and accelerated our momentum. Revenue was up 6% and non-GAAP EPS grew 52%. Reported billings growth was 10 percent, our first quarter of double-digit growth. We are closing the fiscal year out strong, and more importantly, we're well on our way to creating a meaningful and sustainable growth business. Leading the growth momentum, our partner business posted double-digit revenue growth up 15 percent. Retail was strong in the quarter, performing well through retail and during the holidays. Internationally, Japan was particularly strong as it relates to identity theft protection solutions such as dark web monitoring and ID Advisor sold through partners and retailers. Finding the right opportunities and markets to build and expand these long-term partnerships is one of our key strategic focus areas to broaden our reach and bring cyber safety to more consumers in underpenetrated markets. Stay tuned for more developments in this area as we continue to transform the company. Our direct-to-consumer revenue, which represents the majority of our business, was up 5%. We saw broad-based growth across the portfolio as well as strong performance through the holiday season. While our North America business is considerably larger than the rest of the world, the international growth rate continues to show strength and outpace the America's. In the quarter, our direct business grew double digits across multiple countries, including Germany, France, Australia, and New Zealand, where we have recently added dark web monitoring into our Northern 360 offering. This is part of our strategic push to expand Northern identity products internationally and bring more comprehensive cyber safety offering to international consumers. We definitely have more room to grow here, especially with the synergies and extended global reach we will be leveraging with Avira and the freemium model. In Q3, our direct customer count grew over 300,000 sequentially and close to 900,000 year-over-year, bringing our total count to 21 million. This was our fifth straight quarter of net direct customer ads sequentially. Our customer retention rate remained stable at 85%. Our industry-leading monthly ARPU, average revenue per user, also remain strong at $9. Both metrics are strong indicators that our current customers see the value of our products. Notwithstanding the effect of tenure and geographical mix, we continue to see opportunities to improve our pool as we enrich the cyber safety value offered to our customers and to improve retention rates, especially in the early years of the customer journey. One of the key contributors to our customer count growth and retention success continues to be the Norton 360 integrated platform, the first truly integrated cyber safety offering in the market. At the end of Q3, approximately 60% of our installed base are using Norton 360. This platform is designed to provide a comprehensive protection while driving higher customer engagement. This level of adoption shows that our approach to provide an easy-to-use platform and comprehensive protection through a membership model resonates well with our customers. And we're working hard to continue bringing new functionalities, simplifying the membership plans, and constantly improving the user experience. The combination of Nolan 360 platform, our international expansion effort, and our strategic shift to new forms of digital marketing is working and bringing cyber safety to new customers. Looking back at the last 12 months, we've welcomed approximately 4 million new customers to Northern LifeLock, the majority of which was on Northern 360. We are seeing early improvements in renewal trends with these newer customer cohorts. We're engaging with these customers differently, communicating with new alerts, measuring what works, what doesn't, and we're able to scale product launches more effectively through our in-house e-commerce platform. At the heart of all of this, it's our technologies and accelerated pace of innovation that enable us to be nimble in bringing new and incremental value to customers. Sometimes we may run the risk of failing fast, but the reward is that we learn even faster to translate that into success as we move to own the consumer cyber safety category. With the ever-expanding scope of cyber crimes and the acceleration of the numbers of attacks that we've all witnessed in the news, we know it's critical to focus on product and service innovation to help keep consumers' digital lives safe and to raise the overall awareness of consumer cyber safety across all audiences. We plan to continue to release new products and features at an accelerated pace that we have not achieved in years. Let me tell you about a couple of them launched in Q3. As part of our global expansion efforts, we successfully launched Nolan ID Advisor in Japan, powered by LifeLock. Here, we specifically targeted retail and service providers to reach new audiences and increase awareness on the value of dark web monitoring. One of the differentiators in this product is the access to a dedicated ID restoration specialist, a Japanese-speaking service agent, to help resolve fraudulent claims from start to finish. Another example is our enhanced Norton 360 mobile experience, which provides customers access to their device security, online privacy, and identity features through one single easy-to-use app, making it easier for customers to access and manage their cyber safety tools from one dashboard. This is another example of our commitment to bring a richer and simpler experience to consumer cyber safety. Looking back, we have demonstrated our continued commitment to grow the top line, drive discipline operating leverage, and pursue value creation for all stakeholders. It's important to me and our entire leadership team to build credibility and a sustainable and growing financial track record. It's also worth noting that behind our strong third quarter performance, you will find a very passionate team working hard to fulfill our vision to protect and empower people to live their digital lives safely. We think customer first. We innovate and grow. We scrappy. We own it. We open. We authentic. These are the core values we live by. And making the world cyber safe is what inspires us. Finally, before I pass it to Natalie, I'm excited to share a little more detail on our recent additions to the board. Cherie Smith is Vice Chair and Partner at Paul Hastings, a prominent global law firm. She brings extensive international experience in data privacy, cybersecurity, and bridge respond issues. Similarly, Emily Health, DocuSign's Chief Trust and Security Officer, brings significant experience in information security, data privacy, in addition to being a key contributor in creating consumer trust to digitally transform an industry. They are both passionate and accomplished leaders who are already valuable members of the board team. And now let me turn the call over to Natalie for more details on the financial results.