Gen Digital Inc.

Good afternoon, everyone. Thank you for standing by. My name is Paul and I'll be your conference operator today. I would like to welcome everyone to the Norton LifeLock fiscal 2022 third quarter earnings call. Today's call is being recorded and all lines having 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 like to pass the call over to Ms. Mary Lai, Head of Investor Relations. Miss, you may begin.

Thank you, Paul, and good afternoon, everyone. Welcome to the Norton LifeLock Fiscal 2022 Third Quarter Earnings Call. Joining me today to review our Q3 results are Vincent Pellet, CEO, and Natalie Dursey, CFO. As a reminder, there will be a replay of this call posted on the Investor Relations website, along with our earnings slides, press release, defining our non-gap 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.norinlifelock.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 and which may be considered forward-looking statements, and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those statements are based on our 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 2, 2021. And now I will turn the call over to our CEO. Vincent?

Thank you, Mary, and welcome, everyone. This was another strong quarter, double-digit growth on both the top and bottom line, and we continue to drive improvements across several key business areas that we believe are critical to our long-term success. Q3 revenue and bookings grew 12% and 11% respectively. The growth profile we delivered was broad-based, reflective of diversification across our product portfolio, our channels, and our geographies. And with 16% growth in EPS, our profitability remains strong and continues to grow faster than revenue. Later in this call, Nathalie will provide you with more details on our Q3 results, but let's take a step back for one minute. It is clear to all of us that we are living more and more of our daily lives online. Shopping, working, learning, creating, sharing, you name it. We are doing it all online. All of it is designed to make our lives easier and better, but it does come with a very real risk of more cyber criminality. Every day, this team wakes up driven by a single purpose, making the world cyber safe for everyone and ultimately powering their digital freedom. Today, we are protecting and empowering approximately 80 million users in more than 150 countries, but we are just getting started. Our strategy is built around our customers and their digital lives. We are focused on accelerating innovation, expanding access and reach, and relentlessly serving our customers' needs. Our innovation engine continues to thrive. In Q3, we introduced Avira Bridge Monitor, where we actively scan the internet and alert users if their email is a part of a data breach. In identity and in privacy, we continue to expand our reach internationally, combining dark web monitoring, anti-track and ID navigator, and bringing it to over 20 countries. Not only do we bring new products to market, we also improve upon category-leading products that we have offered for years. For example, Using machine learnings, we rolled out new alerts detecting unusual transactions for our LifeLock subscribers, better protecting people from various frauds or unusual activities. Day after day, this team brings energy and new ideas about how we can better build out the Nolan360 Cyber Safety integrated platform. Within various plans of Nolan360, our members automatically receive the benefits of our latest innovation. simplified and frictionless onboarding experiences, new device detection and addition through QR codes, easy backup activation, software updater, improved integrated VPN, game booster, cryptocurrency mining and wallet options, and enhanced identity protection features like identity lock and social media monitoring. These are just a few of the new features made available into our Norland 360 platform over just the last few months. And it's not just innovation. It is a continued commitment to protecting our users as highlighted with multiple AV test awards and the most recent, the SELabs Best Consumer Anti-Malware Awards for 2021. We know we are on the right track as over 14 million customers are now on Norland 360. with more than 1 million members added since our investor day last May. We are thrilled that over 60% of our direct customers are now protected by the Norton 360 platform, and it keeps growing. Whether it's launching entirely new products, bringing these products to more people, or improving our industry-leading platform, we know that innovation is a core driver of our success. When customers make the decision to trust us to help protect their digital lives, they stay with us. We have improved our net promoter score by five points to high 40s in the last 12 months. That strengthening engagement is also reflected in our retention rate, which is something we are particularly proud of. In Q3, it was slightly above 85%. If you exclude the first-year customers, retention is at 87% in aggregate, and as high as 90% for some cohort of customers with the identity offering. It speaks to the power of our Northern 360 platform with identity protection, as traditionally in this industry, renewal rates for the first-year customers or security-only customers are lower. But even in this category, we believe we have room for improvement. We've already improved Avira retention to 83%, up three points since we acquired them. Through our evolving and innovative product portfolio and expanding distribution channels, we have now added customers to the platform consistently over nine consecutive quarters. Total direct customers are now over 23.4 million, up 12% or 2.4 million customers added year-over-year, and 126,000 sequentially. The growth was broad-based, although slightly higher mix in security, as expected for a December holiday-driven quarter. In our direct-to-consumer channel, we observed some market pressure on ad prices that slightly pushed up our customer acquisition costs. We partially offset those increases with improvement in shopping cart conversions. One of the key investment areas in our go-to-market strategy is the expansion in indirect channels. The net direct customer count increase that I just shared does not include customers coming through our partner channels, including employee benefits, or through the App Store, for example. In those two channels alone, we added almost half a million customers year over year and over 100,000 customers sequentially. And interestingly, almost two-thirds now of our new customers from App Stores have installed the Nolan 360 app. You will see us continue to expand and invest in our multi-channel approach to reach more customers. While it is great that we've brought innovations to the market, added customers to our platform, and retained them, it is also clear that we're delivering value. In Q3, our average revenue per user, or ARPU, was $8.87. But excluding Avira, we achieved a record organic ARPU well above $9, driven by higher Nolan 360 adoption and successful cross-sell and up-sell activities. Avira's install base is more focused on traditional security features, which drives an ARPU at just below $5. We view this as one of the many opportunities we have to continue to grow and provide more rounded protection to all customers, Avira and internationally. Natalie will provide more details on ARPU in her section. To wrap up, I'm also excited to announce that we are driving to an accelerated close date for the merger with Avast. As you will recall, we originally expected to close in mid-calendar year 2022. However, while there remain some outstanding regulatory conditions that will need to be satisfied or waived before we can close, we currently expect to close on February 24th, 2022. We have made great strides towards combining the two companies, including receiving approvals from both Northern LifeLock and Avast shareholders. satisfying regulatory conditions in the US, Czech Republic, Australia, New Zealand, and securing permanent financing commitments. On the remaining regulatory conditions, we have submitted antitrust filings for the UK, Germany, and Spain, and are fully engaged with each of them. We fundamentally believe that this merger will allow us to increase our pace of innovation and better serve consumers around the world. In the meantime, we'll keep driving our business forward We've made great progress and, frankly, can't wait to merge with Avast. Together, we will accelerate the transformation of consumer cyber safety and power digital freedom for everyone. And now I will pass the call over to Natalie to cover details of the financial results and the activities supporting our merger with Avast.