Gen Digital Inc. 10-Q

Item 1. Financial Statements (Unaudited) GEN DIGITAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in millions, except par value per share amounts) September 30, 2022 April 1, 2022 ASSETS Current assets: Cash and cash equivalents $ 1,095 $ 1,887 Short-term investments — 4 Accounts receivable, net 152 120 Other current assets 345 193 Assets held for sale 30 56 Total current assets 1,622 2,260 Property and equipment, net 108 60 Operating lease assets 50 74 Intangible assets, net 3,332 1,023 Goodwill 10,126 2,873 Other long-term assets 644 653 Total assets $ 15,882 $ 6,943 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 66 $ 63 Accrued compensation and benefits 111 81 Current portion of long-term debt 175 1,000 Contract liabilities 1,597 1,264 Current operating lease liabilities 24 18 Other current liabilities 852 639 Total current liabilities 2,825 3,065 Long-term debt 9,883 2,736 Long-term contract liabilities 87 42 Deferred income tax liabilities 392 75 Long-term income taxes payable 913 996 Long-term operating lease liabilities 41 75 Other long-term liabilities 43 47 Total liabilities 14,184 7,036 Commitments and contingencies (Note 18) Stockholders’ equity (deficit): Common stock and additional paid-in capital, $ 0.01 par value: 3,000 shares authorized; 661 and 582 shares issued and outstanding as of September 30, 2022 and April 1, 2022, respectively 3,378 1,851 Accumulated other comprehensive income (loss) ( 15 ) ( 4 ) Retained earnings (accumulated deficit) ( 1,665 ) ( 1,940 ) Total stockholders’ equity (deficit) 1,698 ( 93 ) Total liabilities and stockholders’ equity (deficit) $ 15,882 $ 6,943 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in millions, except per share amounts) Three Months Ended Six Months Ended September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Net revenues $ 748 $ 692 $ 1,455 $ 1,378 Cost of revenues 119 100 221 202 Gross profit 629 592 1,234 1,176 Operating expenses: Sales and marketing 167 150 323 306 Research and development 73 66 134 134 General and administrative 110 63 214 108 Amortization of intangible assets 29 21 50 42 Restructuring and other costs 9 5 11 12 Total operating expenses 388 305 732 602 Operating income (loss) 241 287 502 574 Interest expense ( 48 ) ( 31 ) ( 79 ) ( 63 ) Other income (expense), net 2 177 1 174 Income (loss) before income taxes 195 433 424 685 Income tax expense (benefit) 126 100 155 171 Net income (loss) $ 69 $ 333 $ 269 $ 514 Net income (loss) per share - basic $ 0.12 $ 0.57 $ 0.46 $ 0.88 Net income (loss) per share - diluted $ 0.12 $ 0.56 $ 0.45 $ 0.87 Weighted-average shares outstanding: Basic 590 582 583 581 Diluted 595 591 599 591 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHEN SIVE INCOME (LOSS) (Unaudited, in millions) Three Months Ended Six Months Ended September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Net income (loss) $ 69 $ 333 $ 269 $ 514 Other comprehensive income (loss), net of taxes: Foreign currency translation gain (loss) 29 ( 15 ) ( 11 ) ( 13 ) Other comprehensive income (loss), net of taxes 29 ( 15 ) ( 11 ) ( 13 ) Comprehensive income (loss) $ 98 $ 318 $ 258 $ 501 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited, in millions, except share amounts) Three months ended September 30, 2022 Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (Deficit) Shares Amount Balance as of July 1, 2022 571 $ 1,479 $ ( 44 ) $ ( 1,734 ) $ ( 299 ) Net income (loss) — — — 69 69 Other comprehensive income (loss), net of taxes — — 29 — 29 Common stock issued under employee stock incentive plans 1 6 — — 6 Repurchases of common stock ( 5 ) ( 104 ) — — ( 104 ) Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued — ( 73 ) — — ( 73 ) Stock-based compensation — 29 — — 29 Extinguishment of convertible debt — ( 100 ) — — ( 100 ) Merger consideration 94 2,141 — — 2,141 Balance as of September 30, 2022 661 $ 3,378 $ ( 15 ) $ ( 1,665 ) $ 1,698 Six months ended September 30, 2022 Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (Deficit) Shares Amount Balance as of April 1, 2022 582 $ 1,851 $ ( 4 ) $ ( 1,940 ) $ ( 93 ) Net income (loss) — — — 269 269 Other comprehensive income (loss), net of taxes — — ( 11 ) — ( 11 ) Common stock issued under employee stock incentive plans 3 6 — — 6 Shares withheld for taxes related to vesting of restricted stock units ( 1 ) ( 16 ) — — ( 16 ) Repurchases of common stock ( 17 ) ( 404 ) — — ( 404 ) Cash dividends declared ($ 0.250 per share of common stock) and dividend equivalents accrued — ( 146 ) — — ( 146 ) Stock-based compensation — 53 — — 53 Extinguishment of convertible debt — ( 100 ) — — ( 100 ) Cumulative effect adjustment from adoption of ASU 2020-06 (1) — ( 7 ) — 6 ( 1 ) Merger consideration 94 2,141 — — 2,141 Balance as of September 30, 2022 661 $ 3,378 $ ( 15 ) $ ( 1,665 ) $ 1,698 (1) Effective on April 2, 2022, the Company adopted ASU 2020-06 ( Debt with Conversion and Other Options, ASC 470-20 ) using a modified retrospective method. See Note 2 for further information about this recently adopted guidance. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited, in millions, except share amounts) Three months ended October 1, 2021 Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (Deficit) Shares Amount Balance as of July 2, 2021 581 $ 2,049 $ 49 $ ( 2,595 ) $ ( 497 ) Net income (loss) — — — 333 333 Other comprehensive income (loss), net of taxes — — ( 15 ) — ( 15 ) Common stock issued under employee stock incentive plans 1 7 — — 7 Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued — ( 73 ) — — ( 73 ) Stock-based compensation — 13 — — 13 Balance as of October 1, 2021 582 $ 1,996 $ 34 $ ( 2,262 ) $ ( 232 ) Six months ended October 1, 2021 Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (Deficit) Shares Amount Balance as of April 2, 2021 580 $ 2,229 $ 47 $ ( 2,776 ) $ ( 500 ) Net income (loss) — — — 514 514 Other comprehensive income (loss), net of taxes — — ( 13 ) — ( 13 ) Common stock issued under employee stock incentive plans 3 8 — — 8 Shares withheld for taxes related to vesting of restricted stock units ( 1 ) ( 15 ) — — ( 15 ) Cash dividends declared ($ 0.250 per share of common stock) and dividend equivalents accrued — ( 147 ) — — ( 147 ) Stock-based compensation — 33 — — 33 Extinguishment of convertible debt — ( 112 ) — — ( 112 ) Balance as of October 1, 2021 582 $ 1,996 $ 34 $ ( 2,262 ) $ ( 232 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 7 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in millions) Six Months Ended September 30, 2022 October 1, 2021 OPERATING ACTIVITIES: Net income $ 269 $ 514 Adjustments: Amortization and depreciation 78 71 Impairments and write-offs of current and long-lived assets ( 5 ) 3 Stock-based compensation expense 53 33 Deferred income taxes ( 51 ) 13 Loss (gain) on extinguishment of debt 9 5 Gain on sale of property — ( 175 ) Non-cash operating lease expense 11 11 Other ( 45 ) 5 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net 17 9 Accounts payable ( 18 ) 27 Accrued compensation and benefits 3 ( 36 ) Contract liabilities ( 85 ) ( 47 ) Income taxes payable ( 91 ) ( 97 ) Other assets 9 ( 5 ) Other liabilities ( 27 ) ( 13 ) Net cash provided by (used in) operating activities 127 318 INVESTING ACTIVITIES: Purchases of property and equipment ( 4 ) ( 2 ) Payments for acquisitions, net of cash acquired ( 6,550 ) ( 40 ) Proceeds from the maturities and sales of short-term investments 4 4 Proceeds from the sale of property — 355 Other 4 ( 4 ) Net cash provided by (used in) investing activities ( 6,546 ) 313 FINANCING ACTIVITIES: Repayments of debt ( 2,738 ) ( 382 ) Proceeds from issuance of debt, net of issuance costs 8,954 512 Net proceeds from sales of common stock under employee stock incentive plans 6 8 Tax payments related to vesting of restricted stock units ( 16 ) ( 14 ) Dividends and dividend equivalents paid ( 153 ) ( 157 ) Repurchases of common stock ( 404 ) — Net cash provided by (used in) financing activities 5,649 ( 33 ) Effect of exchange rate fluctuations on cash and cash equivalents ( 22 ) ( 5 ) Change in cash and cash equivalents ( 792 ) 593 Beginning cash and cash equivalents 1,887 933 Ending cash and cash equivalents $ 1,095 $ 1,526 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 8 Table of Contents GEN DIGITAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Description of Business and Significant Accounting Policies Business On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued ordinary share capital of Avast plc, a public company incorporated in England and Wales and a global leader of digital security and privacy headquartered in Prague, Czech Republic (Avast and such transaction, the Merger). On September 12, 2022, we completed the Merger with Avast, and its results of operations have been included in our Condensed Consolidated Statements of Operations beginning September 12, 2022. See Note 4 for further information about this business combination. In connection with the Merger, effective November 7, 2022, we changed our corporate name from NortonLifeLock Inc. to Gen Digital Inc. (Gen). Gen is a global, leading provider of consumer Cyber Safety solutions. Our portfolio provides protection across three Cyber Security categories: security, identity protection and online privacy. We help customers protect their computer and mobile devices from online threats, safeguard their identity and personal information and strengthen online privacy capabilities and functionalities. Basis of presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America for interim financial information. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022. The results of operations for the three and six months ended September 30, 2022 are not necessarily indicative of the results expected for the entire fiscal year. Fiscal calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. Unless otherwise stated, references to three and six month periods in this report relate to fiscal periods ended September 30, 2022 and October 1, 2021. The three and six months ended September 30, 2022 and October 1, 2021 each consisted of 13 and 26 weeks, respectively. Our 2023 fiscal year consists of 52 weeks and ends on March 31, 2023. Use of estimates The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying Notes. Such estimates include, but are not limited to, valuation of business combinations including acquired intangible assets and goodwill, loss contingencies, the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions, and valuation of assets and liabilities. On an ongoing basis, management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Third-party valuation specialists are also utilized for certain estimates. Actual results could differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment as a result of the COVID-19 pandemic and continuing Russia-Ukraine conflict, and such differences may be material to the Condensed Consolidated Financial Statements. Significant accounting policies With the exception of those discussed in Note 2, there have been no material changes to our significant accounting policies as of and for the three and six months ended September 30, 2022, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022. 9 Table of Contents Note 2. Recent Accounting Standards Recently adopted authoritative guidance Debt with Conversion and Other Options . In August 2020, the FASB issued Accounting Standards Update 2020-06 (ASU 2020-06) which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The new guidance removes from GAAP the separation models for convertible debt with embedded conversion features. As a result, entities will no longer separately present embedded conversion features in equity. A convertible debt instrument will be accounted for wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging , or (2) a convertible debt instrument was issued at a substantial premium. In addition, the debt discount, which is equal to the carry value of the embedded conversion feature upon issuance, will no longer be amortized as interest expense over the life of the instrument. The new guidance also requires the use of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and include the effect of share settlement for instruments that may be settled in cash or shares. See Note 16 for further information related to the diluted earnings per share calculation. We adopted this standard as of April 2, 2022, the first day of fiscal 2023, using a modified retrospective method of transition, under which, financial results and earnings per share amounts reported in prior periods were not adjusted or restated in the Condensed Consolidated Financial Statements. As such, the new guidance was applied to the convertible debt instruments outstanding as of the beginning of this fiscal year, with the cumulative effect of adoption recognized through an adjustment to the opening balance of retained earnings. We increased the carrying amount of the New 2.0 % Convertible Notes (as defined in Note 10) by approximately $ 1 million and reduced additional paid-in capital by approximately $ 7 million, net of tax. The net effect of these adjustments was recorded as an increase to retained earnings as of April 2, 2022. Reference Rate Reform. In March 2020, the FASB issued new guidance providing temporary optional expedients and exceptions to ease the financial reporting burden of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). The standard was effective upon issuance and may generally be applied through December 31, 2022, to any new or amended contracts, hedging relationships and other transactions that reference LIBOR. As of September 30, 2022, we have fully transitioned to SOFR and no longer use LIBOR on any debt or contractual arrangements that are outstanding. Any future contracts, hedging relationships and other transactions will be SOFR denominated. Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had, or will have, a material impact on our Condensed Consolidated Financial Statements and disclosures . Note 3. Assets Held for Sale Assets held for sale During fiscal 2020, we reclassified certain land and buildings previously reported as property and equipment to assets held for sale when the properties were approved for immediate sale in their present condition and the sale was expected to be completed within one year. However, the commercial real estate market continues to be adversely affected by the COVID-19 pandemic, which delayed the expected timing of such sales. During the three months ended September 30, 2022, we determined certain land and buildings in Mountain View, California, which were previously reported as assets held for sale as of April 1, 2022, no longer qualify as held for sale classification. As a result, we reclassified the aggregate $ 26 million carrying value from assets held for sale to property and equipment, net, in our Condensed Consolidated Balance Sheets and recorded an immaterial catch-up depreciation adjustment, which is included in our Condensed Consolidated Statements of Operations. We continue to actively market the remaining property for sale. We have taken into consideration the current real estate values and demand and continue to execute plans to sell this property. As of September 30, 2022, this property remains classified as assets held for sale. During the three and six months ended September 30, 2022 , there were no impairments because the fair value of the properties less costs to sell either equals or exceeds their carrying value. Note 4. Business Combinations Merger with Avast On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued share capital of Avast plc, a public company incorporated in England and Wales (Avast and such transaction, the Merger). The Merger was implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006 (the Scheme). Under the terms of the Merger, Avast shareholders were entitled to elect to receive, for each ordinary share of Avast held, in respect of their entire holding of Avast shares, either: (i) $ 7.61 in cash and 0.0302 of a new share of our common stock (such option, the Majority Cash Option); or (ii) $ 2.37 in cash and 0.1937 of a new share of our common stock (such option, the Majority Stock Option). Each Avast Director who held Avast shares elected for the Majority Stock Option in respect to their entire beneficial holdings of Avast shares. 10 Table of Contents The Merger was approved by our Board of Directors and by our shareholders, the Board of Directors and shareholders of Avast, and regulators including the Federal Trade Commission under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) and in Europe, the German Federal Cartel Office, the Spanish National Markets and Competition Commission and the U.K. Competition and Markets Authority. Closing of Merger with Avast On September 12, 2022, we completed the Merger with Avast, and as a result, we have changed our corporate name to Gen Digital Inc. and have become dual headquartered in Tempe, Arizona and Prague, Czech Republic. Avast is a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protect and enhance users’ online experiences. Combining Avast’s strength in privacy and our strength in identity will create a broad and complementary consumer product portfolio beyond core security and towards adjacent trust-based solutions. The Merger will provide greater geographic diversification and access to a larger user base and will accelerate the transformation of global consumer cyber safety. Upon completion of the Merger, we acquired all of the outstanding common stock of Avast. Based on the election of the Avast shareholders, we paid cash consideration of approximately $ 6,913 million and issued 94,201,233 shares o f our common stock to Avast shareholders. As a result, immediately following the closing of the Merger, Avast shareholders owned approximately 14 % of our outstanding common stock. The fair value of our common stock provided in exchange for all outstanding ordinary shares of Avast was approximately $ 2,141 million. Consideration transferred The total consideration for the Merger with Avast was approximately $ 8,691 million, net of cash acquired, and consisted of the following: (In millions) September 12, 2022 Cash and equity consideration for outstanding Avast common shares (1) $ 8,112 Repayment of outstanding Avast debt (2) 942 Total consideration 9,054 Cash acquired 363 Net consideration transferred $ 8,691 (1) Represents the total value of cash paid and our common stock issued to Avast shareholders pursuant to the Majority Cash/Stock Option in the Scheme. (2) Represents the cash consideration paid concurrent with the close of the Merger to retire certain Avast debt, including repayment of the associated principal, accrued interest, premiums and other costs. Fair value of assets acquired and liabilities assumed We accounted for the Merger as a business combination. The identifiable assets acquired and liabilities assumed of Avast were recorded at their estimated fair values as of the acquisition date and consolidated with those of our company. The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed, especially with respect to intangible assets. Third-party valuation specialists were also utilized for certain estimates. 11 Table of Contents Our preliminary allocation of the aggregate purchase price, based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date, is as follows: (In millions) September 12, 2022 Assets: Accounts receivable $ 61 Other current assets 18 Property and equipment 31 Operating lease assets 18 Intangible assets 2,383 Goodwill 7,267 Other long-term assets 10 Total assets acquired 9,788 Liabilities: Current liabilities 180 Contract liabilities 508 Operating lease liabilities 18 Long-term deferred tax liabilities 345 Other long-term obligations 46 Total liabilities assumed 1,097 Total purchase price $ 8,691 The allocation of the purchase price is based upon a preliminary valuation, and as additional information becomes available, our estimates and assumptions may be subject to refinement within the measurement period, which may be up to one year from the acquisition date. Adjustments to the purchase price may require adjustments to goodwill prospectively. The primary areas of preliminary purchase price allocation that are not yet finalized include intangible assets and certain tax and litigation matters. The preliminary goodwill of $ 7,267 million represents the excess of the consideration transferred over the fair values of the assets acquired and liabilities assumed. It is attributable to the expected synergies of the Merger, including future cost savings from planned integration of infrastructure, facilities, personnel and systems, and other benefits that are anticipated to be generated by combining both companies. Goodwill is allocated to our single reportable segment. Substantially all of the goodwill recognized is expected to be deductible for U.S. tax purposes. See Note 6 for further information on goodwill. Preliminary identified intangible assets and their respective useful lives, as of September 12, 2022, are as follows: (In millions, except for useful lives) Fair Value Weighted-Average Estimated Useful Life (Years) Customer relationships (1) $ 1,055 7 years Developed technology (2) 1,244 6 years Finite-lived trade names (2) 84 10 years Total identified intangible assets $ 2,383 (1) Customer relationships were valued using the multi-period excess earnings method, which is a form of the income approach that considers customer retention rate. (2) Developed technology and finite-lived trade names were valued using the relief-from-royalty method, which is a form of the income approach that considers technology migration and probability of use, respectively. Financing In connection with the Merger, on September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $ 1,500 million revolving credit facility (Revolving Facility), a $ 3,910 million term loan A facility (Term A Facility), (iii) a $ 3,690 million term loan B facility (Term B Facility) and (iv) a $ 750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close. The proceeds were or will be used (i) to finance the cash consideration payable for the Merger, (ii) to repay in full and terminate all commitments under Avast’s credit facility, (iii) to pay expenses relating to the Merger, (iv) to add cash to the balance sheet and (v) for general corporate purposes and on-going business activities. See Note 10 for further information about these debt instruments and the related debt covenants. 12 Table of Contents In connection with the financing provided for Term B Facility, we incurred customary ticking fees with respect to the undrawn commitments that began accruing on the 61st day post-syndication. The ticking fees were payable at the per annum rate of (i) 50 % of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans for 61-90 days from January 28, 2022, the syndication date, and (ii) 100 % of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans on and after 91 days from the syndication date. Ticking fees were payable on the closing date of the transaction. During the three and six months ended September 30, 2022, we paid $ 31 million in ticking fees. Impact on operating results Our results of operations for the three and six months ended September 30, 2022 include $ 48 million of net revenues and $ 1 million of loss before income taxes attributable to Avast beginning September 12, 2022. Additionally, we recognized transaction and integration costs of $ 58 million and $ 21 million for the three months ended September 30, 2022 and October 1, 2021, respectively, and $ 66 million and $ 21 million for the six months ended September 30, 2022 and October 1, 2021, respectively. These costs were primarily associated with legal and professional services and other regulatory closing fees, which were expensed as incurred and included in general and administrative expenses in our Condensed Consolidated Statements of Operations. On the closing date of the Merger, we also incurred $ 145 million of debt issuance costs associated with the senior credit facilities, of which $ 132 million was capitalized and recorded as a reduction of outstanding debt balances and $ 10 million was capitalized and included in Other long-term assets in our Condensed Consolidated Balance Sheets. The remaining $ 3 million was capitalized but immediately extinguished in conjunction with the termination of the Bridge Loan. Unaudited pro forma information The following unaudited pro forma financial information represents the combined historical results for the three and six months ended September 30, 2022 and October 1, 2021, as if the Merger had been completed on April 3, 2021, the first day of fiscal 2022. The results presented below include adjustments to conform Avast financial information, prepared in accordance with International Financial Reporting Standards (IFRS), to U.S. GAAP as well as the impacts of material, nonrecurring pro forma adjustments, including amortization of acquired intangible assets, interest on debt issued to finance the Merger, and acquisition-related transaction costs, and the income tax effect of the other pro forma adjustments. The unaudited pro forma results do not include any anticipated synergies or other expected benefits of the Merger. The following table summarizes the unaudited pro forma financial information: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Net revenues $ 930 $ 925 $ 1,873 $ 1,845 Net income (loss) $ ( 62 ) $ 262 $ 47 $ 376 The unaudited pro forma financial information is provided for informational purposes only and are not indicative of future operations or results that would have been achieved had the Merger been completed as of the beginning of fiscal 2022. Fiscal 2022 acquisition On September 15, 2021, we completed an acquisition of an online reputation management and digital privacy solutions company for total aggregate consideration of $ 39 million, net of $ 1 million cash acquired. The purchase price was primarily allocated to intangible assets and goodwill. Our estimates and assumptions were subject to refinement within the measurement period, which is up to one year from the acquisition date. Adjustments to the purchase price during the measurement period required adjustments to be made to goodwill. The measurement period ended on September 14, 2022. Note 5. Revenues Contract liabilities During the three and six months ended September 30, 2022, we recognized $ 502 million and $ 875 million from the contract liabilities balances as of July 1, 2022 and April 1, 2022, respectively. During the three and six months ended October 1, 2021, we recognized $ 506 million and $ 858 million from the contract liabilities balances as of July 2, 2021 and April 2, 2021, respectively. Remaining performance obligations Remaining performance obligations represent contract revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods. As of September 30, 2022, we had $ 1,204 million of remaining performance obligations, excluding customer deposit liabilities of $ 480 million, of which we expect to recognize approximately 93 % as revenue over the next 12 months. See Note 17 for tabular disclosures of disaggregated revenue by solution and geographic region. 13 Table of Contents Note 6. Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill were as follows: (In millions) Balance as of April 1, 2022 $ 2,873 Merger with Avast 7,267 Translation adjustments ( 14 ) Balance as of September 30, 2022 $ 10,126 Intangible assets, net September 30, 2022 April 1, 2022 (In millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 1,639 $ ( 431 ) $ 1,208 $ 583 $ ( 382 ) $ 201 Developed technology 1,461 ( 164 ) 1,297 217 ( 143 ) 74 Other 91 ( 3 ) 88 8 ( 3 ) 5 Total finite-lived intangible assets 3,191 ( 598 ) 2,593 808 ( 528 ) 280 Indefinite-lived trade names 739 — 739 743 — 743 Total intangible assets $ 3,930 $ ( 598 ) $ 3,332 $ 1,551 $ ( 528 ) $ 1,023 As a result of our Merger with Avast, we recorded $ 2,383 million of acquired intangible assets during the three months ended September 30, 2022. See Note 4 for further information about this business combination. Amortization expense for purchased intangible assets is summarized below: Three Months Ended Six Months Ended Condensed Consolidated Statements of Operations Classification (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Customer relationships and other $ 29 $ 21 $ 50 $ 42 Operating expenses Developed technology 16 11 21 21 Cost of revenues Total $ 45 $ 32 $ 71 $ 63 As of September 30, 2022, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year: (In millions) Remainder of 2023 $ 237 2024 461 2025 400 2026 394 2027 381 Thereafter 720 Total $ 2,593 14 Table of Contents Note 7. Supplementary Information Cash and cash equivalents: (In millions) September 30, 2022 April 1, 2022 Cash $ 427 $ 609 Cash equivalents 668 1,278 Total cash and cash equivalents $ 1,095 $ 1,887 Accounts receivable, net: (In millions) September 30, 2022 April 1, 2022 Accounts receivable $ 153 $ 121 Allowance for doubtful accounts ( 1 ) ( 1 ) Total accounts receivable, net $ 152 $ 120 Other current assets: (In millions) September 30, 2022 April 1, 2022 Prepaid expenses $ 127 $ 107 Income tax receivable and prepaid income taxes 166 35 Other tax receivable 25 27 Other 27 24 Total other current assets $ 345 $ 193 Property and equipment, net: (In millions) September 30, 2022 April 1, 2022 Land $ 14 $ 2 Computer hardware and software 489 462 Office furniture and equipment 27 27 Buildings 40 27 Leasehold improvements 64 56 Construction in progress 1 1 Total property and equipment, gross 635 575 Accumulated depreciation and amortization ( 527 ) ( 515 ) Total property and equipment, net $ 108 $ 60 During the three months ended September 30, 2022, we reclassified $ 26 million of buildings and leasehold improvements, which were previously reported as held for sale as of April 1, 2022, to property and equipment, net. Adjustments associated with catch-up depreciation were immaterial. Refer to Note 3 for further information about our assets held for sale. Other long-term assets: (In millions) September 30, 2022 April 1, 2022 Non-marketable equity investments $ 182 $ 178 Long-term income tax receivable and prepaid income taxes 21 25 Deferred income tax assets 346 351 Long-term prepaid royalty 45 53 Other 50 46 Total other long-term assets $ 644 $ 653 Short-term contract liabilities: (In millions) September 30, 2022 April 1, 2022 Deferred revenue $ 1,117 $ 743 Customer deposit liabilities 480 521 Total short-term contract liabilities $ 1,597 $ 1,264 15 Table of Contents Other current liabilities: (In millions) September 30, 2022 April 1, 2022 Income taxes payable $ 232 $ 109 Other taxes payable 75 87 Accrued legal fees 300 273 Accrued royalties 50 49 Accrued interest 44 32 Other 151 89 Total other current liabilities $ 852 $ 639 Long-term income taxes payable: (In millions) September 30, 2022 April 1, 2022 Deemed repatriation tax payable $ 309 $ 437 Other long-term income taxes 9 3 Uncertain tax positions (including interest and penalties) 595 556 Total long-term income taxes payable $ 913 $ 996 Other income (expense), net: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Interest income $ 3 $ — $ 5 $ — Foreign exchange gain (loss) 2 1 1 2 Gain (loss) on early extinguishment of debt ( 9 ) — ( 9 ) ( 5 ) Gain on sale of properties — 175 — 175 Other 6 1 4 2 Other income (expense), net $ 2 $ 177 $ 1 $ 174 Supplemental cash flow information: Six Months Ended (In millions) September 30, 2022 October 1, 2021 Income taxes paid, net of refunds $ 295 $ 273 Interest expense paid $ 63 $ 60 Cash paid for amounts included in the measurement of operating lease liabilities $ 11 $ 14 Non-cash operating activities: Operating lease assets obtained in exchange for operating lease liabilities $ 18 $ 35 Reduction of operating lease assets as a result of lease terminations and modifications $ 30 $ 8 Non-cash investing and financing activities: Extinguishment of debt with borrowings from same creditors $ — $ 494 Non-cash consideration for the Merger with Avast $ 2,141 $ — Note 8. Financial Instruments and Fair Value Measurements For financial instruments measured at fair value, fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. The three levels of inputs that may be used to measure fair value are: • Level 1: Quoted prices in active markets for identical assets or liabilities. • Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets or model-derived valuations. All significant inputs used in our valuations, such as discounted cash flows, are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. 16 Table of Contents • Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes. Assets measured and recorded at fair value on a recurring basis The following table summarizes our financial instruments measured at fair value on a recurring basis: September 30, 2022 April 1, 2022 (In millions) Fair Value Level 1 Level 2 Fair Value Level 1 Level 2 Assets: Money market funds $ 668 $ 668 $ — $ 1,278 $ 1,278 $ — Corporate bonds — — — 4 — 4 Total $ 668 $ 668 $ — $ 1,282 $ 1,278 $ 4 Financial instruments not recorded at fair value on a recurring basis include our non-marketable equity investments and long-term debt. Non-marketable equity investments As of September 30, 2022 and April 1, 2022, the carrying value of our non-marketable equity investments was $ 182 million and $ 178 million, respectively. Current and long-term debt As of September 30, 2022 and April 1, 2022, the total fair value of our fixed rate debt was $ 2,496 million and $ 2,021 million, respectively. The fair value of our variable rate debt approximated its carrying value. The fair values of all our debt obligations were based on Level 2 inputs. Note 9. Leases We lease certain of our facilities, equipment and data center co-locations under operating leases that expire on various dates through fiscal 2028. Our leases generally have terms that range from 1 year to 8 years for our facilities, 1 year to 3 years for equipment and 1 year to 5 years for data center co-locations. Some of our leases contain renewal options, escalation clauses, rent concessions and leasehold improvement incentives. The following summarizes our lease costs: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Operating lease costs $ 3 $ 4 $ 7 $ 8 Short-term lease costs — 1 1 2 Variable lease costs 2 2 3 3 Total lease costs $ 5 $ 7 $ 11 $ 13 Other information related to our operating leases was as follows: Three Months Ended September 30, 2022 October 1, 2021 Weighted-average remaining lease term 3.2 years 4.9 years Weighted-average discount rate 4.37 % 4.05 % See Note 7 for cash flow information related to our operating leases. As of September 30, 2022, the maturities of our lease liabilities by fiscal year are as follows: (In millions) Remainder of 2023 $ 13 2024 25 2025 16 2026 8 2027 6 Thereafter 1 Total lease payments 69 Less: Imputed interest ( 4 ) Present value of lease liabilities $ 65 17 Table of Contents Note 10. Debt The following table summarizes components of our debt: (In millions, except percentages) September 30, 2022 April 1, 2022 Effective Interest Rate 3.95 % Senior Notes due June 15, 2022 $ — $ 400 4.05 % New 2.00 % Convertible Unsecured Notes due August 15, 2022 — 525 2.62 % 5.00 % Senior Notes due April 15, 2025 1,100 1,100 5.00 % Initial Term Loan due May 7, 2026 — 1,010 LIBOR plus (3) Delayed Term loan due May 7, 2026 — 703 LIBOR plus (3) Term A Facility due September 12, 2027 3,910 — SOFR + % (1) 6.75 % Senior Notes due September 30, 2027 900 — 6.75 % Term B Facility due September 12, 2029 3,690 — SOFR + % (2) 1.29 % Avira Mortgage due December 30, 2029 4 5 1.29 % 7.125 % Senior Notes due September 30, 2030 600 — 7.13 % 0.95 % Avira Mortgage due December 30, 2030 3 4 0.95 % Total principal amount 10,207 3,747 Less: unamortized discount and issuance costs ( 149 ) ( 11 ) Total debt 10,058 3,736 Less: current portion ( 175 ) ( 1,000 ) Total long-term debt $ 9,883 $ 2,736 (1) Term A Facility due 2027 bears interest at a rate equal to Term SOFR plus a credit spread adjustment (CSA) plus a margin based either on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt or consolidated adjusted leverage as defined in the underlying loan agreement. (2) Term B Facility due 2029 bears interest at a rate equal to Term SOFR plus CSA plus 2.00 %. (3) The term loans bear interest at a rate equal to LIBOR plus a margin based either on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt or consolidated adjusted leverage as defined in the underlying loan agreement. The interest rates for the outstanding term loans are as follows: September 30, 2022 April 1, 2022 Term A Facility due September 12, 2027 4.77 % — % Term B Facility due September 12, 2029 4.85 % — % Initial Term Loan due May 7, 2026 — % 1.75 % Delayed Term Loan due May 7, 2026 — % 1.75 % As of September 30, 2022, the future contractual maturities of debt by fiscal year are as follows: (In millions) Remainder of 2023 $ 59 2024 233 2025 234 2026 1,333 2027 233 Thereafter 8,115 Total future maturities of debt $ 10,207 Credit facility We have a credit agreement with financial institutions, which provides a revolving line of credit of $ 1 billion, a 5-year term loan of $ 500 million (the Initial Term Loan) and a delayed draw 5-year term loan commitment of $ 750 million (the Delayed Draw Term Loan). An amendment to the agreement (the First Amendment) also provides for an incremental increase under the Initial Term Loan of $ 525 million. All term loans and revolver credit facilities mature in May 2026, and the credit facilities remain senior secured. The principal amount of the Initial Term Loan and the additional borrowings under the First Amendment must be repaid in quarterly installments on the last business day of each calendar quarter in an amount equal to 1.25 % of the aggregate principal amount as of the date of the First Amendment. The principal amount of the Delayed Draw Term Loan must be repaid in quarterly installments on the last business day of each calendar quarter in an amount equal to 1.25 % of aggregate principal amount as of the borrowing date of the Delayed Draw Term Loan. We may voluntarily repay outstanding principal balances without penalty. 18 Table of Contents Interest on borrowings under the credit agreement can be based on a base rate or the LIBOR at our election. Based on our debt ratings and our consolidated leverage ratios as determined in accordance with the credit agreement, loans borrowed bear interest, in the case of base rate loans, at a per annum rate equal to the applicable base rate plus a margin ranging from 0.125 % to 0.75 %, and in the case of LIBOR loans, LIBOR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %. The unused revolving line of credit is subject to a commitment fee ranging from 0.125 % to 0.30 % per annum. On September 12, 2022, we fully repaid the outstanding principal and accrued interest under the Initial Term Loan and Delay Draw Term Loan, which had an aggregate principal amount outstanding of $ 1,703 million. In addition, we paid $ 3 million of accrued and unpaid interest through the redemption date. The repayments resulted in a loss on extinguishment of $ 2 million. We also terminated our undrawn revolving line of credit of $ 1,000 million, resulting in a loss on extinguishment of $ 4 million. Senior credit facilities Upon the close of the Merger, on September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $ 1,500 million revolving credit facility (Revolving Facility), a $ 3,910 million term loan A facility (Term A Facility), (iii) a $ 3,690 million term loan B facility (Term B Facility) and (iv) a $ 750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close, resulting in a loss on extinguishment of $ 3 million. The Credit Agreement provides that we have the right at any time, subject to customary conditions, to request incremental revolving commitments and incremental term loans up to an unlimited amount, subject to certain customary conditions precedent and other provisions. The lenders under these facilities will not be under any obligation to provide any such incremental loans or commitments. We drew down the aggregate principal amounts of the Term A Facility and Term B Facility to finance the cash consideration payable for the transaction and to fully repay the outstanding principal and accrued interest of the existing credit facilities. The Credit Agreement replaced the existing credit facilities upon the close of the transaction. The Revolving Facility and Term A Facility will mature in September 2027, and the Term Facility B will mature in September 2029; the senior credit facilities remain senior secured. The principal amounts of Term Facility A must be repaid in quarterly installments on the last business day of each calendar quarter equal to 1.25 % of the aggregate principal amount as of the date of the Credit Agreement. The principal amounts of Term Facility B must be repaid in quarterly installments on the last business day of each calendar quarter equal to 0.25 % of the aggregate principal amount as of the date of the Credit Agreement. Quarterly installment payments commence on March 31, 2023. We may voluntarily repay outstanding principal balances under the Revolving Facility and Term A Facility without penalty. Prior to the six month anniversary of the Closing Date, any voluntary prepayment of outstanding principal balances under the Term B Facility is subject to a 1.00 % premium; after such time, voluntary prepayment is permitted without penalty. As of September 30, 2022, there were no borrowings outstanding under our Revolving Facility. Interest on borrowings under the Credit Agreement can be based on a base rate or the SOFR at our election. Based on our debt ratings and our consolidated leverage ratios as determined in accordance with the Credit Agreement, loans borrowed bear interest, in the case of base rate loans, at a per annum rate equal to the applicable base rate plus CSA plus a margin ranging from 0.125 % to 0.75 %, and in the case of the SOFR loans, SOFR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %. Debt covenant compliance The Credit Agreement contains customary representations and warranties, affirmative and negative covenants. Each of the Revolving Facility and Term A Facility will be subject to a covenant that we maintain a consolidated leverage ratio less than or equal to (i) 6.0 to 1.0 from the Closing Date through the last day of the fourth full fiscal quarter following the Closing Date, (ii) 5.75 to 1.0 following the last day of the fourth fiscal quarter after the Closing Date through the last day of the eighth full fiscal quarter following the Closing Date and (iii) 5.25 to 1.0 for each fiscal quarter thereafter; provided that such maximum consolidated leverage ratio will increase to 5.75 to 1.0 for the four fiscal quarters ending immediately should we acquire property, business or assets in an aggregate amount greater than $ 250 million. In addition, the Credit Agreement contains customary events of default under which our payment obligations may be accelerated, including, among others, non-payment of principal, interest or other amounts when due, inaccuracy of representations and warranties, violation of certain covenants, payment and acceleration cross defaults with certain other indebtedness, certain undischarged judgments, bankruptcy, insolvency or inability to pay debts, change of control, the occurrence of certain events related to the Employee Retirement Income Security Act of 1974 (ERISA), and the Company experiencing a change of control. As of September 30, 2022 , we were in compliance with all debt covenants. Senior notes On June 1, 2022, we fully repaid the principal and accrued interest under the 3.95 % Senior Notes due June 2022, which had an aggregate principal amount outstanding of $ 400 million. In addition, we paid $ 7 million of accrued and unpaid interest through the redemption date. 19 Table of Contents O n September 19, 2022, we issued two series of senior notes, consisting of 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030, for an aggregate principal of $ 1,500 million. They are senior unsecured obligations that rank equally in right of payment with all of our existing and future senior, unsecured, unsubordinated obligations and may be redeemed at any time, subject to the make-whole provisions contained in the applicable indenture relating to such series of notes. Interest on these series of notes is payable semi-annually in arrears on March 31 and September 30 for both the 6.75 % Senior Notes and 7.125 % Senior Notes, commencing on March 31, 2023. We may redeem some or all of the 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030 at any time. The First Call Dates of the 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030 are September 30, 2024 and September 30, 2025, respectively. New 2.0 % Convertible Notes As described in Note 2, on April 2, 2022, we adopted ASU 2020-06 using the modified retrospective method. Prior to the adoption of this guidance, we accounted for our convertible debt instruments under the cash conversion model, requiring the convertible notes to be separated into an equity and liability component. W e recognized $ 56 million in equity, net of tax, which consisted of $ 9 million in debt discount, representing the difference between the fair value of the liability component and par value, and $ 47 million in substantial premium due to the fiscal year 2020 amendment, which was accounted for as a debt extinguishment and resulted in the recognition of the New 2.0 % Convertible Notes. Upon adoption of ASU 2020-06, the cash conversion model is now eliminated. We de-recognized the remaining unamortized debt discount of $ 1 million on the New 2.0 % Convertible Notes and therefore will no longer recognize the related amortization as interest expense. Additionally, we recorded a cumulative adjustment to retained earnings of $ 6 million, net of tax, for the debt discount amortization incurred from issuance through April 2, 2022. The remaining $ 47 million of substantial premium will remain in equity, as the new guidance did not eliminate the substantial premium model for convertible instruments. Under this new guidance, the New 2.0 % Convertible Notes included in our Condensed Consolidated Balance Sheet reflect the par value of the liability On August 15, 2022, we settled the $ 525 million principal and conversion rights of our New 2.0 % Convertible Notes in cash. The aggregate settlement amount of $ 630 million was based on $ 20.41 per underlying share into which the New 2.0 % Convertible Notes were convertible. In addition, we paid $ 5 million of accrued and unpaid interest through the date of settlement. The repayments resulted in an adjustment to stockholders’ equity of $ 100 million. Note 11. Derivatives Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flow associated with changes in foreign currency exchange rates and interest rates. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate and interest rate movements. We do not use our derivative instruments for speculative trading purposes. By using derivative financial instruments to hedge exposures to changes in foreign exchange and interest rates, we are exposed to credit risk; however, we mitigate this risk by entering into hedging instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts. Foreign currency exchange forward contracts We conduct business in numerous currencies throughout our worldwide operations and our entities hold monetary assets or liabilities, earn revenues or incur costs in currencies other than the entity’s functional currency. As a result, we are exposed to foreign exchange gains or losses, which impact our operating results. As part of our foreign currency risk mitigation strategy, we have entered into monthly foreign exchange forward contracts to hedge foreign currency balance sheet exposure. These forward contracts are not designated as hedging instruments. We do not hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. As of September 30, 2022 and April 1, 2022, the fair value of these contracts was immaterial. The related gain (loss) recognized in Other income (expense), net in our Condensed Consolidated Statements of Operations was as follows: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Foreign exchange forward contracts gain (loss) $ ( 3 ) $ ( 3 ) $ ( 10 ) $ — The notional amount of our outstanding foreign exchange forward contracts in U.S. dollar equivalent was as follows: (In millions) September 30, 2022 April 1, 2022 Foreign exchange forward contracts purchased $ 171 $ 155 Foreign exchange forward contracts sold $ 48 $ 191 Note 12. Restructuring and Other Costs Our restructuring costs generally consist of severance and termination benefits, contract cancellation charges, asset write-offs and impairments and other exit and disposal costs. Severance costs generally include severance payments, outplacement services, health insurance coverage and legal costs. Contract cancellation charges primarily include penalties for early termination of contracts and write-offs of related prepaid assets. Other exit and disposal costs include costs to exit and consolidate facilities in connection with restructuring events. 20 Table of Contents September 2022 Plan In connection with the Merger, our Board of Directors approved a restructuring plan (the September 2022 Plan) to realize cost savings and operational synergies, which became effective upon the close of the Merger on September 12, 2022. Actions under this plan include the reduction of our workforce, contract terminations, facilities closures, and the sale of underutilized facilities. We expect that we will incur total costs up to $ 280 million, with $ 180 million and $ 100 million estimated to be incurred within the first and second full years, respectively, following the completion of the Merger. These actions are expected to be completed by fiscal 2024. As of September 30, 2022, we have incurred costs of $ 6 million related to the September 2022 Plan. December 2020 Plan In December 2020, our Board of Directors approved a restructuring plan (the December 2020 Plan) to consolidate facilities and reduce operating costs in connection with our acquisition of Avira. These actions were completed in fiscal 2022. Any remaining costs or adjustments are immaterial. We incurred total costs of $ 24 million under the December 2020 Plan. Restructuring and other costs summary During the three and six months ended September 30, 2022, we incurred total restructuring costs of $ 9 million and $ 11 million, respectively. During the three and six months ended October 1, 2021, we incurred total restructuring costs of $ 5 million and $ 12 million, respectively. Note 13. Income Taxes The following table summarizes our effective tax rate for the periods presented: Three Months Ended Six Months Ended (In millions, except percentages) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Income (loss) before income taxes $ 195 $ 433 $ 424 $ 685 Income tax expense (benefit) $ 126 $ 100 $ 155 $ 171 Effective tax rate 65 % 23 % 37 % 25 % Our effective tax rate for the three and six months ended September 30, 2022 differs from the federal statutory income tax rate primarily due to state taxes and the U.S. taxation on foreign earnings, and certain items this quarter including the tax impacts of internal restructuring, deductibility of transaction costs from the Merger, and the limitations of foreign taxes due to the increase of interest expense. Our effective tax rate for the three and six months ended October 1, 2021 differs from the federal statutory income tax rate primarily due to state taxes and U.S. taxation on foreign earnings. We are a multinational company dual headquartered in the U.S. and Czech Republic, subject to tax in multiple U.S. and international tax jurisdictions. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Our results can also be impacted by the costs incurred and the potential deductibility of the expenses. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict. In connection with the Merger, we established $ 345 million of net deferred tax liabilities primarily related to the excess of book basis over the tax basis of acquired identified intangible assets. The net deferred tax liabilities are based upon certain assumptions underlying our preliminary purchase price allocation. Upon finalization of the purchase price allocation, additional adjustments to the amount of our net deferred taxes may be required. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Given the potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, we are unable to accurately estimate when these unrecognized tax benefits will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months. We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. Note 14. Stockholders' Equity Dividends On November 8, 2022, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in December 2022. All shares of common stock issued and outstanding and all restricted stock units (RSUs) and performance-based restricted stock units (PRUs) as of the record date will be entitled to the dividend and dividend equivalent rights (DERs), respectively, which will be paid out if and when the underlying shares are released. However, the 4 million unvested RSUs assumed in connection with the Merger will not be entitled to DERs. See Note 15 for further information about these equity awards. Any future dividends and DERs will be subject to the approval of our Board of Directors. 21 Table of Contents Stock repurchase program Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market and through accelerated stock repurchase transactions. As of September 30, 2022, we had $ 1,370 million remaining under the authorization to be completed in future periods with no expiration date. No shares were repurchased in the prior fiscal year during the six months ended October 1, 2021. The following table summarizes activity related to this program during the six months ended September 30, 2022: Six Months Ended (In millions, except per share amounts) September 30, 2022 Number of shares repurchased 17 Average price per share $ 23.60 Aggregate purchase price $ 404 Subsequent to September 30, 2022, we executed repurchases of 14 million shares of our common stock for an aggregate amount of $ 308 million. As a result, we have $ 1,062 million remaining under our existing share repurchase program. Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss), net of taxes, consisted of foreign currency translation adjustments: (In millions) Foreign Currency Translation Gain (Loss) Balance as of April 1, 2022 $ ( 4 ) Other comprehensive income (loss), net of taxes ( 11 ) Balance as of September 30, 2022 $ ( 15 ) Note 15. Stock-Based Compensation Avast equity awards In connection with the Merger, we assumed the outstanding equity awards under two of Avast’s equity incentive plans (the Avast Holding B.V. 2014 Share Option Plan and the Rules of the Avast plc Long Term Incentive Plan (collectively, the Avast Plans)), which consisted of 4 million unvested RSUs. The assumed RSUs generally retain the terms and conditions under which they were originally granted. We intend to grant all additional shares that remain available for issuance under the Avast Plans. Upon vesting, these assumed RSUs and any additional shares granted will settle into shares of our common stock. See Note 4 for further information about this business combination. The following table sets forth the stock-based compensation expense recognized for our equity incentive plans: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Cost of revenues $ 1 $ 1 $ 2 $ 1 Sales and marketing 8 3 15 8 Research and development 6 3 12 9 General and administrative 14 6 24 15 Total stock-based compensation expense $ 29 $ 13 $ 53 $ 33 Income tax benefit for stock-based compensation expense $ ( 4 ) $ ( 3 ) $ ( 8 ) $ ( 7 ) As of September 30, 2022, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $ 297 million, which will be recognized over an estimated weighted-average amortization period of 2.2 years. 22 Table of Contents The following table summarizes additional information related to our stock-based awards: Six Months Ended (In millions, except per grant data) September 30, 2022 October 1, 2021 Restricted stock units (RSUs): Weighted-average fair value per award granted $ 23.34 $ 21.55 Awards granted 6 3 Total fair value of awards released $ 50 $ 51 Outstanding and unvested 10 5 Performance-based restricted stock units (PRUs): Weighted-average fair value per award granted $ 30.47 $ 28.84 Awards granted 1 1 Total fair value of awards released $ 4 $ — Outstanding and unvested at target payout 4 2 Dividend equivalent rights (DERs) Our RSUs and PRUs, except the 4 million unvested RSUs assumed under the Avast Plans, contain DERs that entitles the recipient of an award to receive cash dividend payments if and when the underlying shares are released. The amount of DERs equals the amount of cumulated dividends on the issued number of common stock that would have been payable since the date the associated award was granted. As of September 30, 2022 and April 1, 2022, current dividends payable related to DER was $ 4 million and $ 11 million, respectively, recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets, and long-term dividends payable related to DER was $ 2 million and $ 2 million, respectively, recorded as part of Other long-term liabilities. Note 16. Net Income Per Share Basic income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share also includes the incremental effect of dilutive potentially issuable common shares outstanding. Dilutive potentially issuable common shares include the dilutive effect of the shares underlying our employee equity awards and convertible debt until its extinguishment on August 15, 2022. The components of basic and diluted net income (loss) per share are as follows: Three Months Ended Six Months Ended (In millions, except per share amounts) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Net income (loss) $ 69 $ 333 $ 269 $ 514 Net income (loss) per share - basic $ 0.12 $ 0.57 $ 0.46 $ 0.88 Net income (loss) per share - diluted $ 0.12 $ 0.56 $ 0.45 $ 0.87 Weighted-average shares outstanding - basic 590 582 583 581 Dilutive potentially issuable shares: Convertible debt 2 7 12 7 Employee equity awards 3 2 4 3 Weighted-average shares outstanding - diluted 595 591 599 591 Anti-dilutive shares excluded from diluted net income per share calculation: Employee equity awards — 1 — 1 Total — 1 — 1 Upon adoption of ASU 2020-06 under the modified retrospective method, we are required to apply the if-converted method to our calculation of diluted earnings per share. For the three and six months ended September 30, 2022, we adjust for the dilutive effect of the maximum number of potential shares to be issued upon settlement of our outstanding convertible debt instruments. Prior period earnings per share amounts are not restated under the modified retrospective method. For the three and six months ended October 1, 2021, the dilutive effect of our debt instruments is calculated using the treasury stock method, under which our convertible debt instruments generally had a dilutive impact on net income per share when our average stock price for the period exceeds the conversion prices for the convertible debt instruments. The initial adoption of ASU 2020-06 had a $ 0.01 impact on dilutive earnings per share, with the dilutive shares underlying the convertible debt increasing by 18 million shares. 23 Table of Contents Note 17. Segment and Geographic Information We operate as one reportable segment. Our Chief Operating Decision Maker reviews financial information presented on a consolidated basis to evaluate company performance and to allocate and prioritize resources. The following table summarizes net revenues for our major solutions: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Consumer security revenues $ 436 $ 404 $ 838 $ 805 Identity and information protection revenues 298 277 592 551 Total Cyber Safety revenues 734 681 1,430 1,356 Legacy revenues 14 11 25 22 Total net revenues (1) $ 748 $ 692 $ 1,455 $ 1,378 (1) During the three months ended September 30, 2022, total net revenues include an unfavorable foreign exchange impact of $ 31 million, consisting of $ 30 million from our consumer security solutions and $ 1 million from our identity and information protection solutions. During the six months ended September 30, 2022, total net revenues include an unfavorable foreign exchange impact of $ 58 million, consisting of $ 56 million from our consumer security solutions, $ 1 million from our identity and information protection solutions and $ 1 million from our legacy solutions. From time to time, changes in our product hierarchy cause changes to the product categories above. When changes occur, we recast historical amounts to match the current product hierarchy. The changes have been reflected for all periods presented above. Consumer security includes revenues from our Norton 360 Security offerings, Norton Security, Avast Security offerings, Norton Secure VPN, Avira Security and other consumer security and device performance solutions through our direct, partners and small business channels. Identity and information protection includes revenues from our Norton 360 with LifeLock offerings, LifeLock identity theft protection and other information protection and privacy solutions. Legacy includes revenues from products or solutions that are no longer in operations in exited markets, have been discontinued or identified to be discontinued, or remain in maintenance mode as a result of integration and product portfolio decisions. Geographic information Net revenues by geography are based on the billing addresses of our customers. The following table represents net revenues by geographic area for the periods presented: Three Months Ended Six Months Ended (In millions) September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021 Americas $ 529 $ 485 $ 1,037 $ 962 EMEA 139 125 259 252 APJ 80 82 159 164 Total net revenues (1) $ 748 $ 692 $ 1,455 $ 1,378 Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan. (1) During the three months ended September 30, 2022, total net revenues include an unfavorable foreign exchange impact of $ 31 million, consisting of $ 18 million from EMEA and $ 13 million from APJ. During the six months ended September 30, 2022, total net revenues include an unfavorable foreign exchange impact of $ 58 million, consisting of $ 34 million from EMEA and $ 24 million from APJ. Revenues from customers inside the U.S. were $ 493 million and $ 972 million during the three and six months ended September 30, 2022, respectively, and $ 460 million and $ 916 million during the three and six months ended October 1, 2021, respectively. No other individual country accounted for more than 10% of revenues. The table below represents cash, cash equivalents and short-term investments held in the U.S. and internationally in various foreign subsidiaries. (In millions) September 30, 2022 April 1, 2022 U.S. $ 644 $ 1,220 International 451 671 Total cash, cash equivalents and short-term investments $ 1,095 $ 1,891 24 Table of Contents The table below represents our property and equipment, net of accumulated depreciation and amortization, by geographic area, based on the physical location of the asset, at the end of each period presented. (In millions) September 30, 2022 April 1, 2022 U.S. $ 43 $ 16 Ireland 25 27 Czech Republic 24 — Germany 12 13 Other countries (1) 4 4 Total property and equipment, net $ 108 $ 60 (1) No other individual country represented more than 10% of the respective totals. Our operating lease assets by geographic area, based on the physical location of the asset, at the end of each period presented, are as follows: (In millions) September 30, 2022 April 1, 2022 U.S. $ 30 $ 66 Czech Republic 11 — Other countries (1) 9 8 Total operating lease assets $ 50 $ 74 (1) No other individual country represented more than 10% of the respective totals. Significant customers No customer accounted for 10% or more of our net revenues during the six months ended September 30, 2022 and October 1, 2021. Customers which are distributors that accounted for over 10% of our total accounts receivable were as follows: September 30, 2022 April 1, 2022 Customer A 14 % 23 % Customer B 18 % — % Note 18. Commitments and Contingencies Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In addition, our bylaws contain indemnification obligations to our directors, officers, employees, and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements, and we have not accrued any material liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements. In connection with the sale of Veritas and the sale of our Enterprise Security business to Broadcom, we assigned several leases to Veritas Technologies LLC or Broadcom and/or their related subsidiaries. As a condition to consenting to the assignments, certain lessors required us to agree to indemnify the lessor under the applicable lease with respect to certain matters, including, but not limited to, losses arising out of Veritas Technologies LLC, Broadcom, or their related subsidiaries’ breach of payment obligations under the terms of the lease. As with our other indemnification obligations discussed above and in general, it is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. As with our other indemnification obligations, such indemnification agreements might not be subject to maximum loss clauses, and to date, generally under our real estate obligations, we have not incurred material costs as a result of such obligations under our leases and have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements. We provide limited product warranties, and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Such indemnification provisions may not be subject to maximum loss clauses. Historically, 25 Table of Contents payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred. Litigation contingencies Trustees of the University of Columbia in the City of New York v. NortonLifeLock As previously disclosed in our public filings, on May 2, 2022, a jury returned its verdict in a patent infringement case filed in 2013 by the Trustees of Columbia University in the City of New York (Columbia) in the U.S. District Court for the Eastern District of Virginia. Columbia originally brought suit alleging infringement of six patents owned by the university. We won a favorable claim construction order on all six patents, and the claim construction was upheld by the Federal Circuit in 2016 on all but U.S. Patent Nos. 8,601,322 and 8,074,115. We also sought inter partes review by the Patent Trial and Appeal Board of the claims of the ‘322 and ‘115 Patents and all but two claims of the ‘322 Patent and three claims of the ‘115 Patent were invalidated. The remaining claims of the ‘322 and ‘115 Patents were the only claims that remained in suit at trial. The jury found that our Norton Security products and Symantec Endpoint Protection products (the latter of which were sold by us to Broadcom as part of an Asset Purchase Agreement dated November 4, 2019) willfully infringe the ‘322 and ‘115 Patents through the use of SONAR/BASH behavioral protection technology. The jury awarded damages in the amount of $ 185 million. Columbia did not seek injunctive relief against us. We intend to cease use of the technology found by the jury to infringe. The jury also found that we did not fraudulently conceal its prosecution of U.S. Patent No. 8,549,643 but did find that two Columbia professors were coinventors of this patent. No damages were awarded related to this patent. A formal judgment has not yet been entered in the case. Post-verdict motions have been filed, and we intend to file an appeal challenging the verdict. At this time, our current estimate of the low end of the range of probable estimated losses from this matter is approximately $ 233 million, reflecting the jury award and prejudgment interest, which we have accrued. The jury’s verdict may be enhanced and, should it be upheld on appeal, could ultimately result in the payment of somewhere between one and three times the jury’s verdict, plus interest and attorneys’ fees. There is a reasonable possibility that a loss may be incurred in excess of our accrual for this matter; however, such loss cannot be reasonably estimated. Securities Class Action and Derivative Litigation Securities class action lawsuits, which have since been consolidated, were filed in May 2018 against us and certain of our former officers, in the U.S. District Court for the Northern District of California. The lead plaintiff’s consolidated amended complaint alleged that, during a purported class period of May 11, 2017 to August 2, 2018, defendants made false and misleading statements in violation of Sections 10(b) and 20(a), and that certain individuals violated Section 20A, of the Securities Exchange Act of 1934, as amended (the Exchange Act). Defendants filed motions to dismiss, which the Court granted in an order dated June 14, 2019. Pursuant to that order, plaintiff filed a motion seeking leave to amend and a proposed first amended complaint on July 11, 2019. The Court granted the motion in part on October 2, 2019, and the first amended complaint was filed on October 11, 2019. The Court’s order dismissed certain claims against certain of our former officers. Defendants filed answers on November 7, 2019. On April 20, 2021, to resolve an alleged conflict of interest raised with respect to the lead plaintiff and its counsel, the Court ordered a second Class Notice disclosing the circumstances of the alleged conflict and providing a further period for class members to opt out, which closed on July 2, 2021. The initial class opt out period closed on August 25, 2020. On May 24, 2021, the parties reached a proposed settlement and release of all claims in the class action, for $ 70 million, and on June 8, 2021, the parties executed a Stipulation and Agreement of Settlement, subject to Court approval and exclusive of any claims that may be brought by shareholders who opted out of the class action. Of the $ 70 million, $ 67.1 million was covered under the applicable insurance policy with the remainder to be paid by us. The Court approved the settlement on February 12, 2022. On November 22, 2021, investment funds managed by Orbis Investment Management Ltd. which previously opted out of the securities class action, filed suit under the Exchange Act of 1934, the Arizona Securities Act, the Arizona Consumer Fraud Act and certain common law causes of action to recover alleged damages for losses incurred by the funds for their purchases or acquisitions of our common stock during the class period. In the fourth quarter of fiscal 2022, we made an immaterial settlement offer in this matter, for which we have accrued. Our Motion to Dismiss is now pending. Purported shareholder derivative lawsuits have been filed against us and certain of our former officers and current and former directors in the U.S. District Courts for the District of Delaware and the Northern District of California, Delaware Chancery Court, and Delaware Superior Court, arising generally out of the same facts and circumstances as alleged in the securities class action and alleging claims for breach of fiduciary duty and related claims; these lawsuits include an action brought derivatively on behalf of our 2008 Employee Stock Purchase Plan. No specific amount of damages has been alleged in these lawsuits. We have also received demands from purported stockholders to inspect corporate books and records under Delaware law. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of the derivative lawsuits or estimate the range of any potential loss. We will continue to incur legal fees in connection with these pending cases and demands, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations. The expense of continuing to defend such litigation may be significant. We intend to defend these lawsuits vigorously, but there can be no assurance that we will be successful in any defense. If any of the lawsuits are decided adversely, we may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations, and cash flows. 26 Table of Contents GSA During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s (DOJ) Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration (GSA) Multiple Award Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices. As reported on the GSA’s publicly-available database, our total sales under the GSA Schedule contract were approximately $ 222 million from the period beginning January 2007 and ending September 2012. We fully cooperated with the government throughout its investigation, and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct government sales under the GSA Schedule contract was approximately $ 145 million; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales has increased. The government also indicated they would pursue claims for certain sales to California, Florida, and New York as well as sales to the federal government through reseller GSA Schedule contracts, which could significantly increase our potential damages exposure. In 2012, a sealed civil lawsuit was filed against us related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the DOJ filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the DOJ and the relator on behalf of New York in an Omnibus Complaint, and a First Amended Omnibus Complaint was filed on October 8, 2015; the state claims also do not state specific damages amounts. On June 6, 2019, we filed a motion seeking summary judgment on all claims asserted by all plaintiffs, and the plaintiffs filed a motion for partial summary judgment on elements of liability on their claims. On October 21, 2019, the DOJ moved for a Prejudgment Writ of Sequestration for us to set aside $ 1,090 million to pay a judgment, should the United States prevail in this litigation, under the Federal Debt Collection Procedures Act. The Writ was sought in response to our announcement of our plans to distribute the after-tax proceeds of the sale of the Symantec enterprise business to Broadcom to our shareholders via a special dividend. The Court denied the Writ on December 12, 2019, on the basis of the government’s failure to establish the “probable validity” of the debt, the amount sought to be sequestered, and our available cash, cash equivalents and short-term investments. The Court permitted the DOJ limited discovery of facts relevant to our financial state and financial projections and the option to renew its motion if appropriate and supported by the analysis of its own financial expert. That discovery period has now closed. On March 30, 2020, the Court issued an Order granting in part and denying in part our motion for summary judgment and granting in part and denying in part the United States’ motion for partial summary judgment. On September 30, 2020, we filed a Motion for Reconsideration of certain rulings in the Court’s March 30 Summary Judgment Order. A second Motion for Reconsideration of certain rulings in the Summary Judgement Order based on significant change in the law was filed on July 23, 2021. Both Motions for Reconsideration were denied. Court ordered mediations in July 2020 and February 2021 were not successful. On March 23, 2021, Plaintiffs withdrew their demand for a jury trial and we consented to proceed with a bench trial, which concluded on March 24, 2022. The Court has not yet issued its judgment and post-trial motions are pending. On May 13, 2021, we reached a settlement in principle with the State of Florida to resolve all claims it asserted in the litigation for $ 0.5 million, plus the relator’s statutory attorney’s fees with respect to the State of Florida’s claims. On February 28, 2022, we reached a settlement in principle with the State of New York and the relator to resolve all of the New York claims asserted in the litigation for $ 5 million. At this time, our current estimate of the low end of the range of probable estimated losses from this matter is $ 50 million, inclusive of the settlement with the states of Florida and New York, which we have accrued. It is possible that the litigation could lead to claims or findings of violations of the False Claims Act and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties. There is a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter; however, such loss cannot be reasonably estimated. Jumpshot Matters At the end of 2019, Avast came under media scrutiny for provision of Avast customer data to its data analytics subsidiary Jumpshot Inc. Jumpshot was a subsidiary of Avast with its own management team and technical experts. Avast announced the decision to terminate its provision of data to, and wind down, Jumpshot on January 30, 2020. As Avast has previously disclosed, it has been in communication with certain regulators and authorities prior to completion of the Merger, and we will continue cooperating fully in respect of all regulatory enquiries. On December 23, 2019, the United States Federal Trade Commission (FTC) issued a Civil Investigative Demand (CID) to Avast seeking documents and information related to its privacy practices, including Jumpshot's past use of consumer information that was provided to it by Avast. Avast responded cooperatively to the CID and related follow-up requests from the FTC. On October 29, 2021, staff at the FTC sent Avast a draft complaint and proposed settlement order. We have been engaged in ongoing negotiations with the FTC staff regarding the scope and terms of the proposed settlement. Any negotiated settlement with the FTC, or absent settlement, any litigation or other legal proceeding between us and the FTC could result in material monetary remedies and/or compliance requirements that impose significant and material cost and resource burdens on us, and may impact our ability to use data in the future. There can be no assurance that we will be successful in negotiating a favorable 27 Table of Contents settlement or in litigation. Any remedies or compliance requirements could adversely affect our ability to operate our business or have a materially adverse impact on our financial results. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this investigation or estimate the range of any potential loss. On February 27, 2020, the Czech Office for Personal Data Protection (the Czech DPA) initiated offense proceedings concerning Avast`s practices with respect to Jumpshot, which remain ongoing and we continue to evaluate our options including an appeal of any findings and assessments. In addition, we received a letter and notification before action from Stichting CUIC – Privacy Foundation for Collective Redress, a Dutch foundation (the Foundation). The Foundation has asserted it represents the interests of Avast customers in the Netherlands whose data was provided to Jumpshot and that by doing so Avast violated the requirements of the GDPR and other provisions in Dutch and European Union privacy and consumer law entitling those customers to damages and other compensation, all of which we dispute. No specific amount of damages has been alleged and to date, no action has been filed. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this notification before action or estimate the range of any potential loss. The outcome of the regulatory proceedings, government enforcement actions and litigation is difficult to predict, and the cost to defend, settle or otherwise resolve these matters may be significant. Plaintiffs or regulatory agencies or authorities in these matters may seek recovery of large or indeterminate amounts or seek to impose sanctions, including significant monetary penalties, as well as equitable relief. The monetary and other impact of these litigations, proceedings or actions may remain unknown for substantial periods of time. Further, an unfavorable resolution of litigations, proceedings or actions could have a material adverse effect on our business, financial condition, and results of operations and cash flows. The amount of time that will be required to resolve these matters is unpredictable, and these matters may divert management’s attention from the day-to-day operations of our business. Any future investigations or additional lawsuits may also adversely affect our business, financial condition, results of operations and cash flows. Other We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.