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Item 7. Management’s Discussion and Analysis

2023-05-25 compared with 2022-05-20 · 165 added, 179 removed, 183 unchanged (65% of the section changed)

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Please read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and related Notes thereto included under Item 15 of this Annual Report on Form 10-K.

NortonLifeLock Inc.

has the largest consumer Cyber Safety platform in the world, empowering nearly 80 million users in more than 150 countries.

We are the trusted and number one top of mind brand in consumer Cyber Safety, according to the 2022 NortonLifeLock brand tracking study.

We help prevent, detect and restore potential damages caused by many cybercriminals.

Gen Digital Inc.

is a global company powering Digital Freedom with a family of trusted consumer brands including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender and CCleaner.

Our core Cyber Safety portfolio provides protection across three key categories in multiple channels and geographies, including security and performance, identity protection, and online privacy.

We have built a technology platform that brings together software and service capabilities within these three categories into a comprehensive and easy-to-use integrated platform across our brands.

We bring award-winning products and services in cybersecurity, privacy and identity protection to approximately 500 million users in more than 150 countries so they can live their digital lives safely, privately, and confidently today and for generations to come.

Fiscal Year Highlights

• In May 2021, we entered into the first amendment to our credit agreement (the First Amendment), which provided for an incremental increase under the Initial Term Loan, and extended the maturity date of the Initial Term Loan, the Delayed Draw Term Loan and revolving credit facility from November 2024 to May 2026.

We borrowed $525 million under the First Amendment of our Initial Term Loan.

• In May 2021, we settled the $250 million principal and conversion rights of the New 2.5% Convertible Senior Notes in cash.

The aggregate settlement amount of $364 million was based on $24.40 per underlying share into which the 2.5% Convertible Notes were convertible.

The extinguishment resulted in an adjustment to stockholders’ equity of $112 million and a loss on extinguishment of $2 million.

• In July 2021, we completed the sale of certain land and buildings in Mountain View, California for cash consideration of $355 million, net of selling costs.

We recognized a gain of $175 million on the sale.

In conjunction with the sale, we signed a 7-year leaseback agreement for a portion of the property.

• In September 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.

• In March 2022, we completed our restructuring plan (the December 2020 Plan) to consolidate facilities and reduce operating costs in connection with our acquisition of Avira during fiscal 2021.

We incurred total costs of $24 million since the inception of the December 2020 Plan, primarily related to severance and termination costs.

Proposed Merger with Avast

On August 10, 2021, we announced a transaction under which we intend 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 Proposed Merger).

The Proposed Merger will be implemented by means of a court-sanctioned scheme of arrangement under the UK Companies Act 2006, as amended (the Scheme), and remains subject to a certain number of conditions.

Under the terms of the Proposed Merger, Avast shareholders will be 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).

Based on our undisturbed closing share price of $27.20 on July 13, 2021, and depending on the Avast shareholder elections, the estimated purchase price range for the Avast shares under the Proposed Merger is $8.1 billion to $8.6 billion.

Each of the directors of Avast who holds shares has undertaken to elect for the Majority Stock Option in respect of their entire beneficial holdings of Avast shares.

We plan to finance the Proposed Merger with existing cash, cash to be generated by operations and new debt financing.

In conjunction with the Proposed Merger, on August 10, 2021, we entered into an agreement (as amended, the Interim Facilities Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $3,600 million term loan interim facility B (the Interim Facility B), (ii) $750 million term loan interim facility A1 (the Interim Facility A1) and $3,500 million term loan interim facility A2 (the Interim Facility A2), and (iii) a $1,500 million interim revolving facility (the Interim Revolving Facility) (collectively, the Interim Facilities) and a commitment letter (as amended, the Commitment Letter) with certain financial institutions, in which they agreed to provide us with financing no less than the financing available under the Interim Facilities (the Definitive Facilities and, together with the Interim Facilities, the Facilities) to finance the cash consideration payable in connection with the Proposed Merger.

The Definitive Facilities will be financed by a syndicate of lenders led by Bank of America, N.A.

and Wells Fargo Bank N.A.

On January 28, 2022, Bank of America, N.A.

and Wells Fargo Bank N.A.

agreed to arrange, on a best efforts basis, additional term loans under the Definitive Facilities in an amount up to $500 million.

The Interim Facilities Agreement contains, and any definitive financing documentation for the Definitive Facilities entered into in connection with the Commitment Letter (the Facilities Agreement) will contain, customary representations and warranties, events of default and covenants for transactions of this type.

The Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction.

In conjunction with the Proposed Merger, on August 10, 2021, we entered into a Co-operation Agreement (the Co-operation Agreement) with Nitro Bidco Limited, our wholly-owned subsidiary (Bidco), and Avast, pursuant to which we and Bidco agreed to, among other things, use all reasonable endeavors for the purposes of obtaining any regulatory authorizations which are required to implement the Proposed Merger, and we, Bidco and Avast agreed to cooperate with each other in preparing required transaction documents and certain other matters in connection with the Proposed Merger.

The Co-operation Agreement also contains certain termination rights.

The Co-operation Agreement also provides that, if we fail to receive approval from the U.K Competition and Markets Authority and cannot consummate the Proposed Merger, we may be required to pay Avast a break fee of up to $200 million.

Table of Conten ts

The Proposed 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 and the Spanish National Markets and Competition Commission.

On March 25, 2022, the U.K Competition and Markets Authority referred the Proposed Merger to a Phase 2 review investigation.

The Proposed Merger is currently expected to close mid-to-late calendar year 2022, subject to regulatory approvals and the satisfaction or waiver of other customary closing conditions.

• In June 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.

• In August 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.

• In September 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.

• In January 2023, we made a voluntary prepayment of $250 million for our senior credit facilities, which was applied exclusively to the Term B Facility.

• During fiscal 2023, we repurchased 40 million shares of our common stock for an aggregate amount of $904 million and paid a total of $314 million in quarterly dividends to shareholders.

Merger with Avast

On September 12, 2022, we completed the Merger with Avast with the issuance of 94,201,223 shares of our common stock to Avast shareholders and cash consideration of $6,910 million, which includes repayment of Avast’s outstanding debt.

In connection with the Merger, we changed our corporate name to Gen Digital Inc.

and became dual headquartered in Tempe, Arizona and Prague, Czech Republic, although our principal executive offices remain in Tempe, Arizona.

Prior to the Merger, Avast was a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protected and enhanced users’ online experiences.

The Merger enables us to create a broad and complementary consumer product portfolio beyond core security and towards adjacent trust-based solutions and achieve greater geographic diversification and access to a larger user base.

We believe this combination will accelerate the transformation of global consumer Cyber Safety.

All financial information related to Avast that is discussed below in key financial metrics, results of operations and liquidity and capital resources is inclusive as of the Closing Date.

Upon close of the Merger with Avast, 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), (ii) 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 at the closing of the Merger.

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 of $1,703 million and aggregate accrued and unpaid interest of $3 million under the Initial Term Loan and Delay Draw Term Loan from the existing credit facilities.

The Credit Agreement replaced our then existing credit facilities upon the close of the Merger.

The Merger has altered the size and scope of our operations, impacting our assets, liabilities, obligations, capital requirements and performance measures.

We expect the key financial metrics and results of operations of the combined company to be materially different than the trends experienced during the year ended March 31, 2023.

As a combined company, we expect to achieve synergies, rapidly launch a broad and innovative product portfolio, expand into new and diversified sales channels and enhance customer experience and retention.

Refer to Note 4 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about this business combination.

Fiscal calendar and basis of presentation

We have a 52/53-week fiscal year ending on the Friday closest to March 31.

Fiscal 2022, 2021 and 2020 in this report refers to fiscal years ended April 1, 2022, April 2, 2021 and April 3, 2020, respectively.

Fiscal 2020 was a 53-week year, whereas fiscal 2022 and 2021 each consisted of 52 weeks.

Fiscal 2023, 2022 and 2021 in this report refers to fiscal years ended March 31, 2023, April 1, 2022 and April 2, 2021, respectively, each of which was a 52-week year.

Key financial metrics

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Operating income (loss) $ 1,227 $ 1,005

Income (loss) from continuing operations $ 836 $ 696

Income (loss) from discontinued operations $ — $ (142)

Net income (loss) $ 1,349 $ 836

Net income (loss) per share from continuing operations - diluted $ 1.41 $ 1.16

Net income (loss) per share from discontinued operations - diluted $ — $ (0.24)

Net income (loss) per share - diluted $ 2.16 $ 1.41

Net cash provided by (used in) operating activities $ 757 $ 974

(in millions) April 1, 2022 April 2, 2021

(In millions) March 31, 2023 April 1, 2022

Cash, cash equivalents and short-term investments $ 750 $ 1,891

Contract liabilities $ 1,788 $ 1,306

• Net revenues increased $245 million, due to higher sales in both of our consumer security products and our identity and protection products.

This was driven by an increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021.

• Operating income (loss) increased $109 million, primarily due to the increase in revenue and a decrease in restructuring costs for which the related activities were completed in fiscal 2021.

This is partially offset by an increase in related cost of revenue, a legal accrual relating to an ongoing patent infringement lawsuit and our investment in advertising during fiscal 2022.

• Income (loss) from continuing operations increased $140 million, primarily due to the increase in operating income as well as other income (expense), net, which was driven by the gain on sale of certain land and buildings in Mountain View, California.

This is partially offset by an increase in income tax expense.

• Income (loss) from discontinued operations, increased from a loss of $142 million, primarily due to the completion of the discontinued operations activities during fiscal 2021.

• Net income (loss) increased $282 million and net income per share increased $0.49, primarily due to the increase in income from continuing operations and the completion of discontinued operations activities during fiscal 2021 as discussed above.

• Cash, cash equivalents and short-term investments increased by $940 million compared to April 2, 2021, primarily due to cash generated by operations during fiscal 2022.

• Contract liabilities increased $41 million, primarily due to higher billings than recognized revenue, partially offset by unfavorable foreign currency fluctuations of the Euro and Japanese Yen.

Table of Conten ts

COVID-19 UPDATE

The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

At the onset of the pandemic, to protect the health and well-being of our employees, partners and third-party service providers, we facilitated a work-from-home requirement for most employees and established site-specific COVID-19 prevention protocols.

We continue to monitor the situation and over the past several months have adjusted our policies and protocols to reflect changes to public health regulations and guidance.

A majority of our offices are now open to employees on a voluntary return basis, and we anticipate opening the remaining offices on a voluntary return basis within the first quarter of fiscal 2023.

To date, we have not seen any meaningful negative impact on our employee productivity.

Nevertheless, as more employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation.

While the COVID-19 pandemic has negatively impacted many sectors of the U.S.

and global economies, the consumer Cyber Safety market experienced increased demand as the pandemic greatly accelerated the digital lives of people around the world.

However, with the extended duration of the pandemic and the easing of prevention protocols and restrictions, we are seeing decreasing demand and increased competition.

In addition, while we did not experience a material increase in cancellations by customers or a material reduction in retention rate in fiscal 2021 or fiscal 2022, should the negative macroeconomic impacts of the COVID-19 pandemic persist or worsen, we may experience continued slowdowns in our business activity and an increase in cancellations by customers or a material reduction in our retention rate in the future, especially in the event of a prolonged recession.

A prolonged recession could adversely affect demand for our offerings, retention rates and harm our business and results of operations, particularly in light of the fact that our solutions are discretionary purchases and thus may be more susceptible to macroeconomic pressures, as well impact the value of our common stock, ability to refinance our debt and our access to capital.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of new variants of the disease, the extent, effectiveness and acceptance of containment actions, such as vaccination programs, and the impact of these and other factors on our employees, customers, partners and third-party service providers.

For more information on the risks associated with the COVID-19 pandemic, please see “Risk Factors” in Item 1A.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

• Net revenues increased $542 million, primarily due to revenue attributable to the contribution from Avast, which was acquired during the second quarter of fiscal 2023, and higher sales in both our consumer security and identity and information protection products, partially offset by unfavorable foreign currency fluctuations.

• Operating income (loss) increased $222 million, primarily due to operating income attributable to Avast, which was acquired during the second quarter of fiscal 2023, and cost synergies post-acquisition, partially offset by unfavorable foreign currency fluctuations.

• Net income (loss) increased $513 million and net income per share increased $0.75, primarily due to an income tax benefit in fiscal 2023, and increased operating income, partially offset by an increase in interest expense associated with our new senior credit facilities and two senior notes.

• Cash, cash equivalents and short-term investments decreased by $1,141 million compared to April 1, 2022, primarily due to the completion of the Merger, repurchases of our common stock, income taxes paid, dividends paid to shareholders, and voluntary prepayment of our Term B facility, offset by proceeds from the issuance of the senior credit facilities and the two senior notes.

Additionally, subsequent to March 31, 2023, we made another voluntary prepayment of $150 million for our senior credit facilities, which was applied exclusively to Term B Facility.

• Contract liabilities increased $482 million, primarily due to contract liabilities assumed from Avast, which was acquired during the second quarter of fiscal 2023.

GLOBAL MACROECONOMIC CONDITIONS

Our results of operations and cash flows are subject to fluctuations due to inflation, changes in foreign currency exchange rates relative to U.S.

dollars, our reporting currency, changes in interest rates, as well as recession risks, which may persist for an extended period.

Additionally, our international results are impacted by the economic conditions in the foreign markets in which we operate and by fluctuations in foreign currency exchange rates.

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.

In addition, in early 2022, worldwide inflation began to increase.

In response to the heightened levels of inflation, central banks, including the U.S.

Federal Reserve and the European Central Bank, raised interest rates significantly in 2022, resulting in an increase in our cost of debt.

Interest rates have increased and are expected to continue to increase in 2023, although at a slower rate.

Volatile market conditions related to Russia’s invasion of Ukraine and retaliatory sanctions against the Russian Federation and Belarus, the COVID-19 pandemic and other macroeconomic events have, at times, and may in the future negatively impact our results of operations and cash flows.

Conversely, we have seen and may continue to see cost savings from the shift to remote and distributed work for certain of our employees in areas including events, travel, utilities and other benefits.

Due to our subscription-based business model, the effect of recent macroeconomic events may not be fully reflected in our results of operations until future periods, if at all.

For a further discussion of the potential impacts of the global macroeconomic conditions on our business , please see “Risk Factors” in Item 1A.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S.

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however, actual results may differ from these estimates.

Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control.

Making estimates and judgments about future events is inherently unpredictable and is subject to significant

uncertainties, some of which are beyond our control.

Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and cash flows.

A summary of our significant accounting policies is included in Note 1, and a description of recently adopted accounting pronouncements and the Company’s expectations of the impact on our Consolidated Financial Statements and disclosures is included in Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements.

Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our Consolidated Financial Statements.

A summary of our significant accounting policies is included in Note 1, and a description of recently adopted accounting pronouncements and the Company’s expectation of the impact on our Consolidated Financial Statements and disclosures are included in Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Business combinations

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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.

Critical estimates in valuing intangible assets include, but are not limited to, future expected cash flows from customer relationships, developed technology, trade names, and acquired patents, and discount rates.

Critical estimates in valuing intangible assets include, but are not limited to, future expected cash flows from customer relationships, developed technology, trade names, and discount rates.

Management estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable.

Third-party valuation specialists are also utilized for certain estimates.

Third-party valuation specialists are utilized for certain estimates.

Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

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We apply judgment in the recognition and measurement of current and deferred income taxes which includes the following critical accounting estimates.

Table of Conten ts

We use a two-step process to recognize liabilities for uncertain tax positions.

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Other income (expense), net (1) 6

Income (loss) from continuing operations before income taxes 37 % 34 %

Income (loss) before income taxes 24 37

Income tax expense (benefit) (16) 7

Income (loss) from continuing operations 30 % 27 %

Income (loss) from discontinued operations — % (6) %

Net income (loss) 40 % 30 %

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Net revenues increased $542 million, primarily due to a $406 million increase in sales of our consumer security products and a $117 million increase in sales of our identity and protection products.

This was driven by the increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021.

Table of Conten ts

This was inclusive of $113 million of foreign exchange headwinds, primarily in our consumer security products.

Performance Metrics

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The following table summarizes supplemental key performance metrics for our solutions:

Fiscal Year (2)

(In millions, except for per user amounts and percentages) 2023 (3)

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Partner revenues $ 341 $ 269

Average direct customer count (2)

Total Cyber Safety revenues $ 3,274 $ 2,757

Legacy revenues $ 66 $ 50

Direct customer count (at quarter-end) 38.2 24.4

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Annual retention rate (4)

(1) Direct customer revenues in fiscal 2022 and 2021 excludes a $11 million and $5 million, respectively, reduction of revenue from a contract liability purchase accounting adjustment, which was recognized in the fourth quarter of fiscal 2021.

(1) Non-GAAP Direct customer revenue differs from GAAP direct customer revenue in fiscal 2023 and 2022 because it excludes a $2 million and $11 million, respectively, reduction of revenue from contract liability purchase accounting adjustments.

We believe that eliminating the impact of this adjustment improves the comparability of revenues between periods.

In addition, although the adjustment amounts will never be recognized in our GAAP financial statements, we do not expect the acquisitions to affect the future renewal rates of revenues excluded by the adjustments.

(2) The average direct customer count for the fourth fiscal quarter of fiscal 2021 was pro-rated to include 1.6 million customers from the Avira acquisition.

We define direct customer revenues as revenues from sales of our consumer solutions to direct customers, which we define as active paid users who have a direct billing relationship with us at the end of the reported period.

We exclude users on free trials and promotions and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscriptions directly with us, or sign up for a paid membership through our web store.

From time to time, we update our methodology due to changes in the business.

In fiscal 2021, the average direct customer count calculation was refined primarily to pro-rate for acquisitions that happen during a quarter, such as Avira, which was acquired in January 2021.

The full year average direct customer count is calculated as an average across the quarters.

In addition, although the adjustment amounts will never

be recognized in our GAAP financial statements, we do not expect the acquisitions to affect the future renewal rates of revenues excluded by the adjustments.

(2) From time to time, changes in our product hierarchy cause changes to the revenue channels above.

When changes occur, we recast historical amounts to match the current revenue channels.

Direct customer revenue currently includes Mobile App Store customers, and legacy revenues includes revenues from products or solutions from markets that we have exited and in which we no longer operate, have been discontinued or identified to be discontinued, or remain in maintenance mode as a result of integration and product portfolio decisions.

As such, prior period performance metrics have been recast to conform to the current period presentation for all periods presented above.

(3) The performance metrics for fiscal 2023 include the revenues earned and customers acquired through our Merger with Avast.

ARPU is based on average customer count and assumes full quarter of revenue for both companies.

Due to the close of the Merger with Avast in the second quarter of fiscal 2023, the fiscal 2023 ARPU is based on the average ARPU for the second, third, and fourth quarter of fiscal 2023, but excludes the first quarter of fiscal 2023.

(4) The annual retention rate for fiscal 2023 includes the customer portfolio acquired through our Merger with Avast.

We define direct customer count as active paid users of our products and solutions who have a direct billing and/or registration relationship with us at the end of the reported period.

Average direct customer count presents the average of the total number of direct customers at the beginning and end of the applicable period.

We exclude users on free trials from our direct customer count.

Users who have indirectly purchased and/or registered for our products or solutions through partners are excluded unless such users convert or renew their subscription directly with us or sign up for a paid membership through our web stores or third-party app stores.

The methodologies used to measure these metrics require judgment and are subject to change due to improvements or revisions to our methodology.

From time to time, we review our metrics and may discover inaccuracies or make adjustments to improve their accuracy, which can result in adjustments to our historical metrics.

Our ability to recalculate our historical metrics may be impacted by data limitations or other factors that require us to apply different methodologies for such adjustments.

We generally do not intend to update previously disclosed metrics for any such inaccuracies or adjustments that are deemed not material.

ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure.

Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP estimated direct customer revenues or other GAAP measures.

We monitor ARPU because it helps us understand the rate at which we are monetizing our consumer customer base.

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APJ includes Asia Pacific and Japan.

Percentage of revenue by geographic region remained consistent in fiscal 2022 and 2021.

While the percentage of revenue by geographic region in fiscal 2023 remains primarily in the Americas, our Merger with Avast has expanded our presence in countries in the EMEA region.

Cost of revenues

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Fiscal 2023 compared to fiscal 2022

Our cost of revenues increased $46 million, primarily due to higher revenue share costs, payment processing fees and technical support costs associated with year-over-year business growth and costs attributable to Avira, which was acquired during the fourth quarter of fiscal 2021.

Table of Conten ts

Our cost of revenues increased $181 million, primarily due to a $97 million increase in the amortization of acquired intangible assets as a result of our Merger with Avast, $52 million increase in payment processing fees, $27 million increase in revenue share costs and royalty charges, and $10 million increase in cloud hosting cost, offset by $6 million decrease in technical support costs.

Operating expenses

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Total $ 1,522 $ 1,383 10 %

Our operating expenses increased in fiscal 2023 compared to fiscal 2022 primarily due to increased headcount, stock-based compensation and restructuring costs, in connection with the Merger which was completed during the second quarter of fiscal 2023.

Fiscal 2023 compared to fiscal 2022

Sales and marketing expense increased $46 million, primarily due to a $70 million increase in advertising and promotional expenses as a result of increased investment in advertising.

This is partially offset by a $20 million decrease in IT and related support costs from corporate restructuring and cost reduction efforts in fiscal 2021.

Research and development expense decreased $14 million, primarily due to a $13 million decrease in shared facility and IT costs.

General and administrative expense increased $177 million, primarily due to a $185 million legal accrual relating to an ongoing patent infringement lawsuit, partially offset by a decrease in compensation and benefits.

Amortization of intangible assets increased $11 million as a result of the Avira acquisition.

Restructuring and other costs decreased $130 million, in connection with the November 2019 Plan, which was substantially completed in the second quarter of fiscal 2021.

Sales and marketing expense increased $60 million, primarily due to a $36 million increase in headcount and IT costs, a $23 million increase in outside services and software expenses, and a $15 million increase of stock-based compensation expense.

This was partially offset by $17 million in sales and marketing efficiencies.

Research and development expense increased $60 million, primarily due to a $39 million increase of headcount and IT costs, a $12 million increase of stock-based compensation expense and a $10 million increase in outside services and software expense.

General and administrative expense decreased $106 million, primarily due to the absence of a $185 million legal accrual in fiscal 2022 relating to an ongoing patent infringement lawsuit and the corresponding legal fees.

This was partially offset by a $40 million increase in outside services due to the Merger with Avast, $25 million increase of stock-based compensation expense and a $16 million increase in headcount costs.

Amortization of intangible assets increased $87 million as a result of the Merger with Avast.

Restructuring and other costs increased $38 million, primarily due to severance and termination benefit costs in connection with the September 2022 Plan.

See Note 12 of the Notes to the Consolidated Financial Statements for details of the fiscal 2023 restructuring activities.

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Gain on sale of properties — 175 (175)

Transition service expense, net — (9) 9

Other (20) (7) (13)

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Fiscal 2023 compared to fiscal 2022

Non-operating income (expense), net, increased $61 million, primarily due to a $175 million gain on the sale of certain land and buildings in Mountain View, California during fiscal 2022 compared to an aggregate $98 million gain on the sale of two properties during fiscal 2021.

This is partially offset by the absence of a $20 million gain on early extinguishment of debt during the first quarter of fiscal 2021, as well as a $7 million impairment of long-term assets primarily associated with one of our equity investments, which is measured at cost minus impairment.

Non-operating income (expense), net, decreased $460 million in income, primarily due to the absence of the $175 million gain on the sale of certain land and buildings in Mountain View, California during the second quarter of fiscal 2022 and an increase in interest expense associated with borrowings under our senior credit facilities (as defined below) and two senior notes, which were issued during the second quarter of fiscal 2023.

Provision for income taxes

We are a U.S.-based multinational company subject to tax in multiple U.S.

We are a multinational company dual headquartered in the U.S.

and Czech Republic, although our principal executive offices remain in Tempe, Arizona, and we are 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.

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Fiscal 2023 compared to fiscal 2022

Our effective tax rate is consistent with prior year.

Table of Conten ts

Discontinued operations

(In millions, except for percentages) 2021

Net revenues $ 1

Gross profit $ 1

Operating income (loss) $ (177)

Income (loss) before income taxes $ (176)

Income tax expense (benefit) $ (34)

Income (loss) from discontinued operations, net of taxes $ (142)

Fiscal 2022 compared to fiscal 2021

Income (loss) from discontinued operations, net of tax, decreased primarily due to the completion of the discontinued operations activities in fiscal 2021.

There was no discontinued operations activity during the year ended April 1, 2022.

Our effective tax rate decreased primarily due to a decrease in income taxes as a result of a tax capital loss, and releases in uncertain tax positions related to the closure of federal and state income tax audits.

See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information about the tax capital loss.

LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS

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Our capital allocation strategy is to balance driving stockholder returns, managing financial risk and preserving our flexibility to pursue strategic options, including acquisitions and mergers.

Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of our common stock.

Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of shares of our common stock.

Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations and amounts available under our Revolving Facility (as defined below), will be sufficient to meet our working capital needs, support on-going business activities and finance the expected synergy costs related to the Merger through at least the next 12 months and to meet our known long-term contractual obligations.

We are currently not aware of any trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months.

However, our future liquidity and capital requirements may vary materially from those as of March 31, 2023 depending on several factors, including, but not limited to, economic conditions;

political climate;

the expansion of sales and marketing activities;

the costs to acquire or invest in businesses;

and the risks and uncertainties discussed in “Risk Factors” in Item 1A.

The following table summarizes our cash flow activities in fiscal 2023 and 2022:

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Increase (decrease) in cash and cash equivalents $ (1,137) $ 954

See Note 7 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for our supplemental cash flow information.

Cash from operating activities

Our cash flows provided by operating activities in fiscal 2022 increased $268 million, primarily due to higher profit before taxes adjusted by non-cash items compared to fiscal 2021.

Our cash flows provided by operating activities in fiscal 2023 decreased $217 million, primarily due to an increase in cash payments in fiscal 2023, including payments of income taxes, debt interest, and transaction costs and other regulatory closing fees in connection with the Merger.

Cash from investing activities

Our cash flows provided by investing activities in fiscal 2022 increased $395 million, primarily due to higher proceeds from the sale of properties and fewer payments for business acquisitions, partially offset by a decrease in proceeds from the maturities and sales of short-term investments.

Our cash flows provided by investing activities in fiscal 2023 decreased $6,873 million, primarily due to the $6,547 million total cash consideration paid for the Merger with Avast, net of $363 million cash acquired and $2,141 million non-cash consideration transferred, as well as the absence of $355 million in proceeds from the sale of certain Mountain View, California properties in fiscal 2022.

Cash from financing activities

Our cash flows used in financing activities in fiscal 2022 decreased $1,570 million, primarily due to a decrease in repayments of debt and no repurchases of common stock.

Fiscal 2022 reflects the settlement of our New 2.5% Convertible Notes of $364 million and partial settlement of our New 2.0% Convertible Notes of $139 million, compared to the settlement of our 2.0% Convertible Notes and repayment of our 4.2% Senior Notes of $1,941 million as well as repurchases of common stock of 304 million during fiscal 2021.

Our cash flows provided by financing activities in fiscal 2023 increased $5,014 million, primarily due to proceeds from the issuance of debt, partially offset by repayment of debt and the continuation of our stock repurchase program.

Fiscal 2023 reflects $8,954 million of aggregate proceeds:

$3,910 million from Term Facility A (as defined below), $3,690 million from Term Facility B (as defined below), $900 million from the 6.75% Senior Notes and $600 million from the 7.125% Senior Notes, net of $146 million of debt issuance costs.

This was partially offset by the $400 million repayment of our 3.95% Senior Notes, $1,010 million repayment of our Initial Term Loan, $703 million repayment of our Delayed Draw Term Loan, settlement of the $525 million principal, $250 million prepayment of our Term B Facility, and $59 million mandatory amortization payments of our Term Facility A and B, $100 million equity rights associated with our New 2.0% Convertible Notes, and common stock repurchases of $904

In contrast, fiscal 2022 reflects $512 million of proceeds from the issuance of our Initial Term Loan, partially offset by the $364 million settlement of our New 2.5% Convertible Notes.

Cash and cash equivalents

As of April 1, 2022, we had cash, cash equivalents and short-term investments of approximately $1,891 million, of which $671 million was held by our foreign subsidiaries.

As of March 31, 2023, we had cash, cash equivalents and short-term investments of approximately $750 million, of which $572 million was held by our foreign subsidiaries.

Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity and generate investment returns.

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however, these distributions may be subject to applicable state or non-U.S.

Table of Conten ts

We have an undrawn revolving credit facility of $1 billion, which expires in May 2026.

On May 7, 2021, we entered into the first amendment to our credit agreement (the First Amendment), which provided for an incremental increase under the Initial Term Loan, and extended the maturity date of the Initial Term Loan, the Delayed Draw Term Loan, and revolving credit facility from November 2024 to May 2026.

We borrowed $525 million under the First Amendment of our Initial Term Loan.

For additional discussion on the amendment, see Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

On May 20, 2021, we settled the $250 million principal and conversion rights of the New 2.5% Convertible Senior Notes in cash.

The aggregate settlement amount of $364 million was based on $24.40 per underlying share into which the 2.5% Convertible Notes were convertible.

In addition, we paid $1 million of accrued and unpaid interest through the date of settlement and $1 million of cash dividends that we declared on May 10, 2021.

On March 18, 2022, we settled $100 million of principal and conversion rights of the New 2.0% Convertible Senior Notes in cash.

The aggregate settlement amount of $139 million was based on $28.32 per underlying shares into which the 2.0% Convertible Notes were convertible.

Sale of certain assets

On July 14, 2021, we completed the sale of certain land and buildings in Mountain View, California for cash consideration of $355 million, net of selling costs.

Cash Requirements

Our principal cash requirements are primarily to meet our working capital needs and support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing our common stock and investing in business acquisitions and mergers.

Proposed Merger with Avast

On August 10, 2021, the Company announced a transaction under which we intend 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 Proposed Merger).

In conjunction with the Proposed Merger, we and certain financial institution parties entered into an Interim Facilities Agreement, under which Bank of America, N.A.

and Wells Fargo Bank N.A., as interim lenders, agreed to provide us with certain term loan and revolving facilities in order to finance the cash consideration payable and based on the terms and conditions set forth in a commitment letter.

The Interim Facilities Agreement includes (i) the Interim Facility B, (ii) the Interim Facility A1 and the Interim Facility A2, and (iii) the Interim Revolving Facility which, on or before the final repayment date, are to be repaid/replaced in full by loans made under the definitive financing documentation for the Definitive Facilities (the Facilities Agreement).

The obligations under the Facilities Agreement will be guaranteed, jointly and severally, by all of our present and future domestic subsidiaries, with certain exceptions, as applicable.

The Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction.

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.

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.

On September 12, 2022, upon close of the Merger with Avast, 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.

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 aggregate outstanding principal of $1,703 million and aggregate accrued and unpaid interest of $3 million under the Initial Term Loan and Delay Draw Term Loan from then existing credit facilities.

The Credit Agreement replaced the existing credit facilities upon the close of the transaction.

During fiscal 2023, we paid an aggregate $145 million in debt issuance costs associated with the senior credit facilities.

The Credit Agreement contains customary representations and warranties and affirmative and negative covenants that we maintain a consolidated leverage ratio of not more than 5.25 to 1.0, or 5.75 to 1.0 if we acquire assets or business in an aggregate amount greater than $250 million, and restrictions on indebtedness, liens, investments, stock repurchases, and dividends (with exceptions permitting our regular quarterly dividend and other specific capital returns).

As of March 31, 2023 , we were in compliance with all debt covenants.

As of March 31, 2023, there were no borrowings outstanding under our Revolving Facility.

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.

During fiscal 2023, we paid an aggregate $14 million in debt issuance costs associated with the two senior notes.

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 accrued 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 and capitalized as a portion of debt issuance cost for the Term B Facility.

During fiscal 2023, we paid and capitalized $31 million in ticking fees.

On January 19, 2023, we made a voluntary prepayment of $250 million for our senior credit facilities, which was applied exclusively to the Term B Facility.

Subsequent to March 31, 2023, on April 28, 2023, we made a voluntary prepayment of $150 million for our senior credit facilities, which was applied exclusively to the Term B Facility.

Material Cash Requirements

Our principal cash requirements are primarily to meet our working capital needs and support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers.

On May 11, 2023, we announced a cash dividend of $0.125 per share of common stock to be paid in June 2023.

We currently expect to continue to pay quarterly cash dividends to stockholders in the future, but such payments will be subject to the approval of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, general business and market conditions and other investment opportunities.

We currently expect to continue to pay quarterly cash dividends to stockholders in the future, but such payments will be subject to the

approval of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, general business and market conditions and other investment opportunities.

Share repurchase program

Under our stock repurchase program, we may purchase shares of our outstanding common stock through accelerated stock repurchase transactions, open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and privately-negotiated transactions.

As of April 1, 2022, the remaining balance of our stock repurchase authorization is $1,774 million and does not have an expiration date.

Under our share repurchase program, we may purchase shares of our outstanding common stock through accelerated stock repurchase transactions and open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act).

As of March 31, 2023, the remaining balance of our stock repurchase authorization is $870 million and does not have an expiration date.

We currently expect to repurchase shares in the future, but the timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and other investment opportunities.

Subsequent to April 1, 2022, we executed repurchases of 4 million shares of our common stock for an aggregate amount of $107 million.

As a result, we have $1,667 million remaining under our existing share repurchase program.

Table of Conten ts

Contractual obligations

The following is a schedule of our significant contractual obligations and commitments as of April 1, 2022.

Restructuring

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.

We have incurred and expect to incur cash expenditures for severance and termination benefits, contract terminations, facilities closures, and the sale of underutilized facilities as well as stock-based compensation charges for accelerated equity awards for certain terminated employees.

We expect that we will incur total costs up to $150 million, with $120 million and $30 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.

During fiscal 2023, we made $43 million in cash payments related to the September 2022 Plan.

See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further cash flow information associated with our restructuring activities.

Significant contractual obligations

The following is a schedule of our significant contractual obligations and commitments as of March 31, 2023.

The expected timing and amount of short-term and long-term payments of the obligations in the following table is estimated based on current information.

Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for certain obligations.

Short-Term Payments Long-Term Payments Total

(In millions)

(In millions) Short-Term Payments Long-Term Payments Total

Contractual obligations:

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Interest payments on debt (2)

530 2,372 2,902

Purchase obligations (3)

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Total $ 1,239 $ 12,503 $ 13,742

(1) As of April 1, 2022, our total outstanding principal amount of indebtedness is comprised of $1,713 million in Term Loans, $1,500 million in Senior Notes, $525 million in Convertible Senior Notes and $9 million in Mortgage Loans.

(1) As of March 31, 2023, our total outstanding principal amount of indebtedness is comprised of $7,292 million in Term Loans, $2,600 million in Senior Notes and $7 million in mortgage loans.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about our debt and debt covenants.

The credit agreement we entered into in November 2019, which was amended and extended through May 2026 on May 7, 2021, contains customary representations and warranties, non-financial covenants for financial reporting, affirmative and negative covenants, including a covenant that we maintain a consolidated leverage ratio of not more than 5.25 to 1.0, or 5.75 to 1.0 if we acquire assets or business in an aggregate amount greater than $250 million, and restrictions on indebtedness, liens, investments, stock repurchases, and dividends (with exceptions permitting our regular quarterly dividend and other specific capital returns).

As of April 1, 2022 , we were in compliance with all debt covenants.

(2) Interest payments calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes and credit facility.

Interest on variable rate debt was calculated using the interest rate in effect as of April 1, 2022.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on the Senior Notes, Convertible Senior Notes and Term loans.

(2) Interest payments calculated based on the contractual terms of the related debt instruments.

Interest on variable rate debt was calculated using the interest rate in effect as of March 31, 2023.

Interest on variable rate debt may vary based on the performance of our interest rate swaps.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on the term loans and senior notes.

(3) Agreements for purchases of goods or services, with terms that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased;

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See Note 9 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on leases.

Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of April 1, 2022, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of March 31, 2023, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Therefore, $509 million in long-term income taxes payable has been excluded from the contractual obligations table.

See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.

Under the terms of the Proposed Merger, we expect to pay a purchase price for the Avast shares, ranging from $8.1 billion to $8.6 billion, upon the completion of the transaction in mid-to-late calendar year 2022.

In conjunction with the Proposed Merger, we have secured debt under the Interim Facilities which will be available upon the close of the transaction.

If the Proposed Merger is completed, our debt obligations will include principal and interest payments related to these credit facilities.

See Note 4 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information regarding this business combination and the related debt instruments.

Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations and amounts available under our credit facility, will be sufficient to meet our working capital needs and support on-going business activities through at least the next 12 months and to satisfy our known long-term contractual obligations.

We plan to finance the cash consideration payable to Avast primarily with borrowings under our Definitive Facilities.

We believe that our existing cash and cash to be generated by operations, along with amounts available under the new credit facility, will satisfy our long-term cash requirements for this transaction.

However, our future liquidity and capital requirements may vary materially from those as of April 1, 2022 depending on several factors, including, but not limited to, economic conditions;

political climate;

the expansion of sales and marketing activities;

the costs to acquire or invest in businesses;

and the risks and uncertainties discussed in “Risk Factors” in Item 1A.

Table of Conten ts

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 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.

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, product warranties and losses arising out of our breach of agreements or representations and warranties made by us, including claims alleging that our software infringes on the intellectual property rights of a third party.

In connection with the sale of our Enterprise Security business to Broadcom, we assigned several leases to Broadcom or certain of its subsidiaries.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis