What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-04 · 200 added, 132 removed, 667 unchanged (33% of the section changed)

3 unchanged sentences

(Unaudited, in millions, except par value per share amounts)

June 30, 2023 March 31, 2023

September 29, 2023 March 31, 2023

Current assets:

30 unchanged sentences

3,000 shares authorized;

639 and 640 shares issued and outstanding as of June 30, 2023 and March 31, 2023, respectively

641 and 640 shares issued and outstanding as of September 29, 2023 and March 31, 2023, respectively

Accumulated other comprehensive income (loss) 6 ( 15 )

6 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three Months Ended

June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net revenues $ 948 $ 748 $ 1,894 $ 1,455

23 unchanged sentences

(Unaudited, in millions)

Three Months Ended

June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net income (loss) $ 149 $ 69 $ 338 $ 269

8 unchanged sentences

(Unaudited, in millions, except share amounts)

Three months ended June 30, 2023

Three months ended September 29, 2023

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 June 30, 2023 639 $ 2,697 $ 36 $ ( 396 ) $ 2,337

Net income (loss) — — — 149 149

Other comprehensive income (loss), net of taxes — — ( 30 ) — ( 30 )

Common stock issued under employee stock incentive plans 2 6 — — 6

Shares withheld for taxes related to vesting of stock units — ( 1 ) — — ( 1 )

Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued

— ( 82 ) — — ( 82 )

Stock-based compensation — 35 — — 35

Balance as of September 29, 2023 641 $ 2,655 $ 6 $ ( 247 ) $ 2,414

Six months ended September 29, 2023 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 March 31, 2023 640 $ 2,800 $ ( 15 ) $ ( 585 ) $ 2,200

7 unchanged sentences

Stock-based compensation — 72 — — 72

Balance as of June 30, 2023 639 $ 2,697 $ 36 $ ( 396 ) $ 2,337

Three months ended July 1, 2022

Balance as of September 29, 2023 641 $ 2,655 $ 6 $ ( 247 ) $ 2,414

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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)

5 unchanged sentences

Shares withheld for taxes related to vesting of stock units

( 1 ) ( 16 ) — — ( 16 )

Repurchases of common stock ( 17 ) ( 404 ) — — ( 404 )

2 unchanged sentences

Stock-based compensation — 53 — — 53

Extinguishment of convertible debt — ( 100 ) — — ( 100 )

Cumulative effect adjustment from adoption of ASU 2020-06 (1)

— ( 7 ) — 6 ( 1 )

Balance as of July 1, 2022 571 $ 1,479 $ ( 44 ) $ ( 1,734 ) $ ( 299 )

(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.

Merger consideration 94 2,141 — — 2,141

Balance as of September 30, 2022 661 $ 3,378 $ ( 15 ) $ ( 1,665 ) $ 1,698

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

(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.

GEN DIGITAL INC.

1 unchanged sentence

(Unaudited, in millions)

Three Months Ended

June 30, 2023 July 1, 2022

Six Months Ended

September 29, 2023 September 30, 2022

OPERATING ACTIVITIES:

Net income $ 189 $ 200

Net income (loss) $ 338 $ 269

Amortization and depreciation 250 78

Impairments and write-offs of current and long-lived assets — ( 5 )

Stock-based compensation expense 72 53

Deferred income taxes ( 976 ) ( 51 )

Loss (gain) on extinguishment of debt — 9

Gain on sale of property ( 4 ) —

12 unchanged sentences

Purchases of property and equipment ( 9 ) ( 4 )

Payments for acquisitions, net of cash acquired — ( 6,550 )

Proceeds from the maturities and sales of short-term investments — 4

Proceeds from the sale of property 13 —

Other ( 1 ) 4

2 unchanged sentences

Repayments of debt ( 266 ) ( 2,738 )

Proceeds from issuance of debt, net of issuance costs — 8,954

Net proceeds from sales of common stock under employee stock incentive plans 6 6

Tax payments related to vesting of stock units ( 20 ) ( 16 )

22 unchanged sentences

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 March 31, 2023.

The results of operations for the three months ended June 30, 2023 are not necessarily indicative of the results expected for the entire fiscal year.

The results of operations for the three and six months ended September 29, 2023 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 month periods in this report relate to fiscal periods ended June 30, 2023 and July 1, 2022.

The three months ended June 30, 2023 and July 1, 2022 each consisted of 13 weeks, respectively.

Unless otherwise stated, references to three and six month periods in this report relate to fiscal periods ended September 29, 2023 and September 30, 2022.

The three and six months ended September 29, 2023 and September 30, 2022 each consisted of 13 and 26 weeks, respectively.

Our 2024 fiscal year consists of 52 weeks and ends on March 29, 2024.

6 unchanged sentences

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 macroeconomic factors such as inflation, fluctuations in foreign currency exchange rates relative to the U.S.

dollars, our reporting currency, changes in interest rates, and Russia’s invasion of Ukraine, and such differences may be material to the Condensed Consolidated Financial Statements.

dollar, our reporting currency, changes in interest rates, and Russia’s invasion of Ukraine, 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 months ended June 30, 2023, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

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 29, 2023, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Recent Accounting Standards

6 unchanged sentences

However, the commercial real estate market was adversely affected by the COVID-19 pandemic, which delayed the expected timing of such sales.

On June 28, 2023, we completed the sale of certain land and buildings in Dublin, Ireland, which was previously classified as held for sale as of March 31, 2023, for cash consideration of $ 13 million, net of selling costs, and recognized a gain on sale of $ 4 million.

We continue to actively market the remaining properties for sale.

We have taken into consideration the current real estate values and demand and continue to execute plans to sell these properties.

As of June 30, 2023, these assets are classified as held for sale.

During the three months ended June 30, 2023 , there were no impairments because the fair value of the properties less costs to sell either equals or exceeds their carrying value.

On July 28, 2023, we entered into an agreement to sell certain land and buildings in Tucson, Arizona, which were previously classified as held for sale as of June 30, 2023 and March 31, 2023, for cash consideration of $ 13 million, net of selling costs.

The transaction is expected to close during the third quarter of fiscal 2024.

During fiscal 2023, we determined land and buildings in Dublin, Ireland, which were previously reported as property and equipment, now qualifies as held for sale.

During the first quarter of fiscal 2024, we completed the sale of certain land and buildings in Dublin, Ireland, which were previously classified as held for sale as of March 31, 2023, for cash consideration of $ 13 million, net of selling costs, and recognized a gain on sale of $ 4 million.

The remaining land and building in Dublin, Ireland, remains as held for sale.

Subsequent to September 29, 2023, on October 12, 2023, we completed the sale of certain land and buildings in Tucson, Arizona, which were previously classified as held for sale as of September 29, 2023 and March 31, 2023, for cash consideration of $ 12 million, net of selling costs.

We recognized a gain on sale of $ 5 million during the third quarter of fiscal 2024.

We have taken into consideration the current real estate values and demand and continue to execute pla ns to sell the remaining property.

As of September 29, 2023, the property is classified as held for sale.

During the three and six months ended September 29, 2023 , there were no impairments because the fair value less costs to sell either equals or exceeds its carrying value.

Business Combinations

4 unchanged sentences

The total consideration for the acquisition of Avast was approximately $ 8,688 million, net of cash acquired.

Our current allocation of the aggregate purchase price, based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date, inclusive of measurement period adjustments, is as follows:

Our final allocation of the aggregate purchase price for the acquisition as of September 12, 2022, was as follows:

(In millions) September 12, 2022

14 unchanged sentences

Total purchase price $ 8,688

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 area of preliminary purchase price allocation that is not yet finalized are certain tax matters.

There were immaterial measurement period adjustments during the three months ended June 30, 2023.

Our estimates and assumptions were subject to refinement within the measurement period, which ended during the second quarter of fiscal 2024.

Adjustments to the purchase price during the measurement period required adjustments to be made to goodwill.

During the three and six months ended September 29, 2023, we recorded measurement period adjustments resulting in a net decrease to goodwill of $ 14 million, resulting from updated information regarding deferred tax liabilities, which resulted in a decrease of $ 14 million of long-term deferred tax liabilities.

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, as if the acquisition 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 acquisition, 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 acquisition.

The following table summarizes the unaudited pro forma financial information:

September 30, 2022

(In millions) Three Months Ended Six Months Ended

Net revenues $ 930 $ 1,873

Net income (loss) $ ( 62 ) $ 47

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 acquisition been completed as of the beginning of fiscal 2022.

Contract liabilities

During the three months ended June 30, 2023, we recognized $ 700 million from the contract liabilities balances as of March 31, 2023.

During the three months ended July 1, 2022, we recognized $ 508 million from the contract liabilities balances as of April 1, 2022.

During the three and six months ended September 29, 2023, we recognized $ 693 million and $ 1,206 million from the contract liabilities balances as of June 30, 2023 and March 31, 2023, respectively.

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.

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 June 30, 2023, we had $ 1,219 million of remaining performance obligations, excluding customer deposit liabilities of $ 490 million, of which we expect to recognize approximately 94 % as revenue over the next 12 months.

As of September 29, 2023, we had $ 1,148 million of remaining performance obligations, excluding customer deposit liabilities of $ 524 million, of which we expect to recognize approximately 94 % as revenue over the next 12 months.

See Note 17 for tabular disclosures of disaggregated revenue by solution and geographic region.

3 unchanged sentences

Balance as of March 31, 2023 $ 10,217

Purchase accounting adjustment ( 14 )

Translation adjustments

Balance as of June 30, 2023 $ 10,241

Balance as of September 29, 2023 $ 10,199

Intangible assets, net

June 30, 2023 March 31, 2023

September 29, 2023 March 31, 2023

(In millions) Gross

10 unchanged sentences

Amortization expense for purchased intangible assets is summarized below:

Three Months Ended Condensed Consolidated Statements of Operations Classification

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended Condensed Consolidated Statements of Operations Classification

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Customer relationships and other $ 61 $ 29 $ 122 $ 50 Operating expenses

1 unchanged sentence

Total $ 119 $ 45 $ 237 $ 71

As of June 30, 2023, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

As of September 29, 2023, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

(In millions)

4 unchanged sentences

Cash and cash equivalents:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Cash $ 417 $ 576

2 unchanged sentences

Accounts receivable, net:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Accounts receivable $ 148 $ 169

2 unchanged sentences

Other current assets:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Prepaid expenses $ 122 $ 122

3 unchanged sentences

Property and equipment, net:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Land $ 13 $ 13

8 unchanged sentences

Other long-term assets:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Non-marketable equity investments $ 176 $ 176

4 unchanged sentences

Short-term contract liabilities:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Deferred revenue $ 1,075 $ 1,153

2 unchanged sentences

Other current liabilities:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Income taxes payable $ 201 $ 172

4 unchanged sentences

Total other current liabilities $ 540 $ 703

Other long-term liabilities:

(In millions) September 29, 2023 March 31, 2023

Long-term accrued legal fees $ 588 $ —

Total other long-term liabilities $ 631 $ 43

Long-term income taxes payable:

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Deemed repatriation tax payable $ 139 $ 310

Other long-term income taxes 1 1

Uncertain tax positions (including interest and penalties) 530 509

Unrecognized tax benefits and related interest and penalties 1,073 509

Total long-term income taxes payable $ 1,213 $ 820

As of September 29, 2023, total deferred income taxes changed by $ 984 million, which primarily relates to goodwill of $ 592 million, intangibles of $ 112 million, and other accruals and reserves not currently tax deductible of $ 192 million, and current year unrecognized tax benefits and penalties, which increased by $ 450 million and $ 90 million, respectively.

Other income (expense), net:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Interest income $ 6 $ 3 $ 12 $ 5

Foreign exchange gain (loss) 1 2 2 1

Gain (loss) on early extinguishment of debt — ( 9 ) — ( 9 )

Gain on sale of properties — — 4 —

2 unchanged sentences

Supplemental cash flow information:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

Six Months Ended

(In millions) September 29, 2023 September 30, 2022

Income taxes paid, net of refunds $ 270 $ 295

2 unchanged sentences

Non-cash operating activities:

Operating lease assets obtained in exchange for operating lease liabilities $ — $ 18

Reduction of operating lease assets as a result of lease terminations and modifications $ ( 7 ) $ 30

Non-cash investing and financing activities:

Purchases of property and equipment in current liabilities $ 4 $ —

Non-cash consideration for the Merger with Avast $ — $ 2,141

Financial Instruments and Fair Value Measurements

9 unchanged sentences

The following table summarizes our financial instruments measured at fair value on a recurring basis:

June 30, 2023 March 31, 2023

September 29, 2023 March 31, 2023

(In millions) Fair Value Level 1 Level 2 Fair Value Level 1 Level 2

6 unchanged sentences

Non-marketable equity investments

As of June 30, 2023 and March 31, 2023, the carrying value of our non-marketable equity investments was $ 176 million and $ 176 million, respectively.

As of September 29, 2023 and March 31, 2023, the carrying value of our non-marketable equity investments was $ 176 million.

Current and long-term debt

As of June 30, 2023 and March 31, 2023, the total fair value of our current and long-term fixed rate debt was $ 2,578 million and $ 2,593 million, respectively.

As of September 29, 2023 and March 31, 2023, the total fair value of our current and long-term fixed rate debt was $ 2,550 million and $ 2,593 million, respectively.

The fair value of our variable rate debt approximated its carrying value.

4 unchanged sentences

The following summarizes our lease costs:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Operating lease costs $ 2 $ 3 $ 6 $ 7

3 unchanged sentences

Other information related to our operating leases was as follows:

Three Months Ended

June 30, 2023 July 1, 2022

September 29, 2023 March 31, 2023

Weighted-average remaining lease term 3.9 years 2.8 years

1 unchanged sentence

See Note 7 for cash flow information related to our operating leases.

As of June 30, 2023, the maturities of our lease liabilities by fiscal year are as follows:

As of September 29, 2023, the maturities of our lease liabilities by fiscal year are as follows:

(In millions)

5 unchanged sentences

(In millions, except percentages)

June 30, 2023 March 31, 2023 Effective

September 29, 2023 March 31, 2023 Effective

Interest Rate

19 unchanged sentences

The interest rates for the outstanding term loans are as follows:

June 30, 2023 March 31, 2023

September 29, 2023 March 31, 2023

Term A Facility due September 12, 2027 6.92 % 6.66 %

Term B Facility due September 12, 2029 7.42 % 6.91 %

As of June 30, 2023, the future contractual maturities of debt by fiscal year are as follows:

As of September 29, 2023, the future contractual maturities of debt by fiscal year are as follows:

(In millions)

15 unchanged sentences

We may voluntarily repay outstanding principal balances under the Revolving Facility and both Term Loan facilities without penalty.

As of June 30, 2023, there were no borrowings outstanding under our Revolving Facility;

As of September 29, 2023, there were no borrowings outstanding under our Revolving Facility;

however, from time to time we utilize letters of credits as part of our ordinary course of business.

2 unchanged sentences

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 %.

On October 13, 2023 and October 27, 2023, we made voluntary prepayments of $ 100 million each, pursuant to Section 2.05(a) of the Credit Agreement dated September 12, 2022.

The prepayments were applied exclusively to the Term B Facility.

Debt covenant compliance

3 unchanged sentences

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 June 30, 2023 , we were in compliance with all debt covenants.

As of September 29, 2023 , we were in compliance with all debt covenants.

On February 9, 2017, we issued $ 1,100 million aggregate principal amount of our 5.0 % Senior Notes due April 15, 2025 (the 5.0 % Senior Notes).

8 unchanged sentences

The following table sets forth total interest expense recognized related to our Convertible Senior Notes:

Three Months Ended

(In millions) July 1, 2022

September 30, 2022

(In millions) Three Months Ended Six Months Ended

Contractual interest expense $ 1 $ 4

2 unchanged sentences

(1) Payments in lieu of conversion price adjustments consist of amounts paid to holders of the Convertible Senior Notes when our quarterly dividend to our common stockholders exceeds the amounts defined in the Convertible Senior Notes agreements.

During the three months ended June 30, 2023, we did no t recognize any interest expense related to our Convertible Senior Notes as they were settled during the second quarter of fiscal year 2023.

During the three and six months ended September 29, 2023, we did no t recognize any interest expense related to our Convertible Senior Notes as they were settled during the second quarter of fiscal year 2023.

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.

16 unchanged sentences

Summary of derivative instruments

The following table summarizes our outstanding derivative instruments as of June 30, 2023 and March 31, 2023:

The following table summarizes our outstanding derivative instruments as of September 29, 2023 and March 31, 2023:

Notional Amount Fair Value of Derivative Assets Fair Value of Derivative Liabilities

(In millions) June 30, 2023 March 31, 2023 June 30, 2023 March 31, 2023 June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023 September 29, 2023 March 31, 2023 September 29, 2023 March 31, 2023

Foreign exchange contracts not designated as hedging instrument (1)

2 unchanged sentences

Total $ 1,241 $ 1,291 $ 24 $ 1 $ — $ 2

(1) The fair values of the foreign exchange contracts are less than $ 1 million as of June 30, 2023 and March 31, 2023.

(1) The fair values of the foreign exchange contracts are less than $ 1 million as of September 29, 2023 and March 31, 2023.

The following table summarizes the effect of our cash flow hedges on AOCI during the periods indicated:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

September 29, 2023

(In millions) Three Months Ended Six Months Ended

Interest rate swap contracts designed as cash flow hedge $ ( 10 ) $ ( 32 )

During the three and six months ended September 30, 2022, there was no effect of our cash flow hedges on AOCI as interest rate swaps were not effective until the fourth quarter of fiscal 2023.

The related gain (loss) recognized in our Condensed Consolidated Statements of Operations, with presentation location was as follows:

Three Months Ended Condensed Consolidated Statements of Operations Classification

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended Condensed Consolidated Statements of Operations Classification

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Foreign exchange contracts not designated as hedging instrument $ ( 6 ) $ ( 3 ) $ ( 9 ) $ ( 10 ) Other income (expense), net

1 unchanged sentence

Total $ ( 2 ) $ ( 3 ) $ ( 2 ) $ ( 10 )

As of June 30, 2023, we estimate that $ 15 million of net deferred gains related to our interest rate hedges will be recognized in earnings over the next 12 months.

As of September 29, 2023, we estimate that $ 16 million of net deferred gains related to our interest rate hedges will be recognized in earnings over the next 12 months.

Restructuring and Other Costs

7 unchanged sentences

Actions under this plan include the reduction of our workforce, contract terminations, facilities closures, and the sale of underutilized facilities as well as stock-based compensation charges for accelerated equity awards to 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 acquisition.

These actions are expected to be completed by fiscal 2024.

As of June 30, 2023, we have incurred total costs of $ 86 million related to the September 2022 Plan.

We expect that we will incur total costs up to $ 150 million following the completion of acquisition.

These actions are expected to be completed by the end of fiscal 2024.

As of September 29, 2023, we have incurred total costs of $ 102 million related to the September 2022 Plan.

Our activities and liabilities related to our September 2022 Plan are presented in the table below:

(in millions) Liability Balance as of March 31, 2023 Costs, Net of Adjustments Cash Payments Liability Balance as of June 30, 2023

(in millions) Liability Balance as of March 31, 2023 Costs, Net of Adjustments Cash Payments Non-Cash Items Liability Balance as of September 29, 2023

Severance and termination benefit costs $ 7 $ 22 $ ( 16 ) $ ( 1 ) $ 12

Contract cancellation charges — 2 ( 2 ) — —

Stock-based compensation charges — 1 — ( 1 ) —

Other exit and disposal costs — 8 ( 8 ) — —

3 unchanged sentences

Our restructuring and other costs are presented in the table below:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Severance and termination benefit costs $ 11 $ 1 $ 22 $ 1

Contract cancellation charges 1 — 2 —

Stock-based compensation charges 1 — 1 —

Other exit and disposal costs 4 8 9 10

Total restructuring and other costs $ 17 $ 9 $ 34 $ 11

Occasionally, we incur costs related to past restructuring plans.

These charges were immaterial for the three and six months ended September 29, 2023.

The following table summarizes our effective tax rate for the periods presented:

Three Months Ended

Three Months Ended Six Months Ended

(In millions, except percentages)

June 30, 2023 July 1, 2022

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Income (loss) before income taxes $ ( 141 ) $ 195 $ 63 $ 424

1 unchanged sentence

Effective tax rate 206 % 65 % ( 437 ) % 37 %

Our effective tax rate for the three months ended June 30, 2023, differs from the federal statutory income tax rate primarily due to tax benefits related to the set up and write-off of deferred tax items from an internal restructuring, partially offset by state taxes and the U.S.

Our effective tax rate for the three and six months ended September 29, 2023, differs from the federal statutory income tax rate primarily due to tax benefits related to the set up and write-off of deferred tax items resulting from an internal restructuring, partially offset by state taxes, changes in unrecognized tax benefits and related interest and penalties, and the U.S.

taxation on foreign earnings.

Our effective tax rate for the three months ended July 1, 2022, differs from the federal statutory income tax rate primarily due to tax benefits related to the foreign currency remeasurement of an Irish deferred tax asset and discrete legal expenses booked during the quarter, partially offset by state taxes.

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.

In connection with our Avast integration plan, in July 2023, we executed a legal entity restructuring as part of an ongoing effort to simplify our business operational and tax structure.

We are evaluating the impact of this transaction on our Condensed Consolidated Financial Statements, however, an estimate of the impact cannot be made at this time.

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.

Although potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could decrease (whether by payment, release, or a combination of both) in the next 12 months.

Depending on the nature of the settlement or expiration of statutes of limitations, it could affect our income tax provision and therefore benefit the resulting effective tax rate.

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.

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 our acquisition with Avast, and the limitations of foreign taxes due to the increase of interest expense.

In the second quarter of fiscal 2024, as part of the Avast integration plan, which geographically realigned and simplified our business, we undertook a legal entity and operational restructuring.

As part of that process, we distributed certain assets within the legal entity operating structure and as a result, we recorded a net tax benefit of $ 268 million.

Differences between the final outcome and recorded amounts will impact the provision for income taxes in the period in which such a determination is made and could have a material impact on our Condensed Consolidated Balance Sheet and Statement of Operations in future years.

Stockholders' Equity

On August 3, 2023, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in September 2023.

On November 7, 2023, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in December 2023.

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, respectively, which will be paid out if and when the underlying shares are released.

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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 June 30, 2023, we had $ 829 million remaining under the authorization to be completed in future periods with no expiration date.

The following table summarizes activity related to this program during the three months ended June 30, 2023 and July 1, 2022:

Three Months Ended

As of September 29, 2023, we had $ 829 million remaining under the authorization to be completed in future periods with no expiration date.

No shares were repurchased during the three months ended September 29, 2023.

The following table summarizes activity related to this program during six months ended September 29, 2023 and September 30, 2022:

Six Months Ended

(In millions, except per share amounts)

June 30, 2023 July 1, 2022

September 29, 2023 September 30, 2022

Number of shares repurchased 3 17

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Other comprehensive income (loss), net of taxes ( 4 ) 25 21

Balance as of June 30, 2023 $ 17 $ 19 $ 36

Balance as of September 29, 2023 $ ( 19 ) $ 25 $ 6

Stock-Based Compensation

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The following table sets forth the stock-based compensation expense recognized for our equity incentive plans:

Three Months Ended

Three Months Ended Six Months Ended

(In millions)

June 30, 2023 July 1, 2022

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Cost of revenues $ 1 $ 1 $ 2 $ 2

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General and administrative 13 14 29 24

Restructuring and other costs 1 — 1 —

Total stock-based compensation expense $ 35 $ 29 $ 72 $ 53

Income tax benefit for stock-based compensation expense $ ( 4 ) $ ( 4 ) $ ( 9 ) $ ( 8 )

As of June 30, 2023, the total unrecognized stock-based compensation expense related to our unvested stock-based awards was $ 307 million, which will be recognized over an estimated weighted-average amortization period of 2.2 years.

As of September 29, 2023, the total unrecognized stock-based compensation expense related to our unvested stock-based awards was $ 265 million, which will be recognized over an estimated weighted-average amortization period of 2.1 years.

The following table summarizes additional information related to our stock-based awards:

Three Months Ended

(In millions, except per grant data) June 30, 2023 July 1, 2022

Six Months Ended

(In millions, except per grant data) September 29, 2023 September 30, 2022

Restricted stock units (RSUs):

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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 June 30, 2023 and March 31, 2023, current dividends payable related to DER was $ 3 million and $ 5 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.

As of September 29, 2023 and March 31, 2023, current dividends payable related to DER was $ 4 million and $ 5 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, recorded as part of Other long-term liabilities.

Net Income Per Share

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The components of basic and diluted net income (loss) per share are as follows:

Three Months Ended

Three Months Ended Six Months Ended

(In millions, except per share amounts)

June 30, 2023 July 1, 2022

September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Net income (loss) $ 149 $ 69 $ 338 $ 269

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The following table summarizes net revenues for our major solutions:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Consumer security revenues $ 604 $ 436 $ 1,202 $ 838

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Total net revenues (1)

(1) During the three months ended June 30, 2023, total net revenues include an unfavorable foreign exchange impact of $ 9 million from our consumer security solutions.

$ 948 $ 748 $ 1,894 $ 1,455

(1) During the three months ended September 29, 2023, total net revenues include an unfavorable foreign exchange impact of $ 7 million from our consumer security solutions.

During the six months ended September 29, 2023, total net revenues include an unfavorable foreign exchange impact of $ 16 million from our consumer security solutions.

From time to time, changes in our product hierarchy cause changes to the product categories above.

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The following table represents net revenues by geographic area at the end of each period presented:

Three Months Ended

(In millions) June 30, 2023 July 1, 2022

Three Months Ended Six Months Ended

(In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022

Americas $ 616 $ 529 $ 1,238 $ 1,037

EMEA 237 139 462 259

APJ 95 80 194 159

Total net revenues (1)

$ 948 $ 748 $ 1,894 $ 1,455

The Americas include U.S., Canada and Latin America;

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APJ includes Asia Pacific and Japan.

(1) During the three months ended June 30, 2023, total net revenues include an unfavorable foreign exchange impact of $ 9 million, consisting of $ 7 million from EMEA and $ 2 million from APJ.

(1) During the three months ended September 29, 2023, total net revenues include an unfavorable foreign exchange impact of $ 7 million, consisting of $ 6 million from EMEA and $ 1 million from APJ.

During the six months ended September 29, 2023, total net revenues includes an unfavorable foreign exchange impact of $ 16 million, consisting of $ 13 million from EMEA and $ 3 million from APJ.

Revenues from customers inside the U.S.

were $ 565 million and $ 479 million during the three months ended June 30, 2023 and July 1, 2022, respectively.

were $ 562 million and $ 1,127 million during the three and six months ended September 29, 2023, respectively, and $ 493 million and $ 972 million during the three and six months ended September 30, 2022 ,respectively.

No other individual country accounted for more than 10% of revenues.

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and internationally in various foreign subsidiaries.

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

International 422 572

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The table below represents our property and equipment, net of accumulated depreciation and amortization, by geographic areas, based on the physical location of the asset, at the end of each period presented.

(In millions) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Czech Republic 10 16

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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) June 30, 2023 March 31, 2023

(In millions) September 29, 2023 March 31, 2023

Czech Republic 7 12

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Significant customers and channel partners

No individual, end-user customer accounted for 10% or more of our net revenues during the three months ended June 30, 2023 and July 1, 2022.

No individual, end-user customer accounted for 10% or more of our net revenues during the six months ended September 29, 2023 and September 30, 2022.

Distributors that accounted for over 10% of our total billed and unbilled accounts receivable were as follows:

June 30, 2023 March 31, 2023

September 29, 2023 March 31, 2023

Distributor A 15 % 13 %

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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 $ 239 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.

On September 30, 2023, the court entered its judgment, which awarded Columbia (i) enhanced damages of 2.6 times the jury award;

(ii) prejudgment interest, post-judgment interest, and supplemental damages to be calculated in accordance with the parties’ previous agreement;

and (iii) attorneys’ fees subject to the parties meeting and conferring as to amount.

We have complied with the court’s order and submitted a stipulation regarding the final calculations of all outstanding interest, royalties and attorneys’ fees.

We have posted the required surety bond, and notice our appeal.

At this time, our current estimate of the low end of the range of probable estimated losses from this matter is approximately $ 576 million, which we have accrued.

There is a reasonable possibility that a loss may be incurred in excess of our accrual for this matter;

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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.

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.

On February 7, 2023, our Motion to Dismiss was granted in part and denied in part.

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The Court also found in favor of the State of California in part and awarded penalties in the amount of $ 0.4 million.

The resulting Judgment was filed by the Court on January 20, 2023.

The resulting Judgment was

filed by the Court on January 20, 2023.

On February 16, 2023, Plaintiffs filed Motions to Amend Judgment to revive the damages claimed at trial.

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and Jumpshot Inc ., was filed in the Northern District of California alleging violations of the Electronic Communications Privacy Act, California Invasion of Privacy Act, statutory larceny, unfair competition and various common law claims related to the provision of customer data to Jumpshot.

On February 24, 2023, we filed a Motion to Dismiss, which is still pending.

The Complaint was dismissed in part, with leave to amend, and Plaintiffs have now filed a First Amended Complaint which we intend to move to dismiss.

At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this action or estimate the range of any potential loss.

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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-Q

Item 1. Financial Statements