Gen Digital Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements and factors that may affect future results The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act. Forward-looking statements include statements that represent our expectations or beliefs concerning future events, including, without limitation, references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” “forecast,” “outlook,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” and similar expressions. In addition, projections of our future financial performance; anticipated growth and trends in our businesses and in our industries; the consummation of or anticipated impacts of acquisitions (including our ability to achieve synergies from our acquisition of Avast), divestitures, restructurings, stock repurchases, financings, debt repayments and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our products and solutions; anticipated tax rates, benefits and expenses; the impact of inflation, fluctuations in foreign currency exchange rates, changes in interest rates, Russia’s invasion of Ukraine and other global macroeconomic factors on our operations and financial performance; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including economic recessions, inflationary pressures and those other factors that we discuss in Part II Item 1A, of this Quarterly Report on Form 10-Q and the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. We encourage you to read those sections carefully. There may also be other factors that have not been anticipated or that are not described in our periodic filings with the SEC, generally because we did not believe them to be significant at the time, which could cause actual results to differ materially from our projections and expectations. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. OVERVIEW Gen 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 calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three and six months ended September 29, 2023 and September 30, 2022 each consisted of 13 weeks and 26 weeks, respectively. Our 2024 fiscal year consists of 52 weeks and ends on March 29, 2024. Key financial metrics The following tables provide our key financial metrics for the periods presented: Three Months Ended Six Months Ended (In millions, except for per share amounts) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022 Net revenues $ 948 $ 748 $ 1,894 $ 1,455 Operating income (loss) $ 25 $ 241 $ 387 $ 502 Net income (loss) $ 149 $ 69 $ 338 $ 269 Net income (loss) per share - diluted $ 0.23 $ 0.12 $ 0.52 $ 0.45 Net cash provided by (used in) operating activities $ 125 $ (88) $ 351 $ 127 As Of (In millions) September 29, 2023 March 31, 2023 Cash and cash equivalents $ 629 $ 750 Contract liabilities $ 1,672 $ 1,788 Below are our financial highlights for the second quarter of fiscal 2024, compared to the corresponding period in the prior year: • Net revenues increased $200 million, primarily due to revenue 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 decreased $216 million, primarily due to an increase of a legal accrual related to an ongoing patent infringement lawsuit and corresponding legal fees. See Note 18 of the Notes to the Condensed Consolidated Financial 27 Table of Contents Statements for further information. This was partially offset by increased Net revenues and cost synergies post-acquisition. • Net income increased $80 million and Net income per share - diluted increased 0.11, primarily due to an income tax benefit in the second quarter of fiscal 2024, partially offset by decreased operating income discussed above and increased interest expense associated with our new senior credit facilities and two senior notes. Below are our financial highlights for the first six months of fiscal 2024, compared to the corresponding period in the prior year: • Net revenues increased $439 million, primarily due to revenue 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) decreased $115 million primarily due to an increase in legal accrual related to ongoing litigation and an increase in amortization of intangible assets recognized as a result of our merger with Avast. This is partially offset by the increase in net revenues discussed above and cost synergies post-acquisition. • Net income increased $69 million and net income per share increased $0.07, primarily due to an income tax benefit in the second quarter of fiscal 2024, partially offset by decreased operating income discussed above and increased interest expense associated with our new senior credit facilities and two senior notes. • Cash and cash equivalents decreased by $121 million compared to March 31, 2023, primarily due to cash interest paid, cash tax paid, dividends paid to shareholders, voluntary prepayments of our Term B facility, a mandatory principal amortization payment of our Term A facility, and repurchases of our common stock. • Contract liabilities decreased $116 million compared to March 31, 2023, primarily due to a seasonal decline in billings and fluctuations in foreign currency rates. 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 certain 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 continued to increase in 2023, and while inflation rates have slowed, global inflation remains high and has impacted our results due to higher costs. Volatile market conditions related to military conflicts such as Russia’s invasion of Ukraine and retaliatory sanctions against the Russian Federation and Belarus, 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 real estate, 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. Fluctuations in inflation, interest rates and foreign currency exchange rates are uncertain and could result in further adverse impacts to our reported results. For a further discussion of the potential impacts of the global macroeconomic conditions on our business, please see Part I, Item III and “Risk Factors” in Part II, Item 1A below. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our Condensed Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; 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. 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. Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three and six months ended September 29, 2023. 28 Table of Contents RESULTS OF OPERATIONS The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Three Months Ended Six Months Ended September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022 Net revenues 100 % 100 % 100 % 100 % Cost of revenues 19 16 19 15 Gross profit 81 84 81 85 Operating expenses: Sales and marketing 20 22 19 22 Research and development 9 10 9 9 General and administrative 41 15 24 15 Amortization of intangible assets 6 4 6 3 Restructuring and other costs 2 1 2 1 Total operating expenses 78 52 61 50 Operating income (loss) 3 32 20 35 Interest expense (18) (6) (18) (5) Other income (expense), net 1 — 1 — Income (loss) before income taxes (15) 26 3 29 Income tax expense (benefit) (31) 17 (15) 11 Net income (loss) 16 % 9 % 18 % 18 % Note: Percentages may not add due to rounding. Net revenues Three Months Ended Six Months Ended (In millions, except for percentages) September 29, 2023 September 30, 2022 Change in % September 29, 2023 September 30, 2022 Change in % Net revenues $ 948 $ 748 27 % $ 1,894 $ 1,455 30 % Three Months Ended September 29, 2023 Compared with Three Months Ended September 30, 2022 Net revenues increased $200 million, primarily due to a $168 million increase in sales of our consumer security products and a $30 million increase in sales of our identity and information protection products. This is inclusive of $7 million of foreign exchange headwinds, primarily in our consumer security solutions. Six Months Ended September 29, 2023 Compared with Six Months Ended September 30, 2022 Net revenues increased $439 million, primarily due to a $364 million increase in sales of our consumer security products and a $67 million increase in sales of our identity and information protection products. This is inclusive of $16 million of foreign exchange headwinds, primarily in our consumer security solutions. 29 Table of Contents Performance Metrics We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies. The following table summarizes supplemental key performance metrics: Three Months Ended (1) (In millions, except for per user amounts) September 29, 2023 (2) September 30, 2022 (2) Direct customer revenues $ 837 $ 660 Partner revenues $ 95 $ 74 Total Cyber Safety revenues $ 932 $ 734 Legacy revenues $ 16 $ 14 Direct customer count (at quarter end) 38.5 38.6 Direct average revenue per user (ARPU) $ 7.28 $ 6.98 (1) 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. (2) The performance metrics for the three months ended September 29, 2023 and September 30, 2022 include the revenues earned and customers acquired through our acquisition with Avast. ARPU is based on average customer count and assumes full quarter of revenue for both companies. 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. Net revenues by geographical region Three Months Ended Six Months Ended September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022 Americas 65 % 71 % 65 % 71 % EMEA 25 % 18 % 24 % 18 % APJ 10 % 11 % 10 % 11 % The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan. Percentage of revenue by geographic region in the three and six months ended September 29, 2023 remains primarily in the Americas but is beginning to shift more into the EMEA markets, as the acquisition with Avast has contributed to a stronger presence in those regional countries. Cost of revenues Three Months Ended Six Months Ended (In millions, except for percentages) September 29, 2023 September 30, 2022 Change in % September 29, 2023 September 30, 2022 Change in % Cost of revenues $ 180 $ 119 51 % $ 359 $ 221 62 % Three Months Ended September 29, 2023 Compared with Three Months Ended September 30, 2022 30 Table of Contents Our cost of revenues increased $61 million, primarily due to a $42 million increase in the amortization of acquired intangible assets, a $13 million increase in payment processing fees, and a $6 million increase in revenue share costs. Six Months Ended September 29, 2023 Compared with Six Months Ended September 30, 2022 Our cost of revenues increased $138 million, primarily due to a $94 million increase in the amortization of acquired intangible assets, a $28 million increase in payment processing fees, and a $14 million increase in revenue share costs. Operating expenses Three Months Ended Six Months Ended (In millions, except for percentages) September 29, 2023 September 30, 2022 Change in % September 29, 2023 September 30, 2022 Change in % Sales and marketing $ 187 $ 167 12 % $ 368 $ 323 14 % Research and development 85 73 16 % 175 134 31 % General and administrative 393 110 257 % 449 214 110 % Amortization of intangible assets 61 29 110 % 122 50 144 % Restructuring and other costs 17 9 89 % 34 11 209 % Total operating expenses $ 743 $ 388 91 % $ 1,148 $ 732 57 % Three Months Ended September 29, 2023 Compared with Three Months Ended September 30, 2022 Sales and marketing expense increased $20 million, primarily due to a $7 million increase in our investment in advertising, a $5 million increase in occupancy and IT costs, a $4 million increase in outside services and software expenses, and a $2 million increase of stock-based compensation expense. Research and development expense increased $12 million, primarily due to a $6 million increase in outside services and software expense, a $4 million increase of stock-based compensation expense, and a $3 million increase in headcount costs. General and administrative expense increased $283 million, primarily due to a $340 million increase in legal accruals, of which $335 million is related to an ongoing patent infringement lawsuit and the corresponding legal fees. This was partially offset by a $52 million decrease in acquisition and integration costs related to our acquisition with Avast, an $11 million insurance settlement related to previous litigation matters received in the second quarter of fiscal 2024, and a $5 million decrease in headcount costs. Amortization of intangible assets increased $32 million, primarily as a result of the Avast acquisition. Restructuring and other costs increased $8 million, primarily due to severance, termination benefits and other exit and disposal costs in connection with the September 2022 Plan. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2024 restructuring activities. Six Months Ended September 29, 2023 Compared with Six Months Ended September 30, 2022 Sales and marketing expense increased $45 million, primary due to a $12 million increase in outside services and software expenses, a $10 million increase in our investment in advertising, a $9 million increase in occupancy and IT costs, a $9 million increase in headcount costs, and a $4 million increase of stock-based compensation expense. Research and development expense increased $41 million, primarily due to an $18 million increase in headcount costs, a $14 million increase in outside services and software expenses, and a $9 million increase of stock-based compensation expense. General and administrative expense increased $235 million, primarily due to a $287 million increase in legal accrual, of which $284 million is related to an ongoing patent infringement lawsuit and the corresponding legal fees. This was partially offset by a $54 million decrease in acquisition and integration costs related to our acquisition with Avast, and an $11 million insurance settlement related to previous litigation matters received in the second quarter of fiscal 2024. Amortization of intangible assets increased $72 million primarily as a result of the Avast acquisition. Restructuring and other costs increased $23 million, primarily due to severance, termination benefits and other exit and disposal costs in connection with the September 2022 Plan. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2024 restructuring activities. 31 Table of Contents Non-operating income (expense), net Three Months Ended Six Months Ended (In millions) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022 Interest expense $ (173) $ (48) $ (343) $ (79) 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 — Other — 6 1 4 Total non-operating income (expense), net $ (166) $ (46) $ (324) $ (78) Three Months Ended September 29, 2023 Compared with Three Months Ended September 30, 2022 Non-operating income (expense), net, increased by $120 million in expense, primarily due to an increase in interest expense associated with our new senior credit facilities and two senior notes, all of which were issued during the second quarter of fiscal 2023. Six Months Ended September 29, 2023 Compared with Six Months Ended September 30, 2022 Non-operating income (expense), net, increased by $246 million, primarily due to an increase in interest expense associated with our new senior credit facilities and two senior notes, all of which were issued during the second quarter of fiscal 2023. This is partially offset by the absence of the loss on early extinguishment of debt related to our Initial Term Loan, Delayed Draw Term Loan, and Bridge Loan, all of which were early extinguished during the second quarter of fiscal 2023. Provision for income taxes Three Months Ended Six Months Ended (In millions, except for percentages) September 29, 2023 September 30, 2022 September 29, 2023 September 30, 2022 Income (loss) before income taxes $ (141) $ 195 $ 63 $ 424 Income tax expense (benefit) $ (290) $ 126 $ (275) $ 155 Effective tax rate 206 % 65 % (437) % 37 % 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 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 discrete items 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. 32 Table of Contents LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS Liquidity and Capital Resources We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt and proceeds from divestitures for our liquidity needs. 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 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, will be sufficient to meet our working capital needs, support on-going business activities and finance the expected synergy costs related to the acquisition with Avast 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 September 29, 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 Part II, Item 1A below. Cash flows The following summarizes our cash flow activities: Six Months Ended (In millions) September 29, 2023 September 30, 2022 Net cash provided by (used in): Operating activities $ 351 $ 127 Investing activities $ 3 $ (6,546) Financing activities $ (485) $ 5,649 See Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for our supplemental cash flow information. Cash from operating activities Our cash flows provided by operating activities increased $224 million, primarily due to cash collections from revenue attributable to our acquisition with Avast during the first six months of fiscal 2023 . Cash from investing activities Our cash flows provided by and used in investing activities increased $6,549 million, primarily related to the absence of the total cash consideration paid for our acquisition with Avast during the first six months of fiscal 2023. Cash from financing activities Our cash flows provided by and used in financing activities decreased $6,134 million, primarily due to lower repayments of debt and repurchases of common stock under our repurchase program and by the absence of proceeds from the issuance of debt during the first six months of fiscal 2023. The first six months of fiscal 2024, reflect $266 million in voluntary prepayments and principal amortization payments of our Term Loans and mortgages and $41 million in repurchases of common stock. In contrast, the first six months of fiscal 2023 reflect $8,954 million of aggregate proceeds: $3,910 million from Term Facility A, $3,690 million from Term Facility B, $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, offset by the $400 million repayment of our 3.95% Senior Notes, $1,010 million repayment of our Initial Draw Term Loan, $703 million repayment of our Delayed Draw Term Loan and the settlement of the $525 million principal and $100 million equity rights associated with our New 2.0% Convertible Notes. Repurchases of common stock in the first six months of fiscal 2023 were $404 million. Cash and cash equivalents As of September 29, 2023, we had cash, cash equivalents and short-term investments of $629 million, of which $422 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. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however, these distributions may be subject to applicable state or foreign taxes. 33 Table of Contents Debt We have an undrawn revolving credit facility of $1,500 million, which expires in September 2027. Subsequent to September 29, 2023, on October 13, 2023 and October 27, 2023, we made voluntary prepayments of $100 million each, for our senior credit facilities, which were applied exclusively to the Term B Facility. Stock repurchases During the six months ended September 29, 2023 and September 30, 2022, we executed repurchases of 3 million and 17 million of our common stock under our existing stock repurchase program for an aggregate amount of $41 million and $404 million, respectively. Material Cash Requirements Our principal cash requirements are primarily to meet our working capital needs, 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. Debt instruments As of September 29, 2023, our total outstanding principal amount of indebtedness is summarized as follows. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our debt. (In millions) September 29, 2023 Term Loans $ 7,026 Senior Notes 2,600 Mortgage Loans 7 Total debt $ 9,633 The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including compliance with specified financial ratios . As of September 29, 2023, we were in compliance with all debt covenants. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding financial ratios and debt covenant compliance. Dividends On November 7, 2023, we announced a cash dividend of $0.125 per share of common stock to be paid in December 2023. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors. Stock repurchase program Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and through accelerated stock repurchase transactions. As of September 29, 2023, the remaining balance of our stock repurchase authorization was $829 million and does not have an expiration date. 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. Restructuring In connection with the acquisition with Avast, 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 acquisition 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 following the completion of the acquisition. These actions are expected to be completed by the end of fiscal 2024. During the six months ended September 29, 2023, we made $26 million in cash payments related to the September 2022 Plan. See Note 12 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further cash flow information associated with our restructuring activities. 34 Table of Contents Significant contractual obligations Our principal commitments consist of principal and interest payments related to our debt instruments, obligations under our purchase agreements, repatriation tax payments under the Tax Cuts and Jobs Acts and obligations under various non-cancellable 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 September 29, 2023, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $1,073 million in long-term income taxes payable has been excluded from our quarterly review of timing of contractual obligations. Commitments related to repatriation tax payments under the Tax Cuts and Jobs Acts decreased $128 million due to adjustments and payments made during the six months ended September 29, 2023. There have been no other material changes, outside the ordinary course of business, to the contractual obligations reported in our Annual Report. For additional information about our debt obligations and certain other contingencies, see Note 10 and Note 18, respectively, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.