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Item 2. Management’s Discussion and Analysis

2024-02-05 compared with 2023-11-07 · 85 added, 87 removed, 199 unchanged (46% of the section changed)

24 unchanged sentences

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.

The three and nine months ended December 29, 2023 and December 30, 2022 each consisted of 13 weeks and 39 weeks, respectively.

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

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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

Three Months Ended Nine Months Ended

(In millions, except for per share amounts) December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Net revenues $ 951 $ 936 $ 2,845 $ 2,391

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Net income (loss) per share - diluted $ 0.22 $ 0.25 $ 0.75 $ 0.70

Net cash provided by (used in) operating activities $ 125 $ (88) $ 351 $ 127

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

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

Cash and cash equivalents $ 490 $ 750

Contract liabilities $ 1,744 $ 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

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.

Below are our financial highlights for the third quarter of fiscal 2024, compared to the corresponding period in the prior year:

• Net revenues increased $15 million, primarily due to higher sales in both our consumer security and identity and information protection products, partially offset by a decrease in our legacy offerings.

• Operating income decreased $33 million, primarily due to an increase of a legal accrual related to the U.S.

General Services Administration (GSA) litigation.

See Note 18 of the Notes to the Condensed Consolidated Financial Statements for further information.

This was partially offset by decreased restructuring costs related to our acquisition of Avast, increased net revenues and cost synergies post-acquisition.

• Net income decreased $21 million and Net income per share - diluted decreased 0.03, primarily due to decreased operating income discussed above and increased interest expense associated with our new senior credit facilities and two senior notes, partially offset by decreased income tax expense.

Below are our financial highlights for the first nine months of fiscal 2024, compared to the corresponding period in the prior year:

• Net revenues increased $454 million, primarily due to an additional five and a half months of revenue contribution from Avast, up $419 million as compared to the corresponding period, which was acquired during the second quarter of fiscal 2023 in September 2022, and higher sales in both our consumer security and identity and information protection products, partially offset by unfavorable foreign currency fluctuations.

• Operating income decreased $148 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.

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• Cash and cash equivalents decreased by $260 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.

• Contract liabilities decreased $44 million compared to March 31, 2023, primarily due to billing seasonality and fluctuations in foreign currency rates.

GLOBAL MACROECONOMIC CONDITIONS

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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.

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.

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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.

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

Three Months Ended Nine Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Net revenues 100 % 100 % 100 % 100 %

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Percentages may not add due to rounding.

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 %

Three Months Ended Nine Months Ended

(In millions, except for percentages) December 29, 2023 December 30, 2022 Change in % December 29, 2023 December 30, 2022 Change in %

Net revenues $ 951 $ 936 2 % $ 2,845 $ 2,391 19 %

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

Three Months Ended December 29, 2023 Compared with Three Months Ended December 30, 2022

Net revenues increased $15 million, primarily due to a $12 million increase in sales of our consumer security products and a $11 million increase in sales of our identity and information protection products.

This was partially offset by a $8 million decrease in our legacy product offerings.

This is inclusive of $2 million of foreign exchange headwinds, in our consumer security solutions.

Nine Months Ended December 29, 2023 Compared with Nine Months Ended December 30, 2022

Net revenues increased $454 million, due to a $376 million increase in sales of our consumer security products and a $78 million increase in sales of our identity and information protection products.

This is inclusive of $18 million of foreign exchange headwinds, primarily in our consumer security solutions.

4 unchanged sentences

Three Months Ended (1)

(In millions, except for per user amounts) September 29, 2023 (2)

September 30, 2022 (2)

(In millions, except for per user amounts) December 29, 2023 December 30, 2022

Direct customer revenues $ 837 $ 818

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Direct average revenue per user (ARPU) $ 7.21 $ 7.09

Retention rate

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

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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.

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

Retention rate is defined as the percentage of direct customers as of the end of the period from one year ago who are still active as of the most recently completed fiscal period.

We monitor the retention rate to evaluate the effectiveness of our strategies to improve renewals of subscriptions.

Net revenues by geographical region

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Americas 65 % 66 % 65 % 69 %

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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.

Percentage of revenue by geographic region in the three and nine months ended December 29, 2023 remains primarily in the Americas but is shifting 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 %

Three Months Ended Nine Months Ended

(In millions, except for percentages) December 29, 2023 December 30, 2022 Change in % December 29, 2023 December 30, 2022 Change in %

Cost of revenues $ 182 $ 178 2 % $ 541 $ 399 36 %

Three Months Ended September 29, 2023 Compared with Three Months Ended September 30, 2022

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

Three Months Ended December 29, 2023 Compared with Three Months Ended December 30, 2022

Our cost of revenues remained relatively flat.

Nine Months Ended December 29, 2023 Compared with Nine Months Ended December 30, 2022

Our cost of revenues increased $142 million, primarily due to a $94 million increase in the amortization of acquired intangible assets, a $23 million increase in payment processing fees, and a $19 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 %

Three Months Ended Nine Months Ended

(In millions, except for percentages) December 29, 2023 December 30, 2022 Change in % December 29, 2023 December 30, 2022 Change in %

Sales and marketing $ 184 $ 183 1 % $ 552 $ 506 9 %

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Total operating expenses $ 434 $ 390 11 % $ 1,582 $ 1,122 41 %

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.

Three Months Ended December 29, 2023 Compared with Three Months Ended December 30, 2022

Sales and marketing expense remained relatively flat.

Research and development expense decreased $14 million, due to a $9 million decrease in headcount costs and a $5 million decrease in occupancy and IT costs.

General and administrative expense increased $99 million, primarily due to a $41 million reversal in legal accrual related to the GSA litigation and $8 million in legal settlement proceeds, both of which occurred during the third quarter of fiscal 2023, and a $52 million legal accrual in the third quarter of fiscal 2024 related to the GSA litigation.

Amortization of intangible assets remained relatively flat.

Restructuring and other costs decreased $42 million, due to a $35 million decrease in severance, termination benefits and other exit and disposal costs in connection with the September 2022 Plan and a $8 million decrease in stock-based compensation.

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.

Nine Months Ended December 29, 2023 Compared with Nine Months Ended December 30, 2022

Sales and marketing expense increased $46 million, due to a $22 million increase in advertising, a $10 million increase in occupancy costs, a $9 million increase in headcount and outside services, and a $5 million increase of stock-based compensation expense.

Research and development expense increased $27 million, due to a $14 million increase in headcount and outside services, an $9 million increase in cloud hosting costs, and a $9 million increase of stock-based compensation expense.

This was partially offset by a $5 million decrease in occupancy and IT costs.

General and administrative expense increased $334 million, primarily due to a $392 million increase in legal accrual, of which $289 million is related to our litigation case with the Trustees of Columbia University in the City of New York (Columbia) and the corresponding legal fees, a $52 million legal accrual in the third quarter of fiscal 2024 and a $41 million reversal in legal accrual in the third quarter of fiscal 2023, both of which are related to the GSA litigation.

This was partially offset by a $51 million decrease in acquisition and integration costs related to our acquisition with Avast.

Amortization of intangible assets increased $72 million, as a result of the Avast acquisition.

Restructuring and other costs decreased $19 million, primarily due to a $15 million decrease severance, termination benefits and other exit and disposal costs in connection with the September 2022 Plan and a $7 million decrease in stock-based compensation expense.

See Note 12 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2024 restructuring activities.

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

Three Months Ended Nine Months Ended

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

Interest expense $ (165) $ (154) $ (508) $ (233)

2 unchanged sentences

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

Gain on sale of properties — — 4 —

Gain (loss) on sale of properties

Other 2 4 3 10

Total non-operating income (expense), net $ (154) $ (152) $ (478) $ (230)

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

Three Months Ended December 29, 2023 Compared with Three Months Ended December 30, 2022

Non-operating income (expense), net, remained relatively stable.

Nine Months Ended December 29, 2023 Compared with Nine Months Ended December 30, 2022

Non-operating income (expense), net, increased by $248 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

Three Months Ended Nine Months Ended

(In millions, except for percentages) December 29, 2023 December 30, 2022 December 29, 2023 December 30, 2022

Income (loss) before income taxes $ 181 $ 216 $ 244 $ 640

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Effective tax rate 20 % 24 % (98) % 32 %

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.

Our effective tax rate for the three and nine months ended December 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.

Our effective tax rate for the three and nine months ended December 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 the Merger, 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 $285 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.

LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS

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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;

However, our future liquidity and capital requirements may vary materially from those as of December 29, 2023, depending on several factors, including, but not limited to, economic conditions;

political climate;

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The following summarizes our cash flow activities:

Six Months Ended

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

Nine Months Ended

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

Net cash provided by (used in):

4 unchanged sentences

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 .

Our cash flows provided by operating activities increased $233 million, primarily due to cash collections from revenue attributable to our acquisition with Avast during the first nine 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.

Our cash flows provided by and used in investing activities increased $6,550 million, primarily related to the absence of the total cash consideration paid for our acquisition with Avast during the first nine 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:

Our cash flows provided by and used in financing activities decreased $5,994 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 nine months of fiscal 2023.

The first nine months of fiscal 2024, reflect $525 million in voluntary prepayments and principal amortization payments of our Term Loans and mortgages and $141 million in repurchases of common stock.

In contrast, the first nine 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.

Repurchases of common stock in the first nine months of fiscal 2023 were $904 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.

As of December 29, 2023, we had cash, cash equivalents and short-term investments of $490 million, of which $417 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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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.

During the nine months ended December 29, 2023 and December 30, 2022, we executed repurchases of 7 million and 40 million of our common stock under our existing stock repurchase program for an aggregate amount of $141 million and $904 million, respectively.

Material Cash Requirements

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Debt instruments

As of September 29, 2023, our total outstanding principal amount of indebtedness is summarized as follows.

As of December 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

(In millions) December 29, 2023

Term Loans $ 6,768

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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.

As of December 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.

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

On February 1, 2024, we announced a cash dividend of $0.125 per share of common stock to be paid in March 2024.

Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors.

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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.

As of December 29, 2023, the remaining balance of our stock repurchase authorization was $729 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.

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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.

During the nine months ended December 29, 2023, we made $35 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.

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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.

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 December 29, 2023, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Therefore, $1,069 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.

Commitments related to repatriation tax payments under the Tax Cuts and Jobs Acts decreased $128 million due to adjustments and payments made during the nine months ended December 29, 2023.

There have been no other material changes, outside the ordinary course of business, to the contractual obligations reported in our Annual Report.

1 unchanged sentence

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 2. Management’s Discussion and Analysis