What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-02-05 · 96 added, 115 removed, 169 unchanged (56% of the section changed)

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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.

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 of 1934, as amended (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.

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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 consummation of or anticipated impacts of acquisitions (including our ability to achieve synergies from acquisitions, including Avast), divestitures, restructurings, stock repurchases, financings, debt repayments and investment activities;

the outcome or impact of pending litigation, claims or disputes;

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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;

the impact of inflation, fluctuations in foreign currency exchange rates, changes in interest rates, ongoing and new geopolitical conflicts, and other global macroeconomic factors on our operations and financial performance;

and other characterizations of future events or circumstances are forward-looking statements.

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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.

Risk Factors , of this Quarterly Report on Form 10-Q and Item 1A.

Risk Factors of our Annual Report on Form 10-K for the fiscal year ended March 29, 2024.

We encourage you to read those sections carefully.

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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.

Our core cyber safety portfolio provides protection across three key categories in multiple channels and geographies, including security and performance management, 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.

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

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

The three months ended June 28, 2024 and June 30, 2023 each consisted of 13 weeks.

Our 2025 fiscal year consists of 52 weeks and ends on March 28, 2025.

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The following tables provide our key financial metrics for the periods presented:

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

Three Months Ended

(In millions, except for per share amounts) June 28, 2024 June 30, 2023

Net revenues $ 965 $ 943

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Net income (loss) per share - diluted $ 0.29 $ 0.29

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

(In millions) June 28, 2024 March 29, 2024

Cash and cash equivalents $ 644 $ 846

Contract liabilities $ 1,819 $ 1,884

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.

• Net income increased $48 million and net income per share increased $0.05, 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 $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.

Below are our financial highlights for the first quarter of fiscal 2025, compared to the corresponding period in the prior year:

• Net revenues increased $22 million, primarily due to higher sales in both our consumer security and identity and information protection products.

• Operating income increased $58 million, primarily due to increased net revenues, decrease in restructuring costs related to our acquisition of Avast and lower amortization of intangible assets.

• Net income decreased $6 million, primarily due to increased income tax expense, partially offset by increased operating income discussed above and decreased interest expense associated with our Term B facility.

• Cash and cash equivalents decreased by $202 million compared to March 29, 2024, primarily due to repurchases of our common stock, cash interest paid, dividends paid to shareholders, voluntary prepayments of our Term B facility, and mandatory principal amortization payment of our Term A facility.

This is partially offset by cash generated from operating activities during the first quarter of fiscal 2025.

• Contract liabilities decreased $65 million compared to March 29, 2024, primarily due to billing seasonality and fluctuations in foreign currency rates.

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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.

dollars, our reporting currency, changes in interest rates, as well as recession risks, any of 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, although volatility did not have a significant impact on our reported results for the first quarter of our fiscal year 2025.

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.

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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.

Although inflation rates slowed in 2023, global inflation currently remains high and has impacted our results due to higher costs.

Volatile market conditions related to geopolitical conflicts and other macroeconomic events have, at times, affected our results of operations and cash flows in non-material ways;

however, geopolitical conflicts and other macroeconomic events may in the future materially impact our results of operations and cash flows.

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.

Inflation, interest rates and foreign exchange rates remained volatile in 2023 and fluctuations in these indicators continue to remain 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

CRITICAL ACCOUNTING 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.

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.

We have based our estimates, judgements and assumptions on historical experience and on various other factors we believe to be reasonable under the circumstances.

We evaluate our estimates, judgements and assumptions 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.

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

Should any of these estimates, judgements or 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 29, 2024.

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 nine months ended December 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 Nine Months Ended

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

Three Months Ended

June 28, 2024 June 30, 2023

Net revenues 100 % 100 %

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Percentages may not add due to rounding.

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 %

Three Months Ended

(In millions, except for percentages) June 28, 2024 June 30, 2023 Change in %

Net revenues $ 965 $ 943 2 %

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

Three Months Ended June 28, 2024 Compared with Three Months Ended June 30, 2023

Net revenues increased $22 million, primarily due to a $10 million increase in sales of our consumer security products and a $15 million increase in sales of our identity and information protection products.

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This is inclusive of $7 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.

Performance Metrics

We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance.

We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies.

Our metrics may be calculated in a manner different than similar metrics used by other companies.

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Three Months Ended

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

(In millions, except for per user amounts) June 28, 2024 June 30, 2023

Direct customer revenues $ 850 $ 829

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Retention rate

(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.

(1) 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.

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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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.

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.

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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.

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 U.S.

GAAP estimated direct customer revenues or other U.S.

GAAP measures.

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

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Net revenues by geographical region

Three Months Ended Nine Months Ended

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

Three Months Ended (1)

June 28, 2024 June 30, 2023

Americas 66 % 65 %

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APJ 10 % 11 %

(1) From time to time, changes in allocation methodologies cause changes to the revenue by geographic area above.

When changes occur, we recast historical amounts to match the current methodology, such as for the three months ended June 30, 2023 where we aligned allocation methodologies across similar product categories.

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

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APJ includes Asia Pacific and Japan.

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.

Percentage of revenue by geographic region in the three months ended June 28, 2024 remains primarily in the Americas.

Cost of revenues

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 %

Three Months Ended

(In millions, except for percentages) June 28, 2024 June 30, 2023 Change in %

Cost of revenues $ 190 $ 179 6 %

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.

Three Months Ended June 28, 2024 Compared with Three Months Ended June 30, 2023

Cost of revenues increased $11 million, primarily due to a $9 million increase in revenue share costs.

Operating expenses

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 %

Three Months Ended

(In millions, except for percentages) June 28, 2024 June 30, 2023 Change in %

Sales and marketing $ 183 $ 181 1 %

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Total operating expenses $ 358 $ 405 (12) %

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.

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.

Three Months Ended June 28, 2024 Compared with Three Months Ended June 30, 2023

Sales and marketing, research and development, and general and administrative expenses all remained relatively flat.

Amortization of intangible assets decreased $18 million, primarily due to certain intangible assets being fully amortized during fiscal 2024.

Restructuring and other costs decreased $18 million, primarily due to a $17 million decrease in severance, termination benefits and other exit and disposal costs in connection with the September 2022 Plan.

See Note 11 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2025 restructuring activities.

Non-operating income (expense), net

Three Months Ended Nine Months Ended

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

Three Months Ended

(In millions) June 28, 2024 June 30, 2023

Interest expense $ (153) $ (170)

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Foreign exchange gain (loss)

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

Gain (loss) on sale of properties

Other 2 4 3 10

Total non-operating income (expense), net $ (141) $ (158)

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.

Three Months Ended June 28, 2024 Compared with Three Months Ended June 30, 2023

Non-operating income (expense), net, decreased by $17 million in expense, primary due to a $15 million decrease in interest expense related to our Term B facility.

Provision for income taxes

Three Months Ended Nine Months Ended

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

Three Months Ended

(In millions, except for percentages) June 28, 2024 June 30, 2023

Income (loss) before income taxes $ 276 $ 201

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Effective tax rate 34 % 7 %

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.

Our effective tax rate for the three months ended June 28, 2024 differs from the federal statutory income tax rate primarily due to 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 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 Sheets and Statement of Operations in future years.

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.

taxation on foreign earnings.

The Organization for Economic Cooperation and Development (OECD) and many countries have proposed to reallocate a portion of profits of large multinational enterprises (MNE) with an annual global turnover exceeding €20 billion to markets where sales arise (Pillar One), as well as enact a global minimum tax rate of at least 15% for MNE with an annual global turnover exceeding €750 million (Pillar Two).

On December 12, 2022, the European Union reached an agreement to implement the Pillar Two directive of the OECD’s reform of international taxation at the European Union level.

The agreement affirms that all Member States must transpose the Pillar Two directive by December 31, 2023.

The rules will therefore first be applicable for fiscal years starting on or after December 31, 2023.

Ireland, Czech Republic, and certain jurisdictions in which we operate have enacted legislation to implement Pillar Two and other countries are actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals.

The enactment of Pillar Two legislation is not expected to have a material adverse effect on our effective tax rate and Condensed Consolidated Financial Statements in the near term.

We will continue to monitor and reflect the impact of such legislative changes in future Condensed Consolidated Financial Statements as appropriate.

LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS

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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.

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 of 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 December 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 June 28, 2024, depending on several factors, including, but not limited to, economic conditions;

political climate;

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The following summarizes our cash flow activities:

Nine Months Ended

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

Three Months Ended

(In millions) June 28, 2024 June 30, 2023

Net cash provided by (used in):

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Cash from operating activities

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 .

Our cash flows provided by and used in operating activities increased $38 million, primarily due to increased cash collection from our cyber safety billings and higher profit before taxes adjusted by non-cash items compared to during the first three months of fiscal 2024 .

Cash from investing activities

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.

Our cash flows provided by and used in investing activities remained relatively flat.

Cash from financing activities

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 nine months of fiscal 2023 were $904 million.

Our cash flows provided by and used in financing activities decreased $116 million, primarily due to a $231 million increase in repurchases of common stock under our repurchase program.

This was partially offset by a $120 million decrease in voluntary prepayments of our Term B Facility as compared to during the first three months of fiscal 2024.

Cash and cash equivalents

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.

As of June 28, 2024, we had cash and cash equivalents of $644 million, of which $359 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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Stock repurchases

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.

During the three months ended June 28, 2024 and June 30, 2023, we executed repurchases of 11 million and 3 million of our common stock under our existing stock repurchase program for an aggregate amount of $272 million and $41 million, respectively.

Material Cash Requirements

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Debt instruments

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

As of June 28, 2024, our total outstanding principal amount of indebtedness is summarized as follows.

See Note 9 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) December 29, 2023

(In millions) June 28, 2024

Term Loans $ 6,022

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Total debt $ 8,628

The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including compliance with specified financial ratios .

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

The Amended Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including compliance with specified financial ratios .

As of June 28, 2024, we were in compliance with all debt covenants.

See Note 9 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 February 1, 2024, we announced a cash dividend of $0.125 per share of common stock to be paid in March 2024.

On August 1, 2024, we announced a cash dividend of $0.125 per share of common stock to be paid in September 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 December 29, 2023, the remaining balance of our stock repurchase authorization was $729 million and does not have an expiration date.

In May 2024, our Board of Directors authorized a new stock repurchase program through which we may repurchase shares of our common stock in an aggregate amount of up to $3 billion with no fixed expiration.

This new stock repurchase program will supersede any amounts under the prior stock repurchase programs.

As of June 28, 2024, the remaining balance of our stock repurchase authorization was $2,728 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.

In connection with the acquisition of 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.

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These actions are expected to be completed by the end of fiscal 2025.

During the nine months ended December 29, 2023, we made $35 million in cash payments related to the September 2022 Plan.

During the three months ended June 28, 2024, we made $11 million in cash payments related to the September 2022 Plan.

As of June 28, 2024, we have incurred costs of $124 million related to the September 2022 Plan.

See Note 11 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 December 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 June 28, 2024, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Therefore, $1,364 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 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.

There have been no 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 9 and Note 17, respectively, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

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