Gen Digital Inc. 10-Q

Item 1. Financial Statements (Unaudited) GEN DIGITAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in millions, except par value per share amounts) June 28, 2024 March 29, 2024 ASSETS Current assets: Cash and cash equivalents $ 644 $ 846 Accounts receivable, net 152 163 Other current assets 300 334 Assets held for sale 15 15 Total current assets 1,111 1,358 Property and equipment, net 69 72 Intangible assets, net 2,537 2,638 Goodwill 10,205 10,210 Other long-term assets 1,506 1,515 Total assets $ 15,428 $ 15,793 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 83 $ 66 Accrued compensation and benefits 57 78 Current portion of long-term debt 1,332 175 Contract liabilities 1,745 1,808 Other current liabilities 535 599 Total current liabilities 3,752 2,726 Long-term debt 7,190 8,429 Long-term contract liabilities 74 76 Deferred income tax liabilities 253 261 Long-term income taxes payable 1,504 1,490 Other long-term liabilities 685 671 Total liabilities 13,458 13,653 Commitments and contingencies (Note 17) Stockholders’ equity (deficit): Common stock and additional paid-in capital, $ 0.01 par value: 3,000 shares authorized; 615 and 623 shares issued and outstanding as of June 28, 2024 and March 29, 2024, respectively 1,959 2,227 Accumulated other comprehensive income (loss) 6 11 Retained earnings (accumulated deficit) 5 ( 98 ) Total stockholders’ equity (deficit) 1,970 2,140 Total liabilities and stockholders’ equity (deficit) $ 15,428 $ 15,793 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in millions, except per share amounts) Three Months Ended June 28, 2024 June 30, 2023 Net revenues $ 965 $ 943 Cost of revenues 190 179 Gross profit 775 764 Operating expenses: Sales and marketing 183 181 Research and development 81 90 General and administrative 52 56 Amortization of intangible assets 43 61 Restructuring and other costs ( 1 ) 17 Total operating expenses 358 405 Operating income (loss) 417 359 Interest expense ( 153 ) ( 170 ) Other income (expense), net 12 12 Income (loss) before income taxes 276 201 Income tax expense (benefit) 95 14 Net income (loss) $ 181 $ 187 Net income (loss) per share - basic $ 0.29 $ 0.29 Net income (loss) per share - diluted $ 0.29 $ 0.29 Weighted-average shares outstanding: Basic 621 640 Diluted 627 643 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHEN SIVE INCOME (LOSS) (Unaudited, in millions) Three Months Ended June 28, 2024 June 30, 2023 Net income (loss) $ 181 $ 187 Other comprehensive income (loss), net of taxes: Foreign currency translation gain (loss) ( 5 ) 32 Net unrealized gain (loss) on interest rate derivative instruments — 19 Other comprehensive income (loss), net of taxes ( 5 ) 51 Comprehensive income (loss) $ 176 $ 238 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited, in millions, except share amounts) Three months ended June 28, 2024 Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (Deficit) Shares Amount Balance as of March 29, 2024 623 $ 2,227 $ 11 $ ( 98 ) $ 2,140 Net income (loss) — — — 181 181 Other comprehensive income (loss), net of taxes — — ( 5 ) — ( 5 ) Common stock issued under employee stock incentive plans 4 — — — — Shares withheld for taxes related to vesting of stock units ( 1 ) ( 24 ) — — ( 24 ) Repurchases of common stock (1) ( 11 ) ( 274 ) — — ( 274 ) Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued — ( 1 ) — ( 78 ) ( 79 ) Stock-based compensation — 31 — — 31 Balance as of June 28, 2024 615 $ 1,959 $ 6 $ 5 $ 1,970 Three Months Ended June 30, 2023 Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total Stockholders’ Equity (Deficit) Shares Amount Balance as of March 31, 2023 640 $ 2,800 $ ( 15 ) $ ( 633 ) $ 2,152 Net income (loss) — — — 187 187 Other comprehensive income (loss), net of taxes — — 51 — 51 Common stock issued under employee stock incentive plans 3 — — — — Shares withheld for taxes related to vesting of stock units ( 1 ) ( 18 ) — — ( 18 ) Repurchases of common stock ( 3 ) ( 41 ) — — ( 41 ) Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued — ( 81 ) — — ( 81 ) Stock-based compensation — 37 — — 37 Balance as of June 30, 2023 639 $ 2,697 $ 36 $ ( 446 ) $ 2,287 (1) Amount includes excise tax on share repurchases. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents GEN DIGITAL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in millions) Three Months Ended June 28, 2024 June 30, 2023 OPERATING ACTIVITIES: Net income (loss) $ 181 $ 187 Adjustments: Amortization and depreciation 106 125 Stock-based compensation expense 31 37 Deferred income taxes ( 10 ) ( 60 ) Gain on sale of property — ( 4 ) Non-cash operating lease expense 3 6 Other ( 2 ) 18 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net 9 20 Accounts payable 17 ( 12 ) Accrued compensation and benefits ( 21 ) ( 42 ) Contract liabilities ( 56 ) ( 65 ) Income taxes payable 81 28 Other assets 17 ( 27 ) Other liabilities ( 92 ) 15 Net cash provided by (used in) operating activities 264 226 INVESTING ACTIVITIES: Purchases of property and equipment ( 2 ) ( 4 ) Other — ( 2 ) Net cash provided by (used in) investing activities ( 2 ) ( 6 ) FINANCING ACTIVITIES: Repayments of debt ( 88 ) ( 208 ) Tax payments related to vesting of stock units ( 24 ) ( 18 ) Dividends and dividend equivalents paid ( 82 ) ( 83 ) Repurchases of common stock ( 272 ) ( 41 ) Net cash provided by (used in) financing activities ( 466 ) ( 350 ) Effect of exchange rate fluctuations on cash and cash equivalents 2 3 Change in cash and cash equivalents ( 202 ) ( 127 ) Beginning cash and cash equivalents 846 750 Ending cash and cash equivalents $ 644 $ 623 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 7 Table of Contents GEN DIGITAL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Description of Business and Significant Accounting Policies Business Gen Digital Inc. is a global company powering Digital Freedom with a family of trusted consumer brands including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender and CCleaner. Our cyber safety portfolio provides protection across multiple channels and geographies, including security and performance management, identity protection, and online privacy. Our technology platforms bring together software and service capabilities into comprehensive and easy-to-use products and solutions across our brands. We have also evolved beyond traditional cyber safety to offer adjacent trust-based solutions, including digital identity and access management, digital reputation management, and restoration support services. Basis of presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended March 29, 2024. The results of operations for the three months ended June 28, 2024 are not necessarily indicative of the results expected for the entire fiscal year. Fiscal calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. Unless otherwise stated, references to three month periods in this report relate to fiscal periods ended June 28, 2024 and June 30, 2023. 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. Use of estimates The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the Condensed Consolidated Financial Statements and accompanying Notes. Such estimates include, but are not limited to, valuation of business combinations including acquired intangible assets and goodwill, deferred revenue, loss contingencies, the recognition and measurement of current and deferred income taxes, including assessing of unrecognized tax benefits, and valuation of assets and liabilities. On an ongoing basis, management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Third-party valuation specialists are also utilized for certain estimates. Actual results could differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment as a result of macroeconomic factors such as inflation, fluctuations in foreign currency exchange rates relative to the U.S. dollar, our reporting currency, changes in interest rates, ongoing and new geopolitical conflicts, and such differences may be material to the Condensed Consolidated Financial Statements. Significant accounting policies With the exception of those discussed in Note 2, there have been no material changes to our significant accounting policies as of and for the three months ended June 28, 2024, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended March 29, 2024. Revision of Prior Period Financial Statements Historically, we had a practice of recognizing revenue for certain groups of customer renewals on the successful billing date, rather than the renewal start date. This practice was instituted to align with our system which was configured and implemented based on payment confirmation from e-commerce partners. We are changing this practice to recognize revenue for these groups on the renewal start date. We concluded that the impact of this change is not material to any previously issued annual or interim financial statements; however, we have revised previously reported financial information. This correction will also be reflected in future filings, as applicable. We have corrected this error in the accompanying Condensed Consolidated Balance Sheet as of March 29, 2024 by increasing contract liabilities for $ 78 million, increasing other long-term assets for $ 21 million and decreasing retained earnings (accumulated deficit) for $ 57 million. The Condensed Consolidated Statement of Operations for the three months ended June 30, 2023 included a decrease to net revenues of $ 3 million and a decrease to income tax expense (benefit) of $ 1 million. Note 2. Recent Accounting Standards 8 Table of Contents Recently issued authoritative guidance not yet adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. In November 2023, the Financial Accounting Standards Board (FASB) issued new guidance to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. The ASU also clarify circumstances in which an entity can disclose multiple segment measures of profit or loss and provide new segment disclosure requirement for entities with a single reportable segment. This is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We do not expect the adoption of this guidance will have a material impact on our Condensed Consolidated Financial Statements and disclosures. ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. In December 2023, the FASB issued new guidance to update income tax disclosure requirements, requiring disaggregated information about an entity’s effective tax rate reconciliation as well as income taxes paid. This is effective for fiscal years beginning after December 15, 2024. We are currently evaluating the impact of the adoption of this guidance on our Condensed Consolidated Financial Statements and disclosures. There have been no other material changes in recently issued or adopted accounting standards from those disclosed in our Annual Report on Form 10-K for the fiscal year ended March 29, 2024. Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements have had, or will have, a material impact on our Condensed Consolidated Financial Statements and disclosures. Note 3. Assets Held for Sale Assets held for sale During fiscal 2023, we determined land and buildings in Dublin, Ireland, which were previously reported as property and equipment, qualified as held for sale. During the first quarter of fiscal 2024, we completed the sale of certain land and buildings in Dublin, Ireland, for cash consideration of $ 13 million, net of selling costs, and recognized a gain on sale of $ 4 million. The remaining land and building in Dublin, Ireland, remains as held for sale. We have taken into consideration the current real estate values and demand and continue to execute pla ns to sell the remaining property. As of June 28, 2024, this property remains classified as assets held for sale. During the three months ended June 28, 2024, there were no impairments because the fair value less costs to sell either equals or exceeds its carrying value of assets held for sale. Note 4. Revenues Contract liabilities During the three months ended June 28, 2024, we recognized $ 722 million from the contract liabilities balances as of March 29, 2024. During the three months ended June 30, 2023, we recognized $ 711 million from the contract liabilities balances as of March 31, 2023. Remaining performance obligations Remaining performance obligations represent contracted revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods. As of June 28, 2024, we had $ 1,283 million of remaining performance obligations, excluding customer deposit liabilities of $ 536 million, of which we expect to recognize approximately 94 % as revenue over the next 12 months. See Note 16 for tabular disclosures of disaggregated revenue by solution and geographic region. Note 5. Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill are as follows: (In millions) Balance as of March 29, 2024 $ 10,210 Translation adjustments ( 5 ) Balance as of June 28, 2024 $ 10,205 9 Table of Contents Intangible assets, net The following table summarizes the components of our intangible assets, net: June 28, 2024 March 29, 2024 (In millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 1,642 $ ( 814 ) $ 828 $ 1,642 $ ( 773 ) $ 869 Developed technology 1,343 ( 445 ) 898 1,343 ( 388 ) 955 Other 90 ( 18 ) 72 90 ( 15 ) 75 Total finite-lived intangible assets 3,075 ( 1,277 ) 1,798 3,075 ( 1,176 ) 1,899 Indefinite-lived trade names 739 — 739 739 — 739 Total intangible assets $ 3,814 $ ( 1,277 ) $ 2,537 $ 3,814 $ ( 1,176 ) $ 2,638 Amortization expense for purchased intangible assets is summarized below: Three Months Ended Condensed Consolidated Statements of Operations Classification (In millions) June 28, 2024 June 30, 2023 Customer relationships and other $ 43 $ 61 Operating expenses Developed technology 57 57 Cost of revenues Total $ 100 $ 118 As of June 28, 2024, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year: (In millions) Remainder of 2025 $ 300 2026 395 2027 382 2028 379 2029 249 Thereafter 93 Total $ 1,798 Note 6. Supplementary Information Cash and cash equivalents: (In millions) June 28, 2024 March 29, 2024 Cash $ 349 $ 408 Cash equivalents 295 438 Total cash and cash equivalents $ 644 $ 846 Accounts receivable, net: (In millions) June 28, 2024 March 29, 2024 Accounts receivable $ 154 $ 165 Allowance for doubtful accounts ( 2 ) ( 2 ) Total accounts receivable, net $ 152 $ 163 Other current assets: (In millions) June 28, 2024 March 29, 2024 Prepaid expenses $ 143 $ 142 Income tax receivable and prepaid income taxes 129 174 Other tax receivable 11 1 Other 17 17 Total other current assets $ 300 $ 334 10 Table of Contents Property and equipment, net: (In millions) June 28, 2024 March 29, 2024 Land $ 13 $ 13 Computer hardware and software 493 491 Office furniture and equipment 16 16 Buildings 27 28 Leasehold improvements 36 35 Construction in progress 1 1 Total property and equipment, gross 586 584 Accumulated depreciation and amortization ( 517 ) ( 512 ) Total property and equipment, net $ 69 $ 72 Other long-term assets: (In millions) June 28, 2024 March 29, 2024 Non-marketable equity investments $ 136 $ 136 Long-term income tax receivable and prepaid income taxes 11 11 Deferred income tax assets 1,237 1,236 Operating lease assets 49 45 Long-term prepaid royalty 17 21 Other 56 66 Total other long-term assets $ 1,506 $ 1,515 Short-term contract liabilities: (In millions) June 28, 2024 March 29, 2024 Deferred revenue $ 1,209 $ 1,200 Customer deposit liabilities 536 608 Total short-term contract liabilities $ 1,745 $ 1,808 Other current liabilities: (In millions) June 28, 2024 March 29, 2024 Income taxes payable $ 238 $ 198 Other taxes payable 76 72 Accrued legal fees 83 103 Accrued royalties 39 52 Accrued interest 38 78 Current operating lease liabilities 13 13 Other accrued liabilities 48 83 Total other current liabilities $ 535 $ 599 Other long-term liabilities: (In millions) June 28, 2024 March 29, 2024 Long-term accrued legal fees $ 598 $ 586 Long-term operating lease liabilities 41 38 Other 46 47 Total other long-term liabilities $ 685 $ 671 Long-term income taxes payable: (In millions) June 28, 2024 March 29, 2024 Unrecognized tax benefits (including interest and penalties) $ 1,364 $ 1,346 Deemed repatriation tax payable 139 139 Other long-term income taxes 1 5 Total long-term income taxes payable $ 1,504 $ 1,490 11 Table of Contents Other income (expense), net: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Interest income $ 8 $ 6 Foreign exchange gain (loss) 4 1 Gain (loss) on sale of properties — 4 Other — 1 Other income (expense), net $ 12 $ 12 Supplemental cash flow information: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Income taxes paid (received), net of refunds $ 7 $ 21 Interest expense paid $ 191 $ 155 Cash paid for amounts included in the measurement of operating lease liabilities $ 5 $ 8 Non-cash operating activities: Reduction (increase) of operating lease assets as a result of lease terminations and modifications $ ( 7 ) $ ( 1 ) Note 7. Financial Instruments and Fair Value Measurements For financial instruments measured at fair value, fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. The three levels of inputs that may be used to measure fair value are: • Level 1: Quoted prices in active markets for identical assets or liabilities. • Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets or model-derived valuations. All significant inputs used in our valuations, such as discounted cash flows, are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes. Assets measured and recorded at fair value on a recurring basis The following table summarizes our financial instruments measured at fair value on a recurring basis: June 28, 2024 March 29, 2024 (In millions) Fair Value Level 1 Level 2 Fair Value Level 1 Level 2 Assets: Money market funds $ 295 $ 295 $ — $ 438 $ 438 $ — Interest rate swaps 16 — 16 16 — 16 Total $ 311 $ 295 $ 16 $ 454 $ 438 $ 16 Financial instruments not recorded at fair value on a recurring basis include our non-marketable equity investments and long-term debt. Non-marketable equity investments As of June 28, 2024 and March 29, 2024, the carrying value of our non-marketable equity investments was $ 136 million. Current and long-term debt As of June 28, 2024 and March 29, 2024, the total fair value of our current and long-term fixed rate debt was $ 2,620 million and $ 2,624 million, respectively. The fair value of our variable rate debt approximated their carrying value. The fair values of all our debt obligations were based on Level 2 inputs. 12 Table of Contents Note 8. Leases We lease certain facilities, equipment and data center co-locations under operating leases that expire on various dates through fiscal 2030. Our leases generally have terms that range from 1 year to 8 years for our facilities, 1 year to 4 years for equipment and 1 year to 5 years for data center co-locations. Some of our leases contain renewal options, escalation clauses, rent concessions and leasehold improvement incentives. The following summarizes our lease costs: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Operating lease costs $ 3 $ 4 Short-term lease costs 1 — Variable lease costs — 1 Total lease costs $ 4 $ 5 Other information related to our operating leases was as follows: June 28, 2024 March 29, 2024 Weighted-average remaining lease term 4.6 years 4.6 years Weighted-average discount rate 5.80 % 5.35 % See Note 6 for cash flow information related to our operating leases. As of June 28, 2024, the maturities of our lease liabilities by fiscal year are as follows: (In millions) Remainder of 2025 $ 11 2026 14 2027 14 2028 9 2029 8 Thereafter 5 Total lease payments 61 Less: Imputed interest ( 7 ) Present value of lease liabilities $ 54 13 Table of Contents Note 9. Debt The following table summarizes components of our debt: (In millions, except percentages) June 28, 2024 March 29, 2024 Effective Interest Rate 5.00 % Senior Notes due April 15, 2025 $ 1,100 $ 1,100 5.00 % Term A Facility due September 12, 2027 3,617 3,666 SOFR + % (2) 6.75 % Senior Notes due September 30, 2027 900 900 6.75 % Term B Facility due September 12, 2029 2,405 2,444 SOFR + % (3) 1.29 % Avira Mortgage due December 30, 2029 (1) 3 3 1.29 % 7.125 % Senior Notes due September 30, 2030 600 600 7.13 % 0.95 % Avira Mortgage due December 30, 2030 (1) 3 3 0.95 % Total principal amount 8,628 8,716 Less: unamortized discount and issuance costs ( 106 ) ( 112 ) Total debt 8,522 8,604 Less: current portion ( 1,332 ) ( 175 ) Total long-term debt $ 7,190 $ 8,429 (1) The Avira Mortgages are denominated in a foreign currency so the balances of these mortgages may fluctuate based on changes in foreign currency exchange rates. (2) Term A Facility due 2027 bears interest at a rate equal to Term SOFR plus a credit spread adjustment (CSA) plus a margin based either on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt or consolidated adjusted leverage as defined in the underlying loan agreement. (3) Term B Facility due 2029 bears interest at a rate equal to Term SOFR plus 1.75 %. The interest rates for the outstanding term loans are as follows: June 28, 2024 March 29, 2024 Term A Facility due September 12, 2027 6.94 % 7.18 % Term B Facility due September 12, 2029 7.09 % 7.43 % As of June 28, 2024, the future contractual maturities of debt by fiscal year are as follows: (In millions) Remainder of 2025 $ 117 2026 1,392 2027 233 2028 4,017 2029 38 Thereafter 2,831 Total future maturities of debt $ 8,628 Senior credit facilities On September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $ 1,500 million revolving credit facility (Revolving Facility), a $ 3,910 million term loan A facility (Term A Facility), (iii) a $ 3,690 million term loan B facility (Term B Facility) and (iv) a $ 750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the close of the acquisition of Avast. The Credit Agreement provides that we have the right at any time, subject to customary conditions, to request incremental revolving commitments and incremental term loans up to an unlimited amount, subject to certain customary conditions precedent and other provisions. The lenders under these facilities will not be under any obligation to provide any such incremental loans or commitments. We drew down the aggregate principal amounts of the Term A Facility and Term B Facility to finance the cash consideration payable for our acquisition of Avast and to fully repay the outstanding principal and accrued interest of the existing credit facilities at the time. The Credit Agreement replaced the existing credit facilities upon the close of the transaction. The Revolving Facility and Term A Facility will mature in September 2027, and the Term Facility B will mature in September 2029; the senior credit facilities remain senior secured. On June 5, 2024, we entered into the First Amendment with certain financial institutions under the Credit Agreement, as amended (Amended Credit Agreement). The First Amendment repriced our Term B Facility interest rate from the applicable benchmark rate plus CSA plus 2.0 % to the applicable benchmark rate plus 1.75 %. Other than as described above, the Revolving Facility and the term loan facilities under the First Amendment continue to have the same terms as provided under the Credit Agreement. 14 Table of Contents The principal amounts of Term Facility A must be repaid in quarterly installments on the last business day of each calendar quarter equal to 1.25 % of the aggregate principal amount as of the date of the Amended Credit Agreement. The principal amounts of Term Facility B must be repaid in quarterly installments on the last business day of each calendar quarter equal to 0.25 % of the aggregate principal amount as of the date of the Amended Credit Agreement. Quarterly installment payments commenced on March 31, 2023. We may voluntarily repay outstanding principal balances under the Revolving Facility and Term loan facilities without penalty or premium. As of June 28, 2024, there were no borrowings outstanding under our Revolving Facility; however, from time to time we utilize letters of credits as part of our ordinary course of business. Letters of credit reduce our Revolving Facility commitment amounts. Interest on our Term A facility borrowings under the Amended Credit Agreement, can be based on a base rate or the SOFR at our election. Based on our debt ratings and our consolidated leverage ratios as determined in accordance with the Amended Credit Agreement, loans borrowed bear interest, in the case of base rate loans, at a per annum rate equal to the applicable base rate plus CSA plus a margin ranging from 0.125 % to 0.75 %, and in the case of the SOFR loans, SOFR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %. Debt covenant compliance The Amended Credit Agreement contains customary representations and warranties, affirmative and negative covenants. Each of the Revolving Facility and Term A Facility are subject to a covenant that we maintain a consolidated leverage ratio less than or equal to (i) 6.0 to 1.0 from the second quarter of fiscal 2023 through the last day of the second quarter of fiscal 2024, (ii) 5.75 to 1.0 following the last day of the second quarter of fiscal 2024 through the last day of the second quarter of fiscal 2025 and (iii) 5.25 to 1.0 for each fiscal quarter thereafter; provided that such maximum consolidated leverage ratio will increase to 5.75 to 1.0 for the four fiscal quarters ending immediately should we acquire property, business or assets in an aggregate amount greater than $ 250 million. In addition, the Amended Credit Agreement contains customary events of default under which our payment obligations may be accelerated, including, among others, non-payment of principal, interest or other amounts when due, inaccuracy of representations and warranties, violation of certain covenants, payment and acceleration cross defaults with certain other indebtedness, certain undischarged judgments, bankruptcy, insolvency or inability to pay debts, change of control, the occurrence of certain events related to the Employee Retirement Income Security Act of 1974 (ERISA), and the Company experiencing a change of control. As of June 28, 2024 , we were in compliance with all financial debt covenants. Senior notes On February 9, 2017, we issued $ 1,100 million aggregate principal amount of our 5.0 % Senior Notes due April 15, 2025 (the 5.0 % Senior Notes). The 5.0 % Senior Notes bear interest at a rate of 5.00 % per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning on October 15, 2017. On or after April 15, 2020, we may redeem some or all of the 5.0 % Senior Notes at the applicable redemption prices set forth in the supplemental indenture, plus accrued and unpaid interest. O n September 19, 2022, we issued two series of senior notes, consisting of 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030, for an aggregate principal of $ 1,500 million. They are senior unsecured obligations that rank equally in right of payment with all of our existing and future senior, unsecured, unsubordinated obligations and may be redeemed at any time, subject to the make-whole provisions contained in the applicable indenture relating to such series of notes. Interest on these series of notes is payable semi-annually in arrears on March 31 and September 30 for both the 6.75 % Senior Notes and 7.125 % Senior Notes, commencing on March 31, 2023. We may redeem some or all of the 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030 at any time, subject to a prepayment penalty that expires one year prior to the maturity of each respective note. The First Call Dates of the 6.75 % Senior Notes due 2027 and 7.125 % Senior Notes due 2030 are September 30, 2024 and September 30, 2025, respectively. Note 10. Derivatives Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flow associated with changes in foreign currency exchange rates and interest rates. These hedging contracts reduce, but do not entirely eliminate the impact of adverse foreign exchange rate and interest rate movements. We do not use our derivative instruments for speculative trading purposes. By using derivative financial instruments to hedge exposures to changes in foreign exchange and interest rates, we are exposed to credit risk; however, we mitigate this risk by entering into hedging instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts. Foreign currency exchange forward contracts 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 impacts our operating results. As part of our foreign currency risk mitigation strategy, we have entered into monthly foreign exchange forward contracts to hedge foreign currency balance sheet exposure. These forward contracts are not designated as hedging instruments. We do not hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. 15 Table of Contents Interest rate swap In March 2023, we entered into interest rate swap agreements to mitigate risks associated with the variable interest rate of our Term A Facility. These pay-fixed, receive-floating rate interest rate swaps have the economic effect of hedging the variability of forecasted interest payments until their maturity on March 31, 2026. Pursuant to the agreements, we have effectively converted $ 1 billion of our variable rate borrowings under Term A Facility to fixed rates, with $ 500 million at a fixed rate of 3.762 % and $ 500 million at a fixed rate of 3.55 %. These arrangements are designated as cash flow hedges for accounting purposes and as such, we will recognize the changes in the fair value of these interest rate swaps in Accumulated other comprehensive income (loss) (AOCI), and the periodic settlements or accrued settlements of the swap will be recognized within or against interest expense in our Condensed Consolidated Statements of Operations. Cash flows related to these hedges are classified under operating activities in our Condensed Consolidated Statement of Cash Flows. Summary of derivative instruments The following table summarizes our outstanding derivative instruments as of June 28, 2024 and March 29, 2024: Notional Amount Fair Value of Derivative Assets Fair Value of Derivative Liabilities (In millions) June 28, 2024 March 29, 2024 June 28, 2024 March 29, 2024 June 28, 2024 March 29, 2024 Foreign exchange contracts not designated as hedging instrument (1) $ 312 $ 345 $ — $ — $ — $ — Interest rate swap contracts designated as cash flow hedge 1,000 1,000 16 16 — — Total $ 1,312 $ 1,345 $ 16 $ 16 $ — $ — (1) The fair values of the foreign exchange contracts are less than $ 1 million as of June 28, 2024 and March 29, 2024. The following table summarizes the effect of our cash flow hedges on AOCI during the periods indicated: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Interest rate swap contracts designated as cash flow hedge $ ( 4 ) $ ( 22 ) The related gain (loss) recognized in our Condensed Consolidated Statements of Operations was as follows: Three Months Ended Condensed Consolidated Statements of Operations Classification (In millions) June 28, 2024 June 30, 2023 Foreign exchange contracts not designated as hedging instrument $ ( 3 ) $ ( 3 ) Other income (expense), net Interest rate swap contracts designated as cash flow hedge 4 3 Interest expense Total $ 1 $ — As of June 28, 2024, we estimate that $ 12 million of net deferred gains related to our interest rate hedges will be recognized in earnings over the next 12 months. Note 11. Restructuring and Other Costs Our restructuring and other costs consist primarily of severance and termination benefits, contract cancellation charges, asset write-offs and impairments and other exit and disposal costs. Severance costs generally include severance payments, outplacement services, health insurance coverage and legal costs. Contract cancellation charges primarily include penalties for early termination of contracts and write-offs of related prepaid assets. Other exit and disposal costs include costs to exit and consolidate facilities in connection with restructuring events. Separation costs primarily consist of consulting costs incurred in connection with our divestitures. September 2022 Plan In connection with our 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 acquisition on September 12, 2022. Actions under this plan include the reduction of our workforce, contract terminations, facilities closures, and the sale of underutilized facilities as well as stock-based compensation charges for accelerated equity awards to certain terminated employees. We expect that we will incur total costs up to $ 150 million following the completion of the acquisition. These actions are expected to be completed by the end of fiscal 2025. As of June 28, 2024, we have incurred costs of $ 124 million related to the September 2022 Plan. 16 Table of Contents Restructuring and other costs summary Our restructuring and other costs are presented in the table below: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Severance and termination benefit costs $ ( 1 ) $ 11 Contract cancellation charges — 1 Other exit and disposal costs — 5 Total restructuring and other costs $ ( 1 ) $ 17 Note 12. Income Taxes The following table summarizes our effective tax rate for the periods presented: Three Months Ended (In millions, except percentages) June 28, 2024 June 30, 2023 Income (loss) before income taxes $ 276 $ 201 Income tax expense (benefit) $ 95 $ 14 Effective tax rate 34 % 7 % 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 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. Note 13. Stockholders' Equity Dividends On August 1, 2024, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in September 2024. All shares of common stock issued and outstanding and all restricted stock units (RSUs) and performance-based restricted stock units (PRUs) as of the record date will be entitled to the dividend and dividend equivalent rights, respectively, which will be paid out if and when the underlying shares are released. However, the 4 million unvested RSUs assumed in connection with the acquisition of Avast will not be entitled to DERs. See Note 14 for further information about these equity awards. Any future dividends and DERs will be subject to the approval of our Board of Directors. Stock repurchase program 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. Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market and through accelerated stock repurchase transactions. As of June 28, 2024, we had $ 2,728 million remaining under the authorization to be completed in future periods. The following table summarizes activity related to our stock repurchase program during three months ended June 28, 2024 and June 30, 2023: Three Months Ended (In millions, except per share amounts) June 28, 2024 June 30, 2023 Number of shares repurchased 11 3 Average price per share $ 24.65 $ 16.71 Aggregate purchase price $ 272 $ 41 Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss), net of taxes, consisted of foreign currency translation adjustments and unrealized gain (loss) on derivative instruments: (In millions) Foreign Currency Translation Adjustments Unrealized Gain (Loss) On Derivative Instruments Total Balance as of March 29, 2024 $ ( 5 ) $ 16 $ 11 Other comprehensive income (loss), net of taxes ( 5 ) — ( 5 ) Balance as of June 28, 2024 $ ( 10 ) $ 16 $ 6 17 Table of Contents Note 14. Stock-Based Compensation Avast equity awards In connection with our acquisition of Avast, we assumed the outstanding equity awards under two of Avast’s equity incentive plans (the Avast Holding B.V. 2014 Share Option Plan and the Rules of the Avast plc Long Term Incentive Plan (collectively, the Avast Plans)), which consisted of 4 million unvested RSUs. The assumed RSUs generally retain the terms and conditions under which they were originally granted. We intend to grant all additional shares that remain available for issuance under the Avast Plans. Upon vesting, these assumed RSUs and any additional shares granted will settle into shares of our common stock. The following table sets forth the stock-based compensation expense recognized for our equity incentive plans: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Cost of revenues $ 1 $ 1 Sales and marketing 9 9 Research and development 9 11 General and administrative 12 16 Total stock-based compensation expense $ 31 $ 37 Income tax benefit for stock-based compensation expense $ ( 4 ) $ ( 5 ) As of June 28, 2024, the total unrecognized stock-based compensation expense related to our unvested stock-based awards was $ 270 million, which will be recognized over an estimated weighted-average amortization period of 2.2 years. The following table summarizes additional information related to our stock-based awards: Three Months Ended (In millions, except per grant data) June 28, 2024 June 30, 2023 Restricted stock units (RSUs): Weighted-average fair value per award granted $ 23.47 $ 17.24 Awards granted 5 5 Total fair value of awards released $ 56 $ 35 Outstanding and unvested 10 11 Performance-based restricted stock units (PRUs): Weighted-average fair value per award granted $ 32.44 $ 22.79 Awards granted 1 2 Total fair value of awards released $ 24 $ 19 Outstanding and unvested at target payout 5 6 Dividend equivalent rights (DERs) Our RSUs and PRUs, except for the 4 million assumed RSUs under the Avast Plans, contain DERs that entitle the recipient of an award to receive cash dividend payments when the associated award is released. The amount of DERs equals to the cumulated dividends on the issued number of common stock that would have been payable since the date the associated award was granted. As of June 28, 2024 and March 29, 2024, current dividends payable related to DER was $ 3 million and $ 4 million, respectively, recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets, and long-term dividends payable related to DER was $ 2 million and $ 4 million, respectively, recorded as part of Other long-term liabilities in the Condensed Consolidated Balance Sheets. 18 Table of Contents Note 15. Net Income (Loss) Per Share Basic income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share also includes the incremental effect of dilutive potentially issuable common shares outstanding. Dilutive potentially issuable common shares include the dilutive effect of employee equity awards. The components of basic and diluted net income (loss) per share are as follows: Three Months Ended (In millions, except per share amounts) June 28, 2024 June 30, 2023 Net income (loss) $ 181 $ 187 Net income (loss) per share - basic $ 0.29 $ 0.29 Net income (loss) per share - diluted $ 0.29 $ 0.29 Weighted-average shares outstanding - basic 621 640 Dilutive potentially issuable shares: Employee equity awards 6 3 Weighted-average shares outstanding - diluted 627 643 Anti-dilutive shares excluded from diluted net income per share calculation: Employee equity awards 3 6 Note 16. Segment and Geographic Information We operate as one reportable segment. Our Chief Operating Decision Maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis to evaluate company performance and to allocate and prioritize resources. The following table summarizes net revenues for our major solutions: Three Months Ended (In millions) June 28, 2024 June 30, 2023 Consumer security revenues $ 607 $ 597 Identity and information protection revenues 344 329 Total cyber safety revenues 951 926 Legacy revenues 14 17 Total net revenues (1) $ 965 $ 943 (1) During the three months ended June 28, 2024, total net revenues include an unfavorable foreign exchange impact of $ 7 million from our consumer security solutions. Consumer security includes revenues from our Norton 360 Security offerings, Norton, Avast, AVG, and Avira Security and VPN offerings, and other consumer security and device performance solutions through our direct, partner and small business channels. Identity and information protection includes revenues from our Norton 360 with LifeLock offerings, LifeLock identity theft protection and other identity information protection and privacy solutions. Legacy 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. Geographic information Net revenues by geography are based on the billing addresses of our customers. The following table represents net revenues by geographic area for the periods presented: Three Months Ended (In millions) June 28, 2024 June, 30, 2023 (2) Americas $ 636 $ 614 EMEA 233 226 APJ 96 103 Total net revenues (1) $ 965 $ 943 Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan. (1) During the three months ended June 28, 2024, total net revenues include an unfavorable foreign exchange impact of $ 7 million primarily from APJ. 19 Table of Contents (2) 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. Revenues from customers inside the U.S. were $ 579 million and $ 558 million during the three months ended June 28, 2024 and June 30, 2023, respectively. No other individual country accounted for more than 10% of revenues. The table below represents cash and cash equivalents held in the U.S. and internationally in various foreign subsidiaries: (In millions) June 28, 2024 March 29, 2024 U.S. $ 285 $ 467 International 359 379 Total cash and cash equivalents $ 644 $ 846 The table below represents our property and equipment, net of accumulated depreciation and amortization, by geographic area, based on the physical location of the asset, at the end of each period presented. (In millions) June 28, 2024 March 29, 2024 U.S. $ 46 $ 47 Germany 12 12 Other countries (1) 11 13 Total property and equipment, net $ 69 $ 72 (1) No individual country represented more than 10% of the respective totals. Significant customers and e-commerce partners No individual, end-user customer accounted for 10% or more of our net revenues during the three months ended June 28, 2024 and June 30, 2023. E-commerce partners that accounted for over 10% of our total billed and unbilled accounts receivable were as follows: June 28, 2024 March 29, 2024 E-commerce partner A 13 % 13 % E-commerce partner B 15 % 11 % Note 17. Commitments and Contingencies Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries and other parties with respect to certain matters, including, but not limited to, product warranties and losses arising out of our breach of agreements or representations and warranties made by us, including claims alleging that our software infringes on the intellectual property rights of a third party. In addition, our bylaws contain indemnification obligations to our directors, officers, employees, and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. We monitor the conditions that are subject to indemnification to identify if a loss has occurred. Historically, we have not incurred material costs as a result of obligations under these agreements, and we have not accrued any material liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements. Litigation contingencies Trustees of the University of Columbia in the City of New York v. NortonLifeLock As previously disclosed, on May 2, 2022, a jury returned its verdict in a patent infringement case filed in 2013 by the Trustees of Columbia University in the City of New York (Columbia) in the U.S. District Court for the Eastern District of Virginia. Columbia originally brought suit alleging infringement of six patents owned by the university. We won a favorable claim construction order on all six patents, and the claim construction was upheld by the Federal Circuit in 2016 on all but U.S. Patent Nos. 8,601,322 and 8,074,115. We also sought inter partes review by the Patent Trial and Appeal Board of the claims of the ‘322 and ‘115 Patents and all but two claims of the ‘322 Patent and three claims of the ‘115 Patent were invalidated. The remaining claims of the ‘322 and ‘115 Patents were the only claims that remained in suit at trial. The jury found that our Norton Security products and Symantec Endpoint Protection products (the latter of which were sold by us to Broadcom as part of an Asset Purchase Agreement dated November 4, 2019) willfully infringe the ‘322 and ‘115 Patents through the use of SONAR/BASH behavioral protection technology. The jury awarded damages in the amount of $ 185 million. Columbia did not seek injunctive relief against us. We believe that we have ceased the use of the technology found by the jury to 20 Table of Contents infringe. The jury also found that we did not fraudulently conceal its prosecution of U.S. Patent No. 8,549,643 but did find that two Columbia professors were coinventors of this patent. No damages were awarded related to this patent. On September 30, 2023, the court entered its judgment, which awarded Columbia (i) enhanced damages of 2.6 times the jury award; (ii) prejudgment interest, post-judgment interest, and supplemental damages to be calculated in accordance with the parties’ previous agreement; and (iii) attorneys’ fees subject to the parties meeting and conferring as to amount. We have complied with the court’s order and submitted a stipulation regarding the final calculations of all outstanding interest, royalties and attorneys’ fees. We have posted the required surety bond and have appealed the judgement to the Federal Circuit Court of Appeals, which remains pending. At this time, our current estimate of probable losses from this matter is approximately $ 587 million, which we have accrued and recorded as part of Other long-term liabilities in the Condensed Consolidated Balance Sheets . There is a reasonable possibility that a loss may be incurred in excess of our accrual for this matter; however, such incremental loss cannot be reasonably estimated. Securities Class Action and Derivative Litigation Securities class action lawsuits, which have since been consolidated, were filed in May 2018 against us and certain of our former officers, in the U.S. District Court for the Northern District of California. The lead plaintiff’s consolidated amended complaint alleged that, during a purported class period of May 11, 2017 to August 2, 2018, defendants made false and misleading statements in violation of Sections 10(b) and 20(a), and that certain individuals violated Section 20A, of the Securities Exchange Act of 1934, as amended (the Exchange Act). On May 24, 2021, the parties reached a proposed settlement and release of all claims in the class action, for $ 70 million, and on June 8, 2021, the parties executed a Stipulation and Agreement of Settlement, exclusive of any claims that may be brought by shareholders who opted out of the class action. Of the $ 70 million, $ 67 million was covered under the applicable insurance policy with the remainder to be paid by us. The Court approved the settlement on February 12, 2022. On November 22, 2021, investment funds managed by Orbis Investment Management Ltd. which previously opted out of the securities class action, filed suit under the Exchange Act, the Arizona Securities Act, the Arizona Consumer Fraud Act and certain common law causes of action to recover alleged damages for losses incurred by the funds for their purchases or acquisitions of our common stock during the class period. On February 7, 2023, our Motion to Dismiss was granted in part and denied in part. The parties have now settled the matter and the action was dismissed with prejudice on April 26, 2023. The impact of settlement was not material. Purported shareholder derivative lawsuits were filed against us and certain of our former officers and current and former directors in the Delaware Court of Chancery ( In re Symantec Corp. S’holder. Deriv. Litig. ), Northern District of California ( Lee v. Clark et al., ), and the District of Delaware ( Milliken vs. Clark et al. ). These assert generally the same facts and circumstances as alleged in the securities class action and allege claims for breach of fiduciary duty and related claims. On January 4, 2023, after reaching an agreement on the terms of the proposed settlement, which provides for, among other things, a payment of $ 12 million to the Company by the insurers of the Company’s directors and officers, the parties to the Chancery action filed a Stipulation and Agreement of Settlement, Compromise and Release in that Court, which was approved by the Court on May 4, 2023, over the objection of the Lee and Milliken plaintiffs, and releases all claims in the Chancery, Lee , and Milliken actions, as well as any other claims based on the same operative facts. The parties in the Milliken action stipulated to a dismissal with prejudice, which was entered by that Court on May 12, 2023. The parties in the Lee action stipulated to a dismissal with prejudice, which was entered by that Court on June 12, 2023. All three shareholder derivative lawsuits are now resolved. A fourth lawsuit filed in the Delaware Superior Court, Kukard v. Symantec , brought claims derivatively on behalf of our 2008 Employee Stock Purchase Plan. The parties have reached a settlement in principle, subject to Court approval. The impact of settlement was not material. GSA During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s (DOJ) Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration (GSA) Multiple Award Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices. As reported on the GSA’s publicly available database, our total sales under the GSA Schedule contract were approximately $ 222 million from the period beginning January 2007 and ending September 2012. We fully cooperated with the government throughout its investigation, and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct government sales under the GSA Schedule contract was approximately $ 145 million; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales increased. The government also indicated they would pursue claims for certain sales to California, Florida, and New York as well as sales to the federal government through reseller GSA Schedule contracts, which could significantly increase our potential damages exposure. In 2012, a sealed civil lawsuit was filed against us related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the DOJ filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the DOJ and the relator on 21 Table of Contents behalf of New York in an Omnibus Complaint, and a First Amended Omnibus Complaint was filed on October 8, 2015; the state claims also do not state specific damages amounts. On March 23, 2021, plaintiffs withdrew their demand for a jury trial and we consented to proceed with a bench trial, which concluded on March 24, 2022. We settled with the State of Florida before trial and the State of New York during trial, both for immaterial amounts which have been paid. On January 19, 2023, the Court issued its Findings of Facts and Conclusions of Law in which it found in favor of the United States in part and awarded damages and penalties in the amount of $ 1.3 million. The Court also found in favor of the State of California in part and awarded penalties in the amount of $ 0.4 million. The resulting Judgment was filed by the Court on January 20, 2023. On February 16, 2023, plaintiffs filed Motions to Amend Judgment to revive the damages claimed at trial. On January 16, 2024, the Court granted in part and denied in part the United States’ Motion to Amend and awarded $ 53 million in damages and penalties. The State of California’s Motion to Amend was denied. The January 2023 judgment amount has been paid, and at this time, our current estimate of the low end of the range of probable estimated losses from this matter is $ 53 million, which we have accrued and recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets. On February 13, 2024, we filed a motion to amend and correct the judgement in that the revised damages in the January 2024 decision include damages for products not included on the GSA schedule at issue in the case. The judgement in the case is not yet final, nonetheless we have posted a surety bond and continue to assess our appeal options. It is possible an appeal of the Court’s amended judgment by the plaintiffs, if brought, could lead to further claims or findings of violations of the False Claims Act and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties. There is a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter; however, such loss cannot be reasonably estimated. Jumpshot Matters At the end of 2019, Avast came under media scrutiny for provision of Avast customer data to its data analytics subsidiary Jumpshot Inc. Jumpshot was a subsidiary of Avast with its own management team and technical experts. Avast announced the decision to terminate its provision of data to, and wind down, Jumpshot on January 30, 2020. As Avast has previously disclosed, it has been in communication with certain regulators and authorities prior to completion of the acquisition of Avast, and we will continue cooperating fully in respect of all regulatory enquiries. On December 23, 2019, the United States Federal Trade Commission (FTC) issued a Civil Investigative Demand (CID) to Avast seeking documents and information related to its privacy practices, including Jumpshot's past use of consumer information that was provided to it by Avast. Avast responded cooperatively to the CID and related follow-up requests from the FTC. On October 29, 2021, staff at the FTC sent Avast a draft complaint and proposed settlement order. We engaged in ongoing negotiations with the FTC staff and have reached a negotiated agreement on the terms of a Consent Decree resolving this investigation, the terms of which are not expected to have a material impact on current or ongoing operations. This includes a provision for a non-material amount of monetary relief, which has been paid. On February 27, 2020, the Czech Office for Personal Data Protection (the Czech DPA) initiated offense proceedings concerning Avast`s practices with respect to Jumpshot, the Czech DPA issued a decision in March 2022 finding that Avast had violated the GDPR and issued a fine of CZK 351 million, which is approximately $ 15 million. Avast appealed the decision, which was affirmed by the Czech DPA on April 10, 2024. Avast has now paid the fine levied by the DPA. On June 15, 2024, Avast brought a judicial action in the administrative law court challenging the decision of the Czech DPA On March 27, 2024, Stichting CUIC – Privacy Foundation for Collective Redress, a Dutch foundation (the Foundation), filed its writ of summons to initiate a collective action. The Foundation has asserted it represents the interests of Avast customers in the Netherlands whose data was provided to Jumpshot and that by doing so Avast violated the requirements of the GDPR and other provisions in Dutch and European Union privacy and consumer law entitling those customers to damages and other compensation, all of which we dispute. No specific amount of damages has been alleged to date. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible or estimate the range of any potential loss. On April 18, 2024, we received a letter before action from counsel in the United Kingdom asserting it may bring a representative action on behalf of a class of Avast users in the United Kingdom and Wales for breach of contract and misuse of private information and seeking unspecified damages and a permanent injunction. No lawsuit has been commenced. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible or estimate the range of any potential loss. On December 12, 2022, a putative class action, Lau v. Gen Digital Inc. and Jumpshot Inc ., was filed in the Northern District of California alleging violations of the Electronic Communications Privacy Act, California Invasion of Privacy Act, statutory larceny, unfair competition and various common law claims related to the provision of customer data to Jumpshot. Such claims, to the extent related to Jumpshot, have now been dismissed from the case as has Jumpshot Inc. as a defendant. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this action or estimate the range of any potential loss. We dispute these claims and intend to defend them vigorously. The outcome of the regulatory proceedings, government enforcement actions and litigation is difficult to predict, and the cost to defend, settle or otherwise resolve these matters may be significant. Plaintiffs or regulatory agencies or authorities in these matters may seek recovery of large or indeterminate amounts or seek to impose sanctions, including significant monetary penalties, as well as equitable relief. The monetary and other impact of these litigations, proceedings or actions may remain 22 Table of Contents unknown for substantial periods of time. Further, an unfavorable resolution of litigations, proceedings or actions could have a material adverse effect on our business, financial condition, and results of operations and cash flows. The amount of time that will be required to resolve these matters is unpredictable, and these matters may divert management’s attention from the day-to-day operations of our business. Any future investigations or additional lawsuits may also adversely affect our business, financial condition, results of operations and cash flows. Other We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.