Gen Digital Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements and factors that may affect future results The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act 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. In addition, projections of our future financial performance; anticipated growth and trends in our businesses and in our industries; the consummation of or anticipated impacts of acquisitions (including our ability to achieve synergies from acquisitions, including Avast), divestitures, restructurings, stock repurchases, financings, debt repayments and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our products and solutions; anticipated tax rates, benefits and expenses; the impact of inflation, fluctuations in foreign currency exchange rates, changes in interest rates, 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. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including economic recessions, inflationary pressures and those other factors that we discuss in Part II Item 1A. 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. There may also be other factors that have not been anticipated or that are not described in our periodic filings with the SEC, generally because we did not believe them to be significant at the time, which could cause actual results to differ materially from our projections and expectations. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. OVERVIEW Gen is a global company powering Digital Freedom with a family of trusted consumer brands including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender and CCleaner. Our core cyber safety portfolio provides protection across three key categories in multiple channels and geographies, including security and performance 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. We bring award-winning products and services in cybersecurity, privacy and identity protection to approximately 500 million users in more than 150 countries so they can live their digital lives safely, privately, and confidently today and for generations to come. Fiscal calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three and six months ended September 27, 2024 and September 29, 2023 each consisted of 13 and 26 weeks, respectively. Our 2025 fiscal year consists of 52 weeks and ends on March 28, 2025. Key financial metrics The following tables provide our key financial metrics for the periods presented: Three Months Ended Six Months Ended (In millions, except for per share amounts) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Net revenues $ 974 $ 945 $ 1,939 $ 1,888 Operating income (loss) $ 402 $ 22 $ 819 $ 381 Net income (loss) $ 161 $ 147 $ 342 $ 334 Net income (loss) per share - diluted $ 0.26 $ 0.23 $ 0.55 $ 0.52 As Of (In millions) September 27, 2024 March 29, 2024 Cash and cash equivalents $ 737 $ 846 Contract liabilities $ 1,827 $ 1,884 25 Table of Contents Below are our financial highlights for the second quarter of fiscal 2025, compared to the corresponding period in the prior year: • Net revenues increased $29 million, primarily due to higher sales in both our consumer security and identity and information protection products. • Operating income increased $380 million, primarily due to increased net revenues, decrease in legal costs related to ongoing litigation, lower amortization of intangible assets, and restructuring costs related to our acquisition of Avast. • Net income increased $14 million and net income per share increased $0.03, primarily due to increased operating income discussed above and decreased interest expense associated with our Term B facility. This is offset by the absence of an income tax benefit in the second quarter of fiscal 2024. Below are our financial highlights for the first six months of fiscal 2025, compared to the corresponding period in the prior year: • Net revenues increased $51 million, primarily due to higher sales in both our consumer security and identity and information protection products. • Operating income increased $438 million, primarily due to increased net revenues, decrease in legal costs related to ongoing litigation, lower amortization of intangible assets, and restructuring costs related to our acquisition of Avast. • Net income increased $8 million and net income per share increased $0.03, primarily due to increased operating income discussed above and decreased interest expense associated with our Term B facility. This is offset by the absence of an income tax benefit in the second quarter of fiscal 2024. • Cash and cash equivalents decreased by $109 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 payments of our Term A and B facility. This is partially offset by cash generated from operating activities during the first six months of fiscal 2025. • Contract liabilities decreased $57 million compared to March 29, 2024, primarily due to billing seasonality and fluctuations in foreign currency rates. GLOBAL MACROECONOMIC CONDITIONS Our results of operations and cash flows are subject to fluctuations due to inflation, changes in foreign currency exchange rates relative to U.S. dollars, our reporting currency, changes in interest rates, as well as recession risks, 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 second 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. As a result, we are exposed to foreign exchange gains or losses, which impact our operating results. As part of our foreign currency risk mitigation strategy, we have entered into monthly foreign exchange forward contracts to hedge certain foreign currency balance sheet exposure. In addition, in early 2022, worldwide inflation began to increase. In response to the heightened levels of inflation, central banks, including the U.S. Federal Reserve and the European Central Bank, raised interest rates significantly in 2022, resulting in an increase in our cost of debt. 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. 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 ESTIMATES The preparation of our Condensed Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates, 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, 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. 26 Table of Contents 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 six months ended September 27, 2024. RESULTS OF OPERATIONS The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Three Months Ended Six Months Ended September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Net revenues 100 % 100 % 100 % 100 % Cost of revenues 20 19 20 19 Gross profit 80 81 80 81 Operating expenses: Sales and marketing 19 20 19 19 Research and development 9 9 8 9 General and administrative 7 42 6 24 Amortization of intangible assets 5 6 4 6 Restructuring and other costs — 2 — 2 Total operating expenses 39 79 38 61 Operating income (loss) 41 2 42 20 Interest expense (15) (18) (16) (18) Other income (expense), net 1 1 1 1 Income (loss) before income taxes 26 (15) 28 3 Income tax expense (benefit) 10 (31) 10 (15) Net income (loss) 17 % 16 % 18 % 18 % Note: Percentages may not add due to rounding. Net revenues Three Months Ended Six Months Ended (In millions, except for percentages) September 27, 2024 September 29, 2023 Change in % September 27, 2024 September 29, 2023 Change in % Net revenues $ 974 $ 945 3 % $ 1,939 $ 1,888 3 % Three Months Ended September 27, 2024 Compared with Three Months Ended September 29, 2023 Net revenues increased $29 million, due to a $19 million increase in sales of our identity and information protection products and a $14 million increase in sales of our consumer security products. This was partially offset by a $4 million decrease in our legacy product offerings. This is inclusive of $1 million of foreign exchange headwinds, in our consumer security solutions. Six Months Ended September 27, 2024 Compared with Six Months Ended September 29, 2023 Net revenues increased $51 million, due to a $34 million increase in sales of our identity and information protection products and a $24 million increase in sales of our consumer security products. This was partially offset by a $7 million decrease in our legacy product offerings. This is inclusive of $8 million of foreign exchange headwinds, 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 27 Table of Contents 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. The following table summarizes supplemental key performance metrics: Three Months Ended (In millions, except for per user amounts) September 27, 2024 September 29, 2023 Direct customer revenues $ 860 $ 834 Partner revenues $ 102 95 Total cyber safety revenues $ 962 $ 929 Legacy revenues (1) $ 12 $ 16 Direct customer count (at quarter end) 39.7 38.5 Direct average revenue per user (ARPU) $ 7.26 $ 7.25 Retention rate 78 % 77 % (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. We exclude users on free trials from our direct customer count. Users who have indirectly purchased and/or registered for our products or solutions through partners are excluded unless such users convert or renew their subscription directly with us or sign up for a paid membership through our web stores or third-party app stores. The methodologies used to measure these metrics require judgment and are subject to change due to improvements or revisions to our methodology. From time to time, we review our metrics and may discover inaccuracies or make adjustments to improve their accuracy, which can result in adjustments to our historical metrics. Our ability to recalculate our historical metrics may be impacted by data limitations or other factors that require us to apply different methodologies for such adjustments. We generally do not intend to update previously disclosed metrics for any such inaccuracies or adjustments that are deemed not material. ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for 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. Retention rate is defined as the percentage of direct customers as of the end of the period from one year ago who are still active as of the most recently completed fiscal period. We monitor the retention rate to evaluate the effectiveness of our strategies to improve renewals of subscriptions. Net revenues by geographical region Three Months Ended (1) Six Months Ended (1) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Americas 66 % 65 % 66 % 65 % EMEA 24 % 24 % 24 % 24 % APJ 10 % 11 % 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 and six months ended September 29, 2023 where we aligned allocation methodologies across similar product categories. The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan. Percentage of revenue by geographic region in the three and six months ended September 27, 2024 remains primarily in the Americas. Cost of revenues Three Months Ended Six Months Ended (In millions, except for percentages) September 27, 2024 September 29, 2023 Change in % September 27, 2024 September 29, 2023 Change in % Cost of revenues $ 194 $ 180 8 % $ 384 $ 359 7 % Three Months Ended September 27, 2024 Compared with Three Months Ended September 29, 2023 Cost of revenues increased $14 million, primarily due to a $13 million increase in revenue share costs. 28 Table of Contents Six Months Ended September 27, 2024 Compared with Six Months Ended September 29, 2023 Cost of revenues increased $25 million, primarily due to a $22 million increase in revenue share costs. Operating expenses Three Months Ended Six Months Ended (In millions, except for percentages) September 27, 2024 September 29, 2023 Change in % September 27, 2024 September 29, 2023 Change in % Sales and marketing $ 184 $ 187 (2) % $ 367 $ 368 — % Research and development 83 85 (2) % 164 175 (6) % General and administrative 64 393 (84) % 116 449 (74) % Amortization of intangible assets 44 61 (28) % 87 122 (29) % Restructuring and other costs 3 17 (82) % 2 34 (94) % Total operating expenses $ 378 $ 743 (49) % $ 736 $ 1,148 (36) % Three Months Ended September 27, 2024 Compared with Three Months Ended September 29, 2023 Sales and marketing and research and development remained relatively flat. General and administrative expenses decreased $329 million, primarily due to the absence of $335 million in legal costs related to our litigation with the Trustees of Columbia University in the City of New York (Columbia) in the second quarter of fiscal 2024. Amortization of intangible assets decreased $17 million, primarily due to certain intangible assets being fully amortized during fiscal 2024. Restructuring and other costs decreased $14 million, due to a $13 million decrease in severance, termination benefits, contract cancellation costs and other exit and disposal costs in connection with the September 2022 Plan and a $1 million decrease in stock-based compensation expense. See Note 11 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2025 restructuring activities. Six Months Ended September 27, 2024 Compared with Six Months Ended September 29, 2023 Sales and marketing remained relatively flat. Research and development decreased $11 million, due to an $8 million decrease in headcount and outside services and a $3 million decrease of stock-based compensation expense. General and administrative expense decreased $333 million, primarily due to the absence of $335 million in legal costs related to our litigation with Columbia in the second quarter of fiscal 2024. Amortization of intangible assets decreased $35 million, primarily due to certain intangible assets being fully amortized during fiscal 2024. Restructuring and other costs decreased $32 million, due to a $31 million decrease severance, termination benefits, contract cancellation costs and other exit and disposal costs in connection with the September 2022 Plan and a $1 million decrease in stock-based compensation expense. 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 Six Months Ended (In millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Interest expense $ (149) $ (173) $ (302) $ (343) Interest income 6 6 14 12 Foreign exchange gain (loss) (2) 1 2 2 Gain (loss) on sale of properties — — — 4 Other 1 — 1 1 Total non-operating income (expense), net $ (144) $ (166) $ (285) $ (324) Three Months Ended September 27, 2024 Compared with Three Months Ended September 29, 2023 Non-operating income (expense), net, decreased by $22 million in expense, primary due to a $18 million decrease in interest expense related to our Term B facility. Six Months Ended September 27, 2024 Compared with Six Months Ended September 29, 2023 Non-operating income (expense), net, decreased by $39 million, primarily due to a $32 decrease in interest expense related to our Term B facility. 29 Table of Contents Provision for income taxes Three Months Ended Six Months Ended (In millions, except for percentages) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023 Income (loss) before income taxes $ 258 $ (144) $ 534 $ 57 Income tax expense (benefit) $ 97 $ (291) $ 192 $ (277) Effective tax rate 38 % 202 % 36 % (486) % Our effective tax rate for the three and six months ended September 27, 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 six months ended September 29, 2023, differs from the federal statutory income tax rate primarily due to tax benefits related to the set up and write-off of deferred tax items resulting from an internal restructuring, partially offset by state taxes, changes in unrecognized tax benefits and related interest and penalties, and the U.S. taxation on foreign earnings. 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 Liquidity and Capital Resources We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt and proceeds from divestitures for our liquidity needs. Our capital allocation strategy is to balance driving stockholder returns, managing financial risk and preserving our flexibility to pursue strategic options, including acquisitions and mergers. Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of shares of our common stock. Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations, amounts available under our Revolving Facility and our future refinancing plans related to our upcoming maturities, 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 September 27, 2024, depending on several factors, including, but not limited to, economic conditions; political climate; the expansion of sales and marketing activities; the costs to acquire or invest in businesses; and the risks and uncertainties discussed in “Risk Factors” in Part II, Item 1A below. Cash flows The following summarizes our cash flow activities: Six Months Ended (In millions) September 27, 2024 September 29, 2023 Net cash provided by (used in): Operating activities $ 422 $ 351 Investing activities $ (10) $ 3 Financing activities $ (538) $ (485) See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for our supplemental cash flow information. Cash from operating activities Our cash flows provided by operating activities increased $71 million, primarily due to higher profit before taxes adjusted by non-cash items, increased cash collection from our cyber safety billings and an increase in accounts payable as a result of the timing of payments. This is partially offset by increased cash taxes paid compared to during the first six months of fiscal 2024 . 30 Table of Contents Cash from investing activities Our cash flows provided by and used in investing activities remained relatively flat. Cash from financing activities Our cash flows used in financing activities increased $53 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 and a $58 million decrease in mandatory principal prepayments of our Term A and B Facilities as compared to during the first six months of fiscal 2024. Cash and cash equivalents As of September 27, 2024, we had cash and cash equivalents of $737 million, of which $400 million was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however, these distributions may be subject to applicable state or foreign taxes. Debt We have an undrawn revolving credit facility of $1,490 million, net of our letters of credit, which expires in September 2027. Stock repurchases During the six months ended September 27, 2024 and September 29, 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 Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers. Debt instruments As of September 27, 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) September 27, 2024 Term Loans $ 6,022 Senior Notes 2,600 Mortgage Loans 6 Total debt $ 8,628 The Amended Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including compliance with specified financial ratios . As of September 27, 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. Dividends On October 30, 2024, we announced a cash dividend of $0.125 per share of common stock to be paid in December 2024. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors. Stock repurchase program Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and through accelerated stock repurchase transactions. 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 September 27, 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. 31 Table of Contents Restructuring 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. 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. During the six months ended September 27, 2024, we made $15 million in cash payments related to the September 2022 Plan. As of September 27, 2024, we have incurred costs of $126 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. Significant contractual obligations Our principal commitments consist of principal and interest payments related to our debt instruments, obligations under our purchase agreements, repatriation tax payments under the Tax Cuts and Jobs Acts and obligations under various non-cancellable leases. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of September 27, 2024, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $1,395 million in long-term income taxes payable has been excluded from our quarterly review of timing of contractual obligations. 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.