Q2 2021 NortonLifeLock Inc Earnings Call

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Yeah, and Natalie Jersey CFO.

As a reminder, there will be a replay of this call posted on the Investor Relations Web site, along with the earnings slides press release and supplemental materials to finding on non-GAAP metrics.

Cyber criminals are taking advantage of this shift and I'm proud of our team for continuing to design products and with each with these features that support our vision of cyber safety for everyone.

And to our loyal 50 million customers. Thank you for trusting us to secure a growing portion of your digital activities.

In Q2, we delivered reported billings growth of 7%.

It's in many countries such as the UK, Italy, and Spain, and Europe, and Australia, and Japan, and APG just to name a few.

With less than 30% of our revenues outside North America, we remained relatively underpenetrated in many countries offering us an opportunity to broaden our reach.

Partner revenue, which represents 10% of our business and includes relationships with telcos, we Taylor's an employee benefits brokers grew 7% in queue too.

While retail remains week during this period, we delivered double digit growth in the employee benefits program with strong signings of new employers and strong retention rates across in broad sectors.

Overall, we continue to develop our partner relationships to increase the reach of our solutions to all consumers.

The platform to consumers to provide cyber safety, while we work learn shop or socialize online.

For example, with the rise of gaming and E Sports, we saw an opportunity to help gamers protect and control their.

His family plan also includes a new feature called school time, which helps children stay focused on schoolwork, while remote learning by managing access to the broader web so sorry to kids know gaming during school hours.

While the threat posed by the availability of your personal information online is not new the shift of more and more of our lives online makes privacy as important as ever.

Recently, we've expanded our privacy offering which privacy monitor assistant.

Few corporate responsibility and support our communities.

Those efforts to adjust recognized last month by Forbes and just capital. It is an honor to be named one of America's most just companies and be recognized for our commitment to serve all stakeholders with integrity and accountability.

We also know we have so much more we can do in this area and we will stay committed to corporate responsibility and contributing to building a cyber safe world.

And now let me turn the call over to Natalie for more details on the financial results Natalie. Thank.

Thank you Vincent and Hello, everyone for today's discussion I will focus on non-GAAP financials, starting with our Cutie results and then provide our outlook for Q3.

Over city real estate in July for $120 million.

In addition, as described in the press release the board of Directors approved a regular quarterly cash dividend of 12, and a half cents per common share to be paid on December 16th 2020 for all shareholders of record as of the close of business on November 20, Threerd 2020.

Looking ahead, our commitment to deliver long term shareholder value remains unchanged.

Our resilient and highly recurring business model will afford us the flexibility to be nimble when it comes to investing for growth.

We are continuously evaluating opportunities to drive profitable and sustainable growth, whether it's third product or technology innovation.

Entering adjacent markets.

Geographic and channel expansion or consolidation.

Increased marketing spend in the customer growth that we've seen now for.

A few quarters now.

What we're seeing the early indicators look very very positive very consistent.

When I look at and step back as to you know, let's talk about five quarters ago. When we when we made the decision to increase.

The level of marketing spend.

Up from a $200 million annualized level to about $300 million annualized level, we're now spending roughly about $75 million a quarter as we ramped up that spend we not only spent more.

We chose to reallocate to more efficient channels more spend in digital more spend deployed international we've had expansion and affiliates and along the way less and less and television and radio.

We saw a lot of growth in our customer acquisition units and bookings in exchange for this spend which you would expect but now that we're fully anniversaried into that spend level now it's time to as you are saying really look at the customer cohorts and the behavior attributes and how they differ from what we historically have been used to on a got <unk>.

Owing basis.

We obviously will spend a lotta time doing that but what I would say here on the call today would be as we move forward, we will continue to fund and invest for growth.

We don't fully dedicated to that market invest for growth.

And we look forward to to accelerate our growth in the long term our goal is to as I mentioned reach everyone.

Very helpful. Thanks, guys.

Once again, ladies and gentlemen, please limit your questions to one and one follow up. The next question is from Gregg Moskowitz with Mizuho. Your line is open.

Okay. Thank you very much and good afternoon guys.

Havens, so I guess a bit of a follow up the sockets question, but no one and increasing work from home environment. The number of average devices per family, obviously has gone up.

The online activity on these devices has gone up as you alluded to earlier Vincent and because of that you know is there an opportunity for you to generate more growth for both Norton and Lifelock on a sustainable basis, how do you think about that.

No absolutely I think the opportunity again to address all of the challenges lie.

Linked to the fact that our large move online and it's not just the number of devices is not just the.

Vic activity self shopping it's noisy as I mentioned and as you recognize the whole set of education. It's about gaming, it's about socializing and all of those activities are moving on and creating new opportunities for cyber criminals to take advantage of you did and you virtual assets so that.

Okay.

A huge growing opportunity, we always had that as the investment is this as you recall a year ago. When we sold the enterprise business, which is a huge opportunity to focus solely on the consumer aspect. We're building our capabilities, we increasing the velocity of our innovation you've seen us launching new products at the most.

Freakin rate.

Some are good learnings other we double down in investments and we continue to tweak our portfolio to address those those opportunities I think in the long run we feel really really confident.

We move from frankly, a division that was focused on maximizing cash to now focusing on growth. We return to mid single digit growth, let's build a sustainable machine. If you want to then be able to really provide again and I'll repeat it cyber safety to everyone right billions of people connected to the internet on the one.

Hundred million dollars 100 million people today paying for Standalone cyber safety.

Okay. That's helpful. And then just as a follow up the improvement in net new subscribers over these last few quarters really impressive, especially the last couple do you have any very high level sense of how much of this improvement.

Perhaps attributable to coated as opposed to your expanding marketing program and your increased focus on execution.

Yeah, and the two combined and I would also say the introduction of Norland to 60, the first integrated platform, making cyber safety as kind of one onboard our protection a reality look if you step back a year ago. We said, we're going to grow mid single digits and going to be a balanced approach is going to come from new subscribers.

That they are protected of course.

From an annual tax perspective, we usually see a bomb.

The income tax or do but honestly as we look back in.

Some of the breaches that we've had and now with Covid.

Largely speaking the seasonality has been kind of muted out in combined in combination with the fact of with the rateable Rateable business model that we've got from a revenue guide perspective, I would say, it's very muted from the seasonality perspective.

That's helpful and just on the <unk> side.

Excuse me wanted to parse through the strengths there I continued to continue to be impressed with the.

The sequential in year over year growth in spite of the fact that you've introduced some.

Lower AFP products into the mix to ignite subscriber growth. So I'm wondering if you can kind of parse through as to what's really creating that upward tension on <unk> again in spite of the introduction of some of the lower a S. P. M feature functionality that you've rolled into their <unk> family and that's it for me. Thank you.

Yep and empty that one and is also mention to to you guys. The first your prize is a promotional price and the second in your renewal fries get through the full value.

And so normally when you grow your customer calling you differently also have headwind on that first <unk>. Despite that growth, we're able to maintain very good.

Overall and that sort of testimony of the team we've seen in broad based the growth of this quarter across the the more security angle of our membership but also across identity, which is you know is coming at the strung out, but we've been very disciplined on almost every metric driving solid retention.

Not marketing was promotions and marketing with the message and value we deliver to.

To consumers.

And so and so that is the result, you've seen very studied retention and our pool. Despite the fact that were going on now with that said I do want to say that the focus for us is really to build innovative product we're not looking at.

Marketing perspective, as you diversify into those new markets and introduce your product and solution offering that value proposition to those new customers.

We feel really really bullish about what we can do by deploying our marketing their increment to increment tally very very clear when we look at from a marketing perspective, and a payback perspective.

The Incrementality is just is is definitely a very strong indicator for us to continue to invest there.

Great and then just follow up on on that question on international.

Did you update on on Lifelock, and being able to deploy that type of a service internationally and do you expect as you do drive international subscribers, you end up seeing a lower ARPU just given you.

You don't have that offering and in many of your markets.

Yes, maybe but again I just thought it was the last part of your question, which is retention ARPU outputs metrics as you know weve focusing on the input how do we bring that cyber.

Protection to consumers, which should be incremental value was a lower per unit on not it's incremental value. So thats our focus.

Theme as a company. We believe we are perfectly positioned to not only make all those everyday online activity safer, but to also deliver control of your data your identity and you ask that back to you as a consumer relentlessly we will pursue that mission.

So thanks for joining our call today. Thank you for your support and we look forward to connecting very soon.

This concludes the conference call. Thank you for joining.

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