Q1 2023 NortonLifeLock Inc Earnings Call

[music].

Good afternoon, everyone. Thank you for standing by my name is Matt and I will be your conference operator today.

I'd like to welcome everyone to the Norton Lifelock fiscal 'twenty to 'twenty three first quarter earnings call. Today's call is being recorded in all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.

At this time for opening remarks, I would like to pass the call over to MS. Mary Lai head of Investor Relations Miss you may begin.

Thank you, Matt and Hello, everyone welcome to the Norton Lifelock fiscal 2023 first quarter earnings call. Joining me today to review our Q1 results are Vincent <unk>, CEO and Natalie Bursey CFO as a reminder, there will be a replay of this call are posted on the IR website, along with our slides and press release.

I'd like to remind everyone that during this call all references to financial metrics are non-GAAP and all growth rates are year over year, unless otherwise stated.

A reconciliation of non-GAAP to GAAP measures is included in our press release, which is available on our IR website at Investor Norton Lifelock Dotcom.

Today's call contains statements regarding our business financial performance and operations, including the impact on our business and industry that may be considered forward looking statements and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations.

Those statements are based on current beliefs assumptions and expectations and speak only as of the current date.

For more information please refer to the cautionary statement in our press release and the risk factors in our filings with the SEC and in particular, our annual report on Form 10-K for the fiscal year ended April 1st 2022.

And now I will turn the call over to our CEO Vincent Thank you Maria and welcome everyone to our call. After a very lengthy process in the U K. We are pleased to have received provisional approval from the competition and markets authority for the acquisition of our best all hard work has paid off and we are excited to start the process of bringing the two.

Two companies together with a great purpose and mission of bringing to life protection and then parliament to everyone.

As I have shared before our two companies share a similar vision and both have common values and complementary strengths.

As soon as we can bring us together well, we'll get started on delivering all the benefits of our new company to consumers shareholders and other stakeholders.

Together, we will still have about 500 million users globally sell premium products to consumers for more than $3 5 billion in revenue and have around 4000 employees dedicated to the mission of protecting and empowering people to leave their digital lives safely.

Our friends in privacy and northern lights locks trends in identity supported by our combined <unk>.

This creates a broad and complementary product portfolio beyond core security and towards adjacent trust based solutions.

On top of that the merger will broaden our geographic diversification increase our presence in multiple channels and also sort of very small businesses.

We'll have the opportunity to empower millions of consumers around the world with a complementary product portfolio and culture of innovation.

And while the World do you see a different place than when we started this journey over a year ago. One thing is for sure just sort of want to continue to enjoy the advantages of a world without compromising the security privacy and identity and our sole mission is to bring that and more to everyone.

Our combined financial profile is substantially enhanced through increased scale and long term growth potential synergies strong free cash flow generations supported by a resilient balance sheet as I mentioned based on our last reported financials for both companies, we will scale our combined revenue.

To over $3 5 billion and.

And the combination will unlock significant value creation to approximately $280 million of.

Gross cost synergies and it will give us the capacity to reinvest for innovation partnerships and marketing to further accelerate our transformation.

We will have creating created operating leverage of approximately 52% in blended operating margin that is pretty synergies delivering approximately $1 5 billion of annual free cash flow also pre synergies.

The combination of these and other value creation enabler as we March towards our long term objective of $3 in EPS.

We look forward to re engaging with avast and we starting the integration planning activities. Once the transaction is closed we will be able to share more details on the combined business and its financial model.

So in terms of what's next we will continue to.

Work closely as quickly as possible after the CME publishes its final approval, which is currently expected to be in early September .

Subject to change based on what we know today, we anticipate the closing date of the merger is expected to be between mid September and sometimes in early October .

So with that let me say a few words on our Q1 results.

While we observed weaker consumer sentiment and inflationary pressure impacting the consumer discretionary spend we are proud to deliver a 12 consecutive quarter of bookings growth with Q1 bookings up 5% in constant currency and revenue up 6%.

The quarters performance trucked in line with our mid single digit bookings growth projections for fiscal year, 2023, which I view as a demonstration of the stability that our business operating leverage providing a challenging environment.

Our direct revenue grew 5% in constant currency on top of another strong coffee led to double digit growth quarter a year ago.

In this new environment, our focus has been on balanced performance across a set of very healthy customer metrics.

Total customer count was stable at over $23 3 million up 200000 year over year, but down 200000 sequentially.

Throughout the quarter, we saw the impact of the macro level headwinds in our direct to consumer website global traffic slightly offset by solid conversion rate.

While these headwinds have limited our ability to grow customer count this quarter at the pace, we aspired to it's important to highlight that our overall customer base is healthy we stable retention rates stable at booth and opportunity to continue to drive cross sell upsell as we launch new products.

Our retention rate remained very strong at slightly over 85% in unit customer cohorts, who joined during the so called Covid period have retention rates at par with prior years and through operational initiatives. We continue to make progress in first year renewal rates.

Our efforts have led to happier customers supported by products that are easier to download and easier to use.

Since we became a dedicated consumer cyber safety company, we have grown our direct customer base by approximately 3 million to reach over 23 million customers.

And at the same time improve our retention rates by almost a point during the period.

Another set of activities. We're focused on is delivering more value to more customers in our partner business. In this set of indirect channels, we delivered double digit revenue growth for the seventh straight quarter up 16% in constant currency in this first quarter of fiscal year 'twenty three.

We had very healthy bookings in Q1, including double digit bookings growth in both mobile and employee benefit channels channels in which we added approximately 200000 customers year over year and stayed flat sequentially.

As we continue to build a more global and more diversified go to market model. We look forward to combining with a vast which will allow us to accelerate our strategy of expanding identity and privacy solutions across the globe.

A year ago, we stated that we would transform our company by building a richer product portfolio and we have continued to work towards that we are off to a good start in fiscal year Q1.

For the on the product side in Q1, we have made good inroads from a recent launch of the northern identity advisor plus for the U K market and we've extended the product availability to Australia, New Zealand and Germany.

This is yet another example of our international expansion efforts bolstering identity capabilities.

We also continued to earn positive product reviews from important technology with yours. Just last month, we were awarded PC magazine number one identity theft protection software for 2022, specifically this was Norton 360 with Lifelock product awarded to provide the best overall identity protection in the industry.

This is just one of the many times, we have been recognized for our overall product innovation and development efforts, we continuously assess and prioritize our product roadmap and we know we still have big opportunities to expand our product portfolio, especially in areas beyond core security.

But above all what guides us is our focus on providing quality and value in our products. It is about a seamless end to end customer experience and comprehensive protection, while making it simple for consumers to engage with us and stay safe.

Cyber safety will continue to be an evolving and growing market fueled by the increasing activities online, which brings more risks and challenges to consumers' digital lives.

With the merger with Avast together, we are well positioned to drive the transformation of consumer cyber safety and pursue our long term objective, while being financially resilient in any environment that comes ahead of us.

And with that let me turn the call to Natalie to cover our results in more details.

Thank you Vince and Hello, everyone for today's discussion I will start with the last update followed by our Q1 performance details and our outlook for Q2 fiscal year 2023.

I will focus on non-GAAP financials in year over year growth rates unless otherwise stated.

I'd like to Echo Vincent excitement about the merger with the that we're thrilled to have this positive outcome and look forward to closing the acquisition.

We will immediately restart our pre integration planning effort as we prepare to scale the combined company and work to achieve the $280 million then you'll gross cost synergies.

Let me give you a quick refresher on the transaction financing done in conjunction with the merger.

Which we successfully raised earlier this year.

In total our financing package.

Price of $7 $6 billion of Germany, and term loan b that spread point and half to 2% plus the billion and a half.

And credit facility.

This will replace our existing $1 7 billion dollar.

The term loan a facility and a $1 billion revolver.

Well the interest rate environment has changed since we first announced the merger last year, we still feel good about the rates, we were able to lock in.

The acquisition financing will become funded at close.

Once the deal is closed we will share more information on our long term model and the timing of our $3 EPS objective.

Now onto our Q1 results Q1 was a good start to our fiscal year 2023, especially considering the macroeconomic pressures in volatile FX environment.

Our business is resilient and our customer base is healthy and we continue to execute with discipline.

Our Q1 revenue was $708 million up 6% in constant currency and up 2% in USD.

A four point currency headwind translating to a revenue headwind of $27 million year over year.

Similar to last quarter, we saw continued currency volatility with both the euro and yen depreciating further against the U S dollar, reaching 20 year alert.

It is the third straight quarter in which currency has been several points of headwind to our top line growth.

We anticipate these headwinds will remain for a full year of compares.

We planned the business at todays exchange rate with Euro and USD near parity and a weaker yen.

Despite these macro headwinds we remain focused on execution against our business opportunities and driving towards our long term objectives.

Q1 bookings grew 5% in constant currency on top of a 10% constant currency bookings growth in Q1 last year and in line with our full year projection of mid single digit rate of growth.

We've launched new identity solutions, and we've seen an increase in both geographic reach and adoption.

Our expansion efforts are working as Q1 was our sixth straight quarter of high single digit rate of growth in our I got any privacy products.

Our direct revenue grew 5% in constant currency and 1% in USD impacted by four points of FX headwind.

Looking across our other key operating metrics.

Q1 direct customer count grew by approximately 200000 year over year, but declined by approximately 200000 quarter over quarter.

As we saw headwinds in select markets.

Overall customer unit retention remained stable above 85% and we continued to drive incremental improvements to key cohorts, including our newer customers.

Our monthly average revenue per user or <unk> was $8 82 in USD.

However, adjusted for FX, Arthur expanded nearly 30 cents year over year and extended expanded seven sequentially.

An indication of our successful cross sell efforts.

We have a very healthy resilient customer base and we remain focused on driving new customer acquisition, retaining our existing customers as well as increasing engagement with new products and services.

Turning to our partner business partner revenue was up 16% year over year in constant currency up 10% in USD and marks the seventh consecutive quarter of double digit growth.

We see traction with our identity expansion efforts through partners driving strong growth in our employee benefits channel scaling key international partnerships like Telus.

Diversification and expansion of our go to market channels is a key growth tenant in our long term plan and we will continue to invest in these areas.

Turning to profitability in Q1, we achieved gross margin of 86% roughly flat year on year, while at the same time, expanding adding more features to our product offerings.

Our operating margin for the quarter was 54% up 250 basis points year over year, driven by both our revenue growth and our cost discipline with overall spend down 3% year over year.

As you've heard me say before we are intentional.

With our investment and how we fund our business to drive future growth.

Our G&A functions remain lean with spend at less than 4% of revenue for the second quarter in a row.

With regards to R&D, we continue to be disciplined and invest in new product development and innovation.

With our marketing dollars, we strive to balance across the portfolio and across channels.

With intentional customer acquisition targeting while focusing on long term sustainable growth.

We will continue to be disciplined with our cost structure across all functional areas as we operate in this increasingly challenging environment.

Q1, net income was $265 million up 7% compared to last year.

Diluted EPS was <unk> 45 cents for the quarter up 7% year over year, including three pennies of currency headwind and above the high end of our guidance range.

Adjusting for the impact of currency EPS grew more than twice the rate of revenue at 14% year over year.

We remain committed to driving EPS expansion and achieving our long term EPS objective of $3.

Turning to our cash flow and balance sheet Q1, operating cash flow was $215 million and free cash flow was $213 million.

In Q1, we returned we returned nearly $400 million back to shareholders.

We repurchased $300 million or 12 million shares in buybacks in the quarter and now have approximately $1 $5 billion, meaning in the current share buyback program.

We paid approximately $73 million to shareholders in the form of a regular quarterly dividend of $12.05 per common share.

For Q2, the board of Directors has approved a regular quarterly cash dividend of 12 five cents per common share to be paid on September 14th 2022 for all shareholders of record as of the close of business on August 22022 as described in the press release.

Separate from the transaction financing I discussed earlier, our net.

Net leverage was approximately one four times in the quarter.

We settled in cash or $400 million senior unsecured notes that matured in June .

We also plan to settle in cash or 2% senior convertible note due in the middle of August and that cash settlement will hit our cash flow in fiscal Q2.

As we all know the debt environment has been volatile and rapidly changing we will continue to assess our overall debt needs and leverage profile.

Given our high cash flow generation and strong levels of liquidity, we are confident in our ability to manage through this environment Accordingly.

Now turning to our Q2 outlook based on the continued strengthening of the U S dollar quarter to date, we anticipate an even larger currency headwind.

But I want to emphasize that the underlying health of our business remains strong.

For Q2, we expect non-GAAP revenue in the range of $695 million to $705 million, which translates to mid single digit rate of growth year over year in constant currency reflects a projected FX headwind of four plus points of growth or approximately $30 million.

We expect Q2, non-GAAP EPS to be in the range of 44 to 46 cents per share, which reflects <unk> <unk> of currency headwind year over year.

Our Q2 guidance assumes the avast deal closes in early October 2022.

For fiscal year 2023, we continue to expect bookings growth to be in similar ranges of mid single digits in constant currency.

Considering the close timing of the avast merger, we will not be providing an annual guide at this time.

We plan to provide more details on our overall financial model when we close the transaction.

As always thank you for your time today and I will now turn the call back to the operator to take your questions operator.

Thank you.

I'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove a question. Please press star followed by two.

To ask a question press Star one as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question.

We will pause you briefly as questions are registered.

The first question is from the line those second calia with Barclays.

Line is now open.

Okay, Great, Hey, guys, Hey, Vincent Hey, Natalie Thanks for taking my questions here and congrats on the news from from CMA.

Yep.

Vincent maybe before we talk about a vast I was wondering if you could just touch on some of the dynamics between your partner business and the direct business. It just feels like there's been a little bit of a shift between those two routes to market and so maybe the question is is that intentional and can you just walk us through what's.

Happening there, especially given given the decline the sequential decline in indirect subs this quarter.

Yeah. So differently as you know we have been investing in our partner channels, we've been saying that now for many many quarters in represent above slightly above 10% of our overall business and we believe that there is more opportunities to go to other channels and or to partner with other.

<unk> providers to provide a combined solution two to consumers I mentioned the two channels should we are we like of course is the mobile channel. Some of our competitors have moved that channel into a direct it basically goes through op stores and it's not in that direct business today because of the billing definition doesn't go towards directly.

But to be honest with you the consumers gets on a platform and we have direct access to them and communicate and provide the value. So that has been growing we've seen differently a shift towards.

Mobile mobile users a few quarters ago, we crossed the Norton 360 platform to be the majority of the products sold on mobile which is a very good sign and Youll see us continue to move that to move up in the channel. Good momentum. The second one is employee benefits. It goes to employees that's offered today or.

Employees are.

Full protection in the cyber world identity protection privacy and and device security.

D O two we have the direct engagement with the customers on our larger platform, but the payment goes to.

The pivot of the company that are that supports that we believe we have more to go in in mid market and we continue to invest in our direct <unk> funding was broker to penetrate that and you'll see continued growth and focus both on the product product marketing development site as well as the channel channel side. The so those are the direct.

<unk> customers in our partner business, then we have another set of channels that go and combine with other providers of other solutions to provide a full package. So here like for example, the partnership which Telus in Canada to bring cyber safety, along with a teller solutions to Canadians has had a very strong momentum and you'd see.

<unk> continued to.

To expand.

Travis we Devine, who was the CEO of a ton of experience in the environment has.

Become a.

Customer.

Acquisition.

<unk>, a few quarters ago, and he's developing his team and along with his team. They definitely building up the funnel of new opportunities. So you'll see us continue to invest in that I do want to say a few words on the direct business.

The direct business you mentioned the sequential slight decline then and Youre right on that the metrics are very healthy retention rates have been very strong across all cohorts. We said a year ago, we would improve the first year retention rate and we have by a few points.

Over the last 24 months, we have increased overall retention by a little more than 70 basis point and so youll see continued operation initiatives, whether it's on how the product is being downloaded how it's being used hard value is demonstrated to the customers that improve customer satisfaction and then overall retention.

So strong focus on that has he set of customers.

The GAAP or disappointment. If you won for the quarter is really related to the macro level headwinds that we saw with lower traffic of global traffic on that cyber safety.

Website, if you want.

On Virgin rates still holding well, but it's about traffic each was volatile with pockets of weaknesses.

Are there pockets of areas, where we continue to invest because we feel for the long term and as we navigate through the volatile environment. We know we provide a product that will be needed and in an area that has a structural growth.

Got it got it that's very helpful. Natalie maybe for you.

The operating margin here continues to really outperform and be higher than expected can you just talk about how you're balancing investing in new customer acquisition versus managing for profitability. How do you think about that.

Yeah, Hi, Thanks for the question, Yeah operating margin of 54% now for two quarters and up 250 basis points year over year, we're proud of that that points to a healthy business model, we have and combined with our team's commitment to operate in a disciplined manner.

New acquisition is absolutely a key tenant of our overall growth strategy, we have been clear about that but it's not the only one we have multiple levers to help drive our growth and it's not growth at all costs and that's where the balance comes in.

We continue to invest in customer acquisition marketing you can see that we talked about we spent a lot of time focused on that both through our direct channels and now as well even more so in our partner channels.

We're committed to the growth focus approach when it comes to sales and marketing.

And honestly, we recognize what a competitive industry, we operate in and that consumers have choice and we need to work really really hard to win that choice.

But in addition to investing in marketing, where we've been investing more and more is in product. We've launched some really cool several new offerings.

We continue to diversify the go to market channels, we continue to invest in our customer service offering.

And I think you know.

From that combination of investment, that's where that <unk> growth is really coming from both year over year and quarter over quarter and it allows us to you know.

Sustain and scale, our unit retention of 85% plus both proof points of healthy acquisition that we've seen over the last 10 months 10 quarters excuse me.

That combined with you know we stay committed to operating G&A as lean as possible last two quarters being less than 4% of our revenue obviously provides us a lot of leverage for reinvestment. So as we navigate forward will continue to balance the growth and profit. Both are important I don't think we have to pick I'm confident we will.

We'll find a way to strike that right balance through that this is the disciplined approach that we've applied for now since we've stood up Norton Lifelock.

And above and beyond all that we are just very very excited about the additional opportunities we have as we combine with that.

Got it got it that makes a lot of sense, if I can squeeze.

Third one in Vincent maybe for you we can't can't go on with it without asking you a question on Nevada, and I know that we can't talk too much about specifics until the deal is closed, but maybe philosophically as as you've gotten to know our vas business more than studied this market more.

I guess, how do you think about potential revenue synergies with the combination of unlocking the vast I mean, certainly you were clear about the expense side.

As you spend more and more time with with really both companies. How do you think about the revenue synergies between the two.

Yeah, well. Thanks for your question I would be very disappointed not to have a question on Novartis I think these are very very exciting news.

Doctor Ondrej yesterday I know they are asking me is also super excited.

About coming together and we know we are about to create the foundation on offer and even stronger stronger company with a very broad mission of of that digital freedom for digital lives.

We discussed that in a few quarters ago, but when we made the.

The acquisition model or the transaction model, we based the merits of this transaction on cost synergies overlapping activities.

To the tune of $280 million that I've talked about and.

And we wanted to have the value of that transaction to be based on that we also said that we would reinvest a portion to accelerate the topline growth our transformed the profile of our revenue. We did not include in our acquisition model revenue synergies for many reasons.

But certainly not the reason that it will be our priority number one as soon as we close we see the opportunity in three buckets of op.

<unk> Q1, conceptually without giving any numbers. The first one is on the retention side known in Lifelock has developed a set of capabilities and operations and experience that drive high NPS and retained at the 85% and unit that equivalent number is 68%.

Novartis in the last reported numbers.

And we know that we can bring a lot of the practices and the approaches as we bring a stronger portfolio to the consumers to improve that retention rate there may be some mix differences by geography or product mix, but even when we compare doing due diligence on a number we know we have opportunities there. So that's bucket number one.

The second one is the cross sell upsell capabilities, we've just introduced dose capabilities in Norton and Lifelock about a year and half ago.

And we know of US has been developing the entire business model on that offering a basic product for free and then delivering showing demonstrating more value to the consumers to appoint where the consumer is willing to pay for that value and then growing that value offered to the consumers. We look forward for us to bring those operational skill sets.

If you want into our overall combined company, while we bolster our rich portfolio. So identity Lifelock equivalent services. Then we started to expand internationally will be offered to avast customers as an example, and as.

Asset had to focus more on privacy when you combine the two which would be a very rich portfolio to cross sell and deliver more value to consumers that is a second set of revenue synergies and then the third one is across the complementarity of the geographical footprint with a U S versus international and from our standpoint for data standpoint Europe versus.

Is the rest of the world, but even then they were more of what's emerging market you were bought more about western market and so I see a lot of complementarity as we bring a richer company together locally we can we can accelerate.

Our penetration, including in the VSP or a very small and small business area. We are of US has already a small channel and where as we as you know we were not present, yet some of those businesses have exactly the behavior of consumer consumer so the third bucket is around geographical footprint and.

Expanding the channel as we come together as soon as we close the acquisition I can tell you will be the first task force that will get started on that and then.

As soon as we're ready and the deal is closed we'll share more with investors what our long term plan is in this area.

Okay, great looking forward to it thanks again.

Thank you.

Thank you for your question next question is from the line of Matt Hedberg with RBC.

Your line is now open.

Hey, everyone. This is Tim and Paul for Matt Hedberg.

Great. Thanks for taking our question.

So we were just looking and thinking about the current macros and how security seems to be more resilient. So we were wondering how you were thinking about the durability of these consumer security trends.

Yes, and when we talk about security, we really talk about for US cyber safety, which is not only your device security, but he's also the protection of your digital identities all the way through the restoration in insurance you could have one when something is breached.

From your device from any transaction that can be processed into the cloud we know that cyber criminals continue to increase I was reading a report earlier on that it was like up 7% in the first half just in Europe , and so we will continue to see pressure from that we know consumer penetration in term of fully.

Protection is not here yet at the level of other protection industries, such as insurance industries or others.

So we have more room, we feel really good about the long term structural growth opportunity at our markets offering that together with our vast we will address and continue to expand.

No. It does not mean of course that in the short term you still have volatility you have inflationary pressures you have consumer sentiment and people will look at some of those cost and may see this as a discretionary spend so we definitely have pressure we saw it in our global traffic.

This quarter, but at the same time, we have a lot of levers to drive and deliver the value.

85% of the business is coming from the renewal base in one of their consumer is and we've seen very stable retention rates.

Through the last quarter, but frankly also as I studied the business when I came in two years ago. It was similar behavior in 2008 or 2009. So you see a lot of resilience into our people who already know they need security on or in the digital world.

<unk> Zavala did it may put pressure on new customer acquisition in the short term.

Okay, Yeah, it sounds great and just a quick follow up from the customer perspective, you mentioned really healthy customer metrics and.

In cross sell has been accelerating and great execution on that front. So how are you thinking about customer additions and upsell in a more challenging macro over these next few quarters.

Yeah. Thank you well the good news once a customer is in and as a basic protection is that we can also make them aware of the moment of truth that we call insight, which is Ah moment at which you're connected Internet. When you are the coffee shop on a moment new transfer data on the web and ensuring and monitor that you're fully protected.

Which point in time, we can then raise the value to you of being fully protected versus partially protected and so constant assessment and finding the right moment give us the opportunity to continue to cross sell we still have the vast majority of our customer and customer base to be in the first part of the lower <unk>.

Part of our total value curve. If you won from basic device security all the way to full protection. So we still have a lot of room to continue to educate and drive and demonstrate the value as the consumers move up the value chain.

Okay.

Great. Thanks.

Mhm.

Thank you for your question. The next question is from the line of Fiona Heinz with Morgan Stanley . Your line is now open.

Hi, Ron Fiona on for Hamzah. Thank you for taking the question.

It sounded like some previous commentary on this call that going forward, a big part of driving growth between evolved in Norton Lifelock is going to be the pairing of identity and privacy offerings. So I was wondering if you could give us some more tangible use cases of how consumers can use to basically bundle those two different offerings.

Together.

What's kind of your vision going forward for that cross sell motion. Thank you.

So we will talk about cross sell upsell revenue synergies when the deal is closed.

But conceptually it's all about completing the value of all of the use case, you protect the consumer floor and refining how you communicate in the app or on the platform all of the risk of consumer face is an important one to find balance too you want to do it.

Respectfully and demonstrating the value at the same time, we know that the.

The entire identity protection or theft protection restorations and insurance is something I've asked it does not have and we can really offer as we combine that with security.

As I started to move from security to privacy to have bridge got other views and so.

Combining the product portfolio.

Working on the integrated platform they have a vast one way of noninterest 60 will have to.

Figure that out and then leaving product value that customer can step in once they have basic as I mentioned most of August and the basic platform have basic benefit to see how they move to the next one the practices are about the same at the end of the day as the product portfolio become richer. It's all about the ease of use ease of done.

Loading how you use that and then we've made a lot of effort and a product to do that and expect us to continue as.

As we as we come together.

Got it very helpful. Thank you.

Maybe one more follow up if I could another question touching on the background.

Obviously, we see there's some headwinds in the customer acquisition. This quarter was curious for your view on your sense of how much of that is just traditional seasonality given the summer months than PC shipments are seasonally weaker around that time period and how much of that is.

Kind of what Youre seeing on the ground real time in terms of.

Essentially moderating macro environment. Thank you.

Yeah, no definitely I.

We historically had.

Our Q3 quarters, which is fiscal Q3 for US, which you said December quarter being stronger more on the security side in April quarter, our Q4 quarter being strong on the identity side linked to some events such as stocks and and other things to be honest with you over the last two years, whether it's because of COVID-19 or other macro.

Level as well as the fact that we more and more provide one combined value of full total protection, we've seen less seasonality, but you're right that in the in the moderate seasonal effect. If you won the June quarter would be a low quarter. So from that perspective, our expectation was in line to a lower seasonality.

With that said we did see.

Some headwinds what we call pocket of weaknesses, where we continue to invest at the same rate because we know we're here for the long term and as a portion of our investment Thats goes towards education, but we saw lower traffic and so we're really monitoring and flipping across the.

The set of channels, we have here to try to improve the return on our marketing spend do you want to add anything Anthony.

Yeah, I just think you know.

When you think about even as a consumer you feel the macroeconomic environment you feel inflation, you feel pricing pressures I would combine that with some of the other markers that we see across the industry with PC shipments down now double digit not that were entirely connected to that but it is just another marker that shows us what's happening in our industry.

<unk> and it just it honestly fuels us we've got to be much much more intentional we've gotta be much much more competitive in order to win over the customer choice that's available.

And then we do through a disciplined approach we spend so much time and effort, making sure that those customers are highly engaged as possible we provide great customer service.

And we want to be.

Fulfilling as much of that cyber safety need as we possibly can so that's where that's where we spend most of our time.

Got it very helpful. Thank you all for the time.

Thank you.

At this time there are no more questions I will turn the call back to Vincent.

Oh for closing remarks.

Thank you, Matt before I close the call I would like to take a moment to thank our Norton lifelock team for contributing to our success each and everyday as you've heard me say before we truly have an ambitious team dedicated the mission of the business we're building.

I would also like to say a few words on the upcoming change in our board of directors on behalf of the board and the leadership team I want to thank Ken Hao for his contributions to the company over the last six years, helping Norton lifelock through the successful transition to a standalone consumer cyber safety company and unlocking tremendous shareholder value.

Ken has been a great board member and also a trusted partner to me as a first time, CEO , who wish him well and I'm sure we'll stay in touch.

We have been waiting for 12 months for the approval of our deal with a vast and we're so ready to dive in adult Chandra yesterday, as I mentioned and I know that the avast team feels exactly the same way the company is well positioned to deliver long term value in pursuit of our vision. So thank you for joining and for your continued support of our company and our team.

Yes.

This concludes the conference call. Thank you.