Q1 2024 Gen Digital Inc Earnings Call
Thank you Hannah and good afternoon, everyone welcome to the Gen first quarter fiscal year 2024 earnings call. Joining me today to review our Q1 results are Vincent.
And not only <unk> CFO as a reminder, there will be a replay of this call posted on the IR website, along with our slides and press release.
I would like to remind everyone that during this call all references to the financial metrics are non-GAAP and all growth rates are year over year, unless otherwise stated.
Our recon of non-GAAP to GAAP measures is included in our press release, which is available on our IR website at Investor Doc Gen Digital Dot com.
Today's call contains statements regarding our business financial performance and operations, including the impact of 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 in the SEC and in particular, our most recent reports on Form 10-K, and Form 10-Q, and now I will turn the call over to our CEO Vincent.
Thank you Marie good afternoon, everyone and welcome to our earnings call.
Our fiscal year is off to a great start this quarter is what many of you have come to expect from us strong execution consistent operating discipline and solid results.
This quarter marks our 16th consecutive quarter of growth with Q1, cyber safety bookings and revenue both up low single digits in constant currency, when including Avast historical results in the base.
We continued to make progress with our direct customer count, reducing our gap between acquisition and churn in the post COVID-19 environment and on our way to breakeven.
With operational integration essentially complete we expanded operating margin by another 50 basis points sequentially and six points since the avast merger, which only started nine months ago.
We expanded our earnings power growing EPS, 5% in U S dollars and 9% in constant currency.
Our consistency can be easily taken for granted.
But make no mistakes.
These sustained results speak to the talent and commitment the gym team shows everyday our team is second to none.
As you can tell I'm proud of what we have accomplished but what really excites me is when I look ahead.
We are well positioned to drive innovation and leadership in cyber safety protecting people against the growing threats facing our ever expanding digital lives and we really have only just gotten started.
As the footprint of our digital lives continues to expand people everywhere need easy to use solutions that help protect them and enable all the digital world has to offer.
When Andre.
<unk> talked about bringing Norton lifelock and have US together two years ago, delivering this type of protection to more people in more geographies with a comprehensive product portfolio was the fundamental vision for bringing companies together.
And if you go back and look at the roadmap, we shared with our stakeholders you can not only see our progress on each dimension, but more importantly, I believe you can clearly see that journey is delivering on our mission to empower and protect people everywhere.
One of the key elements for Andre and I was that our combination would create unmatched reach and scale.
So the Gen touch is hundreds of millions of people with a free services and 65 million subscribers direct and indirect with our premium offerings.
We serve consumers in over 150 countries and at the end of Q1, 60% of the people. We serve were outside the U S versus 40% two years ago.
While we continue to believe in growth in all countries, we have tremendous opportunities internationally to serve more people and over time grow the value we deliver to them.
In fact, our customer acquisition success in Latin America is a showcase of this global expansion in.
In Q1, we reached new customers through new channel, new countries and new products, all three dimension in that region.
Q1 International growth was supported by positive customer count and expanding our pool for longer tenured customers, which we view as a strong proxy for those customers adding value over time.
With our global reach we bring to market the broadest and most comprehensive portfolio in consumer cyber safety.
Norton and Lifelock leadership in security and identity, coupled with a vast trends in security technology and privacy.
Also unmatched not only do we have the breadth of offerings, we have many trusted industry leading brands.
Our portfolio of brands allows us to best serve the different needs of our diverse customers.
That'd be from regional or local needs.
Different life stages or levels of tech awareness.
With Norton advanced Lifelock <unk> amongst others, we can meet consumers, where they are and with what they need with avast and <unk>, we can reach less mature markets with premium offerings with no turn we can offer comprehensive suite that delivered tremendous all in one value with.
Higher entry price points and with Lifelock, we offer unmatched identity theft protection plans, including award winning restoration services.
The portfolio in a family of trusted brands are great enablers for us to deliver the right value to consumers in the U S and abroad and grow that as their needs evolve.
This quarter, we delivered our third quarter of sequential improvement in our pool and retention driven by double digit growth in cross sell and adoption of our comprehensive integrated suite today, almost 40% of our direct paid customer base have adopted Norton 360, or a vast one.
Most importantly, jensen investments in technology and innovation are really the engines that power, our current and future success.
In this first year as Jen, we launched several new products and features expanding the portfolio offering to provide our customers more protection and control in the digital world.
Products like advanced identity, and tight truck on Android, Northern secure browser and executive protection and employee benefits all come from the combination of our complementary portfolios and expand the protection and digital empowerment, we offer to consumers.
We promised accelerated innovation and when we brought us in northern Lifelock together.
And now with the integration essentially complete and the strong progress we've made in our next generation modular cyber safety platform. We are beginning to double down on our innovation efforts and revenue synergies.
It is still early days, but just last week, we introduced early access program to our latest innovation called Northern Virginia.
<unk> an AI powered tool that is designed to help consumers quickly identify whether text and email social media message to a weapon is a scam fraud.
With a few clicks setups, Jenny will provide real time guidance and advice on what to do next.
Because it's built on AI technology. It learns as it goes and we will constantly get better.
It is an exciting innovation that's built on our decades of experience in data and advanced technology in consumer cyber safety.
But just as important as the tech is Jeannie takes our customer centric approach to another level.
We created Genie for everyone. It's free it's interactive engaging and is right at your fingertips you can be sure that your daily digital lives is not being compromised by sophisticated and creative cameras.
Genie is just a glimpse of how we plan to innovate and re imagine how people can stay cyber safe.
And there is so much more we can and will do with Genie platform.
Now innovation is hard and it's hardly free so we remain committed to investing in it.
We are on a mission to make cyber safety something people want to live without.
That's why we focused on delivering and frankly exceeding on our promised synergies while reinvesting a portion for innovation and future growth.
We originally promised to $180 million in cost synergies, which we later raced to over $300 million.
In record time with fully integrated our sales marketing and overall infrastructure processes.
We operate out of a unified go to market structure, a single ERP system and go to cash framework and with a committed workforce of under 3500 down from over 45 hundreds.
Halfway through our 18 months timeline, we've already achieved 80% of the cost synergies, enabling us to reach almost 58% operating margin in Q1.
The remainder will come from our first product integration work, which we're careful ways. So as to not disrupt the service and experience of our subscribers rest assure of course that these are all planned out and we will rollout our progress in the coming quarters.
As part of the combinations, we also see revenue synergies, which we size at around $200 million.
A big portion of this revenue opportunity is largely dependent on our next generation platform, which will enable us to offer more value in a more personalized and targeted way across our brands.
While the teams are hard at work, bringing that to life.
We are already leveraging one of our centers of excellence to increase the avast customer retention rates. Another pillar of revenue synergies in Q1 of US retention was up over two points since the close of the merger.
We believe that investing in innovation and growth is a must.
But we are already disciplined about funding those investments responsibly through efficient and streamlined operations.
We've made tremendous progress in the integration and our overall operations.
Which we know will directly support our long term growth.
The 16th quarter of growth and the capabilities, we have built coming together with us demonstrate that our strategy is working.
Two years ago at our last Investor day, we showcased our strategic playbook and transformation.
So there are no one is better positioned than gen to bring cyber safety to everyone.
And the big aspiration goals. We said then are more relevant than ever to achieve our vision. As a reminder, we committed to consistently delight, our customers doubling inp's NPS score to above 70%.
We are committed to protect and empower people from with.
Cyber safety doubling our user base and we're committed to accelerate our growth, while maintaining operating discipline doubling our EPS to $3.
We've made solid progress as we executed on the merger plan and created Jen <unk>.
Providing customers with a great experience is our number one metric we will continue to make our solution easy to use and bring added value to their digital lives in.
In Q1, Lifelock reached an all time high NPS of 60, giving us the blueprint to leverage the operational learnings across our entire portfolio.
Our user base moved from about $80 million as known in Lifelock to hundreds of millions of users as Jen and our direct customer moved from 23 million to over $38 million and also we have been managing through a challenging post COVID-19 environment, including our cost of debt that is much higher than two years ago costing.
Costing us over an incremental 50 in EPS, we remained fully committed to accelerating our long term growth and delivering our $3 EPS commitment.
With our first full year as Jen almost behind US we look forward to sharing more about our vision and our growth opportunities at our next Investor day planned for the fall so stay tuned for the exact date.
Natalie will now review, our quarterly performance and with the merger and integration essentially behind US. She will also share our full year guidance.
On the low end our guidance is based on the current trends growing low single digits.
On the high end growth accelerates to a mid single digit rates towards the end of the year supported by initiatives and investments in key strategic areas, such as international expansion partnership above and beyond security and our product innovation roadmap.
On direct customer count, we expect to continue to drive improvement over time and exited the fiscal year 'twenty on a very positive trend.
And with that let me pass it to you in Italy.
Thank you Vincent and Hello, everyone for today's call I will walk through our first quarter fiscal 2024 results followed by our outlook for Q2 and full year fiscal 2024, I will focus on non-GAAP financials and year over year growth rates unless otherwise stated.
Q1 was our 16th consecutive quarter of growth, reflecting another quarter of solid execution.
We came in above the midpoint of revenue and at the high end of EPS guidance.
Q2, Q1, non-GAAP revenue was $946 million up 34% in USD and 35% in constant currency.
When including Avast historical results cyber safety revenue and bookings both grew 2% year over year in constant currency with broad based growth across brands and across regions.
We continue to execute on our committed cost synergies in an accelerated fashion, which helped expand our operating margin to 58% up 50 basis points sequentially and up six points since the merger.
Direct revenue was $832 million up 33% in USD and up 2% when including a vast historical results.
We continue to make progress across our key performance metrics with consistent retention rate improvement and <unk> expansion, which represents our customers resiliency and loyalty and the strong demand that our product innovation drives.
Our quarter over quarter direct customer count growth is approaching breakeven.
Ending Q1 direct customer count was $38 2 million a decline of only 29000 customers quarter over quarter, a trend we have worked hard to improve.
During the Covid period customer acquisition was at an all time high as the step function change in our digital lives pushed people to find solutions to protect themselves and their families. As we were forced to live more of our lives at home and online.
And over the last year as the world mobilized back to normal life with more employees back in office and students back in school, we've seen the levels of customer acquisition normalize in line with that shift.
Throughout this period as the elevated number of customers cycled through the lifecycle, even though our retention rate remains strong the units of churn were not in line with our current state of customer acquisition, and therefore resulted in five quarters of net quarter over quarter customer count decline.
It's worth, noting however that when you normalize for the Covid periods of acquisition in Q1. This year. Our gross adds grew high single digits, when comparing to pre COVID-19 periods, representing a low to mid single digit CAGR over a three year period.
We are proud of that level of acquisition driven by our high innovation rate and marketing efficiency, especially given the current market conditions.
With our newly expanded gen product offerings and broader geographic expansion efforts, we see growing demand in mobile and higher acquisition in international markets.
Always operating with speed and intent we have deployed marketing spend to capture growth as we evaluate the long term sustainability of these green shoots.
In our more mature channels, we remain focused on improving the conversion of our direct to consumer traffic.
Leveraging our strong brand presence and engaging our customers with our additional product offerings to ensure they are fully protected against the ever changing cyber threats.
Yeah.
Customer count remains a priority for us and we're making continued progress we expect to return to sequential customer count growth in this fiscal year as we stay steadfast in our go to market expansion.
Marketing investments continue to offer the broadest and strongest product portfolio and drive growth in our green shoots.
Turning to retention rate since we became a standalone consumer company in fiscal year 2020, our total direct customer base of $20 million grew to over $23 million by fiscal year 2023, a 5% CAGR over three years.
Over that period of time, we had stable retention of 85% and even improved at slightly above 85%.
Fast forward to now post merger, our combined customer retention rate continues to increase sequentially now over 76% with 150 basis points of improvement since the merge since the merger.
Okay.
When we unpack. This further we have improved the vast retention rate by over two points in line with our revenue synergy plans.
And the industry, leading Norton and Lifelock retention rates remained stable with more tenured identity cohorts at 90% plus retention rate.
We know we still have opportunities to improve churn across cohorts, we see a strong correlation between retention rate and increased adoption of our cyber safety membership suites now closer to 40% of our direct customer base after the merger.
We are focused on driving higher retention through higher engagement.
Continuously, bringing new products to market and demonstrated value to the customer with comprehensive protection and World Class service.
On the monetization front monthly direct <unk> was $7.26 in USD.
An increase of 28 since the merger.
The growth in our revenue per user is primarily driven by engaging our customers and demonstrating increased value through additional products and services we provide.
When we closed the deal one of the exciting opportunities. We shared was the cross pollination of our operational know how between both companies.
Avast had built a $900 million plus topline from free to paid conversions and cross sells forging a strong operational expertise in driving high first purchase and conversions with the right moments of truth messaging and product offerings.
Meanwhile, Norton and Lifelock had industry, leading retention rates of 85% plus with a strong emphasis on elevating membership value and customer service.
As we leverage the strength of both companies, we are now driving higher conversion and penetration across multiple customer cohorts product lines and geographies as well as improving retention on cross sell products.
As we progress through the fiscal year. We are excited to continue scaling this arm of the business with future product introductions.
Our partners business remains an important distribution channel for us and is a growing contributor to our paid customer base.
Partner revenue was $97 million in Q1 up 35% year over year as reported in USD and up 3% when including a vast historical financials.
With the secular tailwind from the growing pervasiveness of breaches the need and demand for consumer identity protection is increasing.
Not only for consumers, but also businesses and state agencies.
More institutions are now turning to our solutions to protect our employees and residents.
Although there is a longer sales cycle, we expect the partner business to continue benefiting from a growing pipeline in the coming quarters, and we will continue our investments in diversified channels.
Rounding out our revenue our legacy business lines contributed $17 million this quarter and continue to make up less than 2% of our total revenue.
We expect legacy to continue declining double digits year over year.
Turning to profitability Q1, operating income was $545 million up 43% year over year.
We expanded operating margin to 58% as we continue to make strong inroads to the 60% plus margin framework, we've outlined in our long term model.
In Q1, our operating expense profile was 30% of revenue moving within our target of 28% to 30% and down from approximately 35% at the time of the merger a testament to the progress we've made on cost synergies.
The speed of execution enables us enables us to redirect some of the efficiency gains back into our growth investment framework.
You will see us continue to invest to bolster our product portfolio with differentiated solutions amplifier international presence, especially in identity and privacy and expand into trust based adjacencies that will touch more parts of the consumers' digital life.
These investments along with the revenue synergies enabled by our remaining product integration will strengthen our mid single digit rate of growth assumption built in our long term model.
Q1, net income was $305 million up 15% year over year.
Diluted EPS was <unk> 47 for the quarter up 5% year over year and up 9% in constant currency, including <unk> <unk> of currency headwind.
Okay.
Interest expense related to our debt was approximately $164 million in Q1, and EPS impact of <unk>, 'twenty, and a 16 headwind compared to last year.
Our non-GAAP tax rate lowered to 22% following our legal entity integration.
And our ending share count was $643 million down 1 million shares quarter over quarter, reflecting the weighted impact of share repurchases in the quarter.
Turning to our balance sheet and cash flow Q1, ending cash balance of $623 million.
We are supported by a total liquidity of over $2 1 billion.
Consisting of our cash balance and a 1 billion and a half revolver.
And we have no near term maturities due in the next two years.
Q1, operating cash flow was $226 million and free cash flow was $222 million, which includes approximately $152 million of cash interest payments this quarter.
Despite the increase in interest payments year over year, our EBITDA to interest coverage ratio is three four times, a testament to our strong earnings power.
Since the vast merger nine months ago, we've generated $850 million in free cash flow and over $1 $3 billion in Unlevered free cash flow approximately one times EBITDA.
As our business consumes very little Capex.
This also includes $55 million of restructuring cash payments since the merger.
Please keep in mind that in Q2 every year, we have seasonal cash tax payments that will impact free cash flow next quarter.
Turning to capital allocation, we remain intentional and balanced with our capital deployment.
In the last nine months since the merger, we've returned $1 billion of capital to shareholders.
With nearly $650 million of share buybacks and the rest in the form of regular quarterly dividends.
In addition, we've paid over $500 million in debt repayments in the same time period.
In Q1, we paid $83 million to shareholders in the form of a regular quarterly dividend of $12.05 per share.
For the next quarter Q2 fiscal 'twenty for the board of directors approved a regular quarterly cash dividend of $12.05 per common share to be paid on September 13th 2023 for all shareholders of record as of the close of business on August 21 2023.
With our strong cash flow generation and disciplined capital deployment, we will continue to utilize our capital to deliver EPS expansion.
Our net leverage is three nine times and we remain committed to the target of approximately three times over the long term.
We will maintain a balanced approach commit to regular dividends pay down debt and deploy opportunistic share buyback.
Now turning to our Q2 fiscal 'twenty for outlook for Q2, we expect non-GAAP revenue in the range of $940 to $950 million translating to a single digit growth in cyber safety expressed in constant currency.
We expect Q2, non-GAAP EPS to be in the range of 46 to <unk> 48 per share as cost synergies are partially offset by near term increased interest expense based on current sofa forward curves.
Now that we're largely complete with our operational integration, we are reintroducing guidance for the full year fiscal 2024.
We expect full year non-GAAP revenue in the range of three 8% to $3 85 billion.
Translating to single digit growth in cyber safety expressed in constant currency.
We expect full year non-GAAP EPS to be in the range of $1 95 to two <unk> per share.
We're off to a great start in fiscal 2024, we are relentlessly focused on executing on our plan and delivering on our commitments always in a disciplined and balanced manner.
Our key performance indicators are trending in the right direction and our financial model is resilient.
As we look to the future we're committed to reinvest into our business to drive sustainable growth and create shareholder value in the long term.
Our future is very bright and I look forward to the opportunity to share more details with you at our analyst and Investor day in the fall.
As always thank you for your time today and I will now turn the call back to the operator to take your questions.
Operator.
Certainly.
I would like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
As a reminder, if you are using a speakerphone. Please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.
Our first question is from the line of Peter Levine with Evercore you May proceed.
Hi, Thanks for taking my question congrats on the.
Great.
For the quarter for our fiscal year.
One for you and then a follow up for Natalie you mentioned doubling down on innovation.
You mentioned Genie AI powered tool that you're offering for free but maybe can you maybe dive into.
I mean, this is an opportunity to kind of down the road charge have an upcharge customers or viewing this more as a retention tool and then as you think about you know.
I think expanding out in your commentary touching upon other areas of our consumers security like what other areas do you think or attractive I think longer term to start thinking about that.
For sure and obviously the topic of innovation and the future development is a huge important framework discussion that difficult to address in a very succinct timeframe here. So we'll share more at our analyst day.
About that specifically, where do we want to invest how we use technology and the new capabilities. We've built to address the nextgen, a cyber safety and more than welcome to Genie <unk>.
It's both.
Future acquisition tool if you want.
We actually acquire vast as capabilities with premium today, the number one priorities adoption and then we're going to continue to add values.
The tool and turn a freemium into a premium and at the same time. It's also our retention rate, because it's adding functionality and value to the curve.
The current members.
So that's that it's more than that because.
The AI new developments. If you won have impacted both for us the threat landscape on one side so is changing.
The threats looks like and from the past device security and protecting your data to personification scams and forwards, becoming a big topic.
AI is accelerating that in ways that are multiple and we'll share more than that and at the same time. It's also an opportunity for us to continue and improve our platform the.
The value, we bring not only against a lack of protection, but also an empowerment tool for you to help understand.
The AI safety Hall.
Algorithm and other.
Machine learning and AI models can influence what youre looking at in the digital World and how you use it. So so we see the whole technology as a transformational strengths here both on the threat and on the protection side that gives us plenty of opportunity. We started currently was a very simple easy to use.
Anti scam tool that you can download then very quickly check whether it's a scam on that gives you advice on what to do and how to address it and then we'll continue to to expense.
In early access and Youll hear more over the next few weeks months and quarters. How it go and then at the 90 day, we'll share more about how we envision the genie platform to be part of our Nextgen cyber safety.
No. Thank you for the color there and then Natalie.
It's about seeing positive customer growth.
This year, maybe one is just what gives you the confidence or what are you seeing today.
Youre going to hit that inflection point, and then second you talked about operating it.
Yeah.
You can see the avast churn.
Churn improve.
Thank you mentioned.
Operating efficiencies to go beyond further that Youre working on this year can you maybe dive into that and kind of tell us what youre doing today.
Kind of get that number even higher to where the Norton memories.
Sure. So we've been on a path of diversification on our go to market, even if new date back two years. When we did our analyst day, we said we were going to.
Expand internationally from a go to market perspective diversified through partners really extend our reach and I would say what I see coming through in the gross adds is that coming to fruition. So we're really seeing a lot of the seeds that we've been planting over the last couple of years, especially in terms of.
<unk> expansion really take hold and so that's that's going to be.
Continued feeder into our gross adds as we move forward.
As we continue to put investment behind that as we continue to diversify our marketing and really leverage the go to market sale.
Sales reps that we've got across many different channels. In addition to that.
What we're really seeing is.
Customers come through the mobile platform and so.
I would say that is what we see that we see that happening across the globe in conjunction with Norton Lifelock with Avast, we see the mobile channel being one that we're going to put a lot of dry powder behind in terms of.
Being able to access our products and service anywhere you are in your digital life and then as it pertains to <unk> vast retention rate.
We've seen nice gains since the merger.
We're not surprised we express that through our revenue synergy.
Modeling and commitment and so the team is just really worked strong strongly together and got out of the gate relatively strong on any best practices that can be shared both ways from Norton Lifelock to avast have asked to Norton Lifelock and we see a couple of low hanging fruit wins so to speak.
Since the merger.
We've been we've continued to build on those learnings and as the teams just become one gen team really having the best practice sharing really pushing the envelope as to what you can believe and how we can re imagine how we go to market in a collective fashion is really.
He's really been beneficial to us and we see that not only in the retention rate, we see that in <unk> as we strengthen and continue to scale. The cross sell upsell muscle across all the brands and as we continue to just have the robust product portfolio and the innovation come to come to fruition or come to market.
It just really all things combined is really helped us make some sequential progress there.
Great. Thanks for the color and again congrats on a good quarter.
Thank you.
Thank you Mr Levine.
Our next question is from the line of the Cat Calia with Barclays. You May proceed.
Okay, Great Hey, Vincent Hey, guys. How are you doing thanks for taking my questions here.
Yes.
Hey, Vincent maybe maybe just for you just on the back of that last question great to see the gross adds.
Kind of get back to more historical levels and and really here that those those investments are starting to bear fruit.
Vincent maybe for you could you just dig into international a little bit I thought that was really interesting what geos or countries or maybe surprising you to the upside and what's the profile of those subscribers are they more security or are they more identity or they both a little bit maybe just one level deeper just on on that part of the investments that seems to be starting to pay off.
Yeah, So absolutely right. We first of all yes, it's nice to see.
Direct customer count pressure, we've seen for the last five quarters continuously being reduced on the path to breakeven and returning to growth and if you look at the really really post COVID-19 effect, where I think we lost 400000 customers that quarter, we've been reducing that gap all the way to almost breakeven here.
In Q1, we for the first time talk about those gross adds because many of you investors or analysts.
Had the impression that maybe with facing like a hand, the winds headwinds that we were not controlling and it was really about flushing through the post COVID-19 impact that not that he described by one reiterated.
But when you look at the gross adds and where we are here in Q1 and up high single digits over the last 253 years low single digit CAGR.
It's actually right in line to what we had said two years ago, which we will grow balancing all of our drivers, including low single digit growth rate on customer count and normalizing for Covid, that's where we're getting to now that is coupled with now having merge with a vast built gen that has <unk>.
Situated capabilities and the capabilities as we had mentioned was the breadth of the portfolio.
The capabilities Wizards renewal cross sell of technology, and then the channel and international expansion you talked about the expansion internationally and I'll give you. One example, because we are actually internationally, we feel pretty good about almost all areas, but Latin America was particularly strong and when you decompose.
The last three quarters strength, we've seen there is really coming down together with arguably northern Lifelock was almost inexistent avast away do you had a lot of presence than we brought into that region. The portfolio of brands introduced products on the northern as well as we continue to then beef up the portfolio and introducing the <unk>.
First identity.
Offering if you want so so expanding the brand expanding the cross sell and in expanding the channel not just direct but also indirect and having a combined view basically leveraging the strength of gen. As we came together with Lifelock and Norton and Lifelock in Nevada, basically the capabilities are coming together.
<unk> and over the next two years, you should see us managing the macro level environment, but really driving on our revenue synergies and accelerated our growth to that mid single digits.
That's awesome.
That's really great to hear I want to come back to net as in the second but Natalie maybe maybe just over to you.
I think that one highlight here actually just zooming out from the quarter.
Is that we now have an annual guide out there right like I think.
We were kind of going quarter to quarter after vast for a lot of good reasons right but.
Im wondering whats changed in your view that gives you more visibility or confidence to start giving.
That's slightly longer term view.
That was a little bit tougher to do before.
Hi, sockets. So thanks for the question I would say from my perspective, it's not it's not things that are new or that have changed I would say, what we really wanted to do was.
Focus on the close and the integration of the deal will get the businesses collectively running as Jen and really get through the lion's share of the integration. It was important for us to focus on achieving the cost synergies, which as you as you have heard.
We're about 80% achieved where in an accelerated timeframe. So this is just the right time for us to reintroduce a full year guide and really lay out for.
For everyone, what our expectations are for the performance.
So from a top line perspective bookings revenue.
Range of outcomes and sing in low to mid single digit rate of growth.
Is it newer isn't changed we're just putting the marker down we expect our growth to continue and to continue to build upon all of the actions that we're taking that are built into our operating plan with that we should see the rate of growth on bookings and revenue build throughout the year.
Not new but we will continue the cost discipline that we've expressed.
You know, we're known for and.
And we are building throughout this year as we build towards the financial framework of a 60% plus margin business will continue to do that.
And then as the growth continues to scale throughout the year, we're going to take the opportunity to put some investment and solidify that rate of growth further accelerate that rate of growth and really put the support behind any productive green shoots that we're seeing albeit still within.
The margin structure that we've we've clearly laid out for for everyone. What's new I would say if anything are constantly changing is the interest rate environment and so you saw what happened just as recent as last week with the cost of debt and the interest rate market and so that will.
Every single rate hike.
It creates another hurdle for us in our cost structure to overcome now we've been very disciplined and very quick to iterate as we see those headwinds, which is why we're continuously recommitting to our profit structure, but if theres anything thats.
That's changed I would say it would be whats out of our control, which it is one example is the cost of debt.
So again, if I can add also of my perspective on this one.
For for as good as operators, we believe we are and for as fast as we wanted to integrate these two leaders together into Gen. The reality is it takes time it takes time to build the best team and today, we have the best team in consumer cyber safety takes time to integrate the processes have center of expertise all renewal.
Across all brands up from one team that has all the expertise same with cross sell et cetera, and it takes just takes time and now we have at least after Q1, a full quarter operating as an integrated company.
And so the confidence to be direct is improving the second aspect would be for me is we have the ambition to trend to change. The current trend we had to flush through the post COVID-19 effect. We are almost at the end of that and you've seen it in the reduction of the customer calling the gap and is getting there if you trend it.
And we've seen early signs of success from our early investment in <unk>.
Cross revenue synergies that we feel confident we now can guide the business.
<unk> term.
Absolutely Vincent if I could fit one more in just on that point around sort of flushing through some of the some of the post COVID-19.
Hangover, if you will.
I think I think some of your comments in the call talked about maybe a pop.
A positive trend sort of exiting the year I know, we don't guide to net adds but how do you sort of think about that do we get back to we get to breakeven by the end of this year do we get back to something more positive any finer point or any color you want to provide just on how that trend looks throughout this year.
Yeah, well I would say negative with negative breakeven is breakeven and positive as positive. So I would expect that we'd break even through the year and finished the year as I said on a positive note, which mean on the on the positive direct customer count growth and I'll stop short of quantified because we have multiple levers will have priorities as we go and we will see trends it's not linear.
In the out week in week out it wasn't going to move but we have so many levers to go and drive the overall long term value that we feel confident enough that this the trend you've seen in <unk> direct customer count over the last five quarters are you reducing that gap almost could call. This quarter breakeven, we still call. It minus 29000 is going to breakeven and then returned to growth.
Very helpful guys. Thanks, so much.
Thank you.
Okay.
Our last question is from the line of Angie song with Morgan Stanley . Please proceed.
Hi, Thank you so much for taking my question.
I think over the last several quarters. It seemed like cost of acquisition has generally trended up could you.
Just touch on some of the trends that you've been seeing as it relates to cap this quarter and maybe just explain how this dynamic may translate to topline growth as you look to realize cost synergies and drive down overall expenses.
Thanks, so much.
We will partner was not that I'll take the first crack at it we.
We can take offline on how you think that khakis, increasing depending on what is in the in the marketing line, but our cost of direct customer acquisition as being within a small range pretty stable for the last few quarters.
Now we continue to invest in that.
We now have a system that we feel is working we have for our entire marketing spend.
By cohort and by investment <unk> the return on investment in the long term value and based on our very structured and data driven framework. We continued to invest more in marketing as you see the growth so for as long as you see positive trend going Youll see us continue to invest in that and we have not seen.
Marketing rate change over the last short term I would say last few few months.
Patrick I don't know if you want to add anything to that.
Yeah.
Okay.
Okay. If there is no more.
Then let me quickly go through the some closing comments I want to mention that on Monday, we publish our 2023 social impact reports.
The New company Jen, we took the opportunity to re imagine what impact do you want to make and reshaped our global social impact strategy with our family of trusted consumer brands.
<unk> headquarters and more importantly, our mission in mind. So today, we're well positioned as the clear leader in consumer cyber safety and we are building a company that drives real impact around the world I'm very proud of the team and what we have accomplished so far this is a reflection of our teams. So intensively mission driven focus on <unk>.
<unk> and creating value for all of our stakeholders and while we have already achieved a lot since becoming solely dedicated to consumer cyber safety. The truth is that we feel that we're really just getting started so thank you for joining the call today and I look forward to talking to you soon.
Thank you that concludes today's call. Thank you for your participation you may now close your lines.
Okay.