Q1 2025 Gen Digital Inc Earnings Call

I'd 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. A reconciliation of non-GAAP-to-GAAP measures is included in our press release and earnings presentation, both of which are available on our IR website at investor.gendigital.com.

and all growth rates are year-over-year unless otherwise stated.

Jason Starr: Transcription by https://otter.ai We encourage investors to monitor this website as we routinely post investor-oriented information such as news and events and financial filings. 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 as of today's date, August 1st, 2024.

Speaker: A reconciliation of non-GAAP to GAAP measures is included in our press release and our earnings presentation, both of which are available on our IR website at investor.gemdigital.com. We encourage investors to monitor this website as we routinely post investor-oriented information such as news and events, and financial filings.

We encourage investors to monitor this website as we routinely post investor-oriented information such as news and events and financial filings.

Speaker: 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. 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 as of today's date, August 1, 2024. We undertake no obligations to update these statements as a result of new information or future events.

Jason Starr: We undertake no obligation to update these statements as a result of new information or future events. For more information, please refer to the cautionary statements in our press release and the risk factors in our filings with the SEC, and in particular, our most recent reports on Form 10-K and Form 10-Q. Now, I'll turn the call over to Vincent.

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.

Speaker: For more information, please refer to the cautionary statements on our press release and the risk factors in our filings with the SEC, and in particular, our most recent reports on Form 10-K and Form 10-Q.

For more information, please refer to the cautionary statements in our press release and the risk factors in our filings with the SEC, and in particular, our most recent reports on Form 10-K and Form 10-Q.

Speaker: And now, I'll turn on the call of events.

Vincent Pilette: Thanks, Jason, and welcome everyone to our Q1 earnings call. We've started fiscal 25 on the good note with operating KPIs supporting a long-term aspiration. We grew cyber safety bookings 4% in constant currency and reached a record direct customer count of 39.3 million at 1.1 million year-over-year. Additionally, our pool is up sequentially and year-over-year-end constant currency, and retention reached 78% again, records supported by record level in life, lock, and a vast. A consistent focus on execution resulted in another double-digit growth quarter for earnings per share at 53% in Q1, at 15% in constant currency. I'm proud of our team for delivering these results and for our continued focus on evolving cyber safety for consumers in a very dynamic threat landscape.

Vincent Pilette: Thanks, Jason, and welcome everyone to our Q1 earnings call. We've started fiscal 25 on a good note, with our operating KPIs supporting our long-term aspirations. We grew cyber safety bookings 4% in constant currency and reached a record direct customer count of 39.3 million, up 1.1 million year-over-year. Additionally, ARPU is up sequentially and year-over-year in constant currency, and retention reached 78%, a gen record supported by record levels in LifeLock and Avast. A consistent focus on execution resulted in another double-digit growth quarter for earnings per share at $0.53 in Q1, up 15% in constant currency.

And now, I'll turn the call over to Vincent. Thanks, Jason, and welcome everyone to our Q1 earnings call. We've started fiscal 25 on a good note with our operating KPIs supporting our long-term aspirations.

Vincent: We grew cyber safety bookings 4% in constant currency and reached a record direct customer count of 39.3 million, up 1.1 million year over year.

Vincent: Additionally, ARPU is up sequentially annual over year in constant currency, and retention reached 78%, a gen record supported by record level in LifeLock and Avast.

Vincent: A consistent focus on execution resulted in another double-digit growth quarter for earnings per share at $0.53 in Q1, up 15% in constant currency.

Vincent Pilette: I'm proud of our team for delivering these results and for our continued focus on evolving cyber safety for consumers in a very dynamic threat landscape. Before Natalie walks you through the details of our results, I would like first to remind everyone about our strategic opportunity and the steady progress we are making to achieve our cyber safety mission. Whether it is a biometric payment at a retail store or our personal performance data combined with recommendation algorithms to buy sportswear, it seems like not a day goes by where we don't do something digitally without sharing more personal information.

Vincent Pilette: Before Natalie walks you through the details of our results, I would like first to remind everyone about our strategic opportunity and the study progress we are making to achieve our cyber safety mission. Whether it is a biometric payment at the retail store or our personal performance data combined with recommendation algorithms to buy sportswear, it seems like not a day goes by where we don't do something digitally without sharing more personal information. And while these experiences can be convenient, our growing digital life leads to the proliferation of sensitive personal information, which is difficult to properly safeguard as it is increasingly out of our control.

Vincent: Before Natalie walks you through the details of our results, I would like first to remind everyone about our strategic opportunity and the steady progress we are making to achieve our cyber safety mission.

Speaker Change: Whether it is a biometric payment at a retail store or our personal performance data combined with recommendation algorithms to buy sportswear, it seems like not a day goes by where we don't do something digitally without sharing more personal information.

Vincent Pilette: And while these experiences can be convenient, our growing digital life leads to the proliferation of sensitive personal information, which is difficult to properly safeguard as it is increasingly out of our control. We depend on our banks, our government institutions, our mobile providers, and our retailers to protect our data. And yet, as we can all see from the ever-increasing number of data breaches in all industries, it is tremendously hard for them to do.

Vincent Pilette: We depend on our banks, our government institutions, our mobile providers, and our retailers to protect our data. And yet, as we can all see by the ever-increasing number of data breaches in all industries, it is tremendously hard for them to do. In just the first half of 2024, we have seen more than 2,000 reported breaches per month across the globe. And those are just the reported breaches, not to mention the many that occur across very small businesses, the local doctor offices, schools, and shops, that also get access to our sensitive personal data. Recent global breaches highlighted the growing threat of cyber attacks, which are often targeted at exploiting human vulnerability.

Vincent Pilette: In just the first half of 2024, we have seen more than 2,000 reported breaches per month across the globe. And those are just the reported breaches, not to mention the many that occur across very small businesses, the local doctor's offices, schools, and shops that also get access to our sensitive personal data. Recent global breaches highlighted the growing threat of cyberattacks which are often targeted at exploiting human vulnerabilities. In the aftermath of such events, there is a surge in impersonation scams, suspicious emails, and text messages designed to trick people into sharing personal information. The rapid development of generative AI has made it easier for criminals to create more personalized and believable scans, including deepfake clones. The potential scope of these threats is broadening, resulting in significant economic and reputational damage.

Nathalie: In just the first half of 2024, we have seen more than 2,000 reported breaches per month across the globe.

Vincent: And those are just the reported breaches, not to mention the many that occur across very small businesses, the local doctor offices, schools, and shops that also get access to our sensitive personal data.

Vincent: Recent global breaches highlighted the growing threat of cyber attacks which are often targeted at exploiting human vulnerabilities.

Vincent Pilette: In the aftermath of such events, there is a search in impersonation scams, suspicious emails, and text messages designed to trick people into sharing personal information. The rubbid development of generative AI has made it easier for criminals to create more personalized and believable scams, including deep fake clones. The potential scope of these threats is broadening, resulting in significant economic and reputational damages. It is clear to anyone paying attention that these threats are creating a dynamic threat landscape, making consumers worldwide more vulnerable than ever to real threats to their privacy, identity, and financial assets. And even the more careful and vigilant people, we struggle to control where their personal data lives and will have little to no visibility into our government's companies and small businesses, protect their data, identity, and reputation, which I believe are amongst the most valuable assets.

Vincent: In the aftermath of such events, there is a surge in impersonation scams, suspicious emails and text messages designed to trick people into sharing personal information.

Vincent: The rapid development of generative AI has made it easier for criminals to create more personalized and believable scans, including deepfake clones.

Vincent: The potential scope of these threats is broadening, resulting in significant economic and reputational damages.

Vincent Pilette: It is clear to anyone paying attention that these threats are creating a dynamic threat landscape, making consumers worldwide more vulnerable than ever to real threats to their privacy, identity, and financial assets. And even the more careful and vigilant people will struggle to control where their personal data lives and will have little to no visibility into how governments, companies, and small businesses protect their data, identity, and reputation, which I believe are among the most valuable assets. I strongly believe that it is not a question of if your personal data will be compromised if it hasn't occurred already, but when.

Vincent: It is clear to anyone paying attention that these threats are creating a dynamic threat landscape, making consumers worldwide more vulnerable than ever to real threats to their privacy, identity, and financial assets.

Vincent: And even the more careful and vigilant people will struggle to control where their personal data lives and will have little to no visibility into how governments, companies, and small businesses protect their data, identity, and reputation, which I believe are among the most valuable assets.

Vincent Pilette: I strongly believe that it is not a question of if your personal data will be compromised, if it hasn't occurred already yet, but when. And that is why the team agenda has made protecting you, your data, and your digital identity are life's work. It is our never-ending mission that we deliver to constant innovation. Today, we already have the most comprehensive product portfolio that meets the consumer needs for security, identity, privacy, and reputation. Our flagship cyber safety membership offerings, Northern 360 of us, one in Aviva Prime, continue to gain traction and regularly receive industry recognition and awards for the way we protect against the merits of cyber threats.

Vincent: I strongly believe that it is not a question of if your personal data will be compromised, if it hasn't occurred already yet, but when.

Vincent Pilette: And that is why the team at Gen has made protecting you, your data, and your digital identity our life's work. It is our never-ending mission that we deliver through constant innovation. Today, we already have the most comprehensive product portfolio that meets consumer needs for security, identity, privacy, and reputation. Our flagship cyber safety membership offerings, Norton 360, Avast, and Avira Prime, continue to gain traction and regularly receive industry recognition and awards for the way they protect against the myriad of cyber threats.

Speaker Change: Our flagship cyber safety membership offerings, Northern 360, Avast1, and Avira Prime, continue to gain traction and regularly receive industry recognition and awards for the way we protect against the myriads of cyber threats.

Vincent Pilette: We don't just stop at delivering to consumers industry-leading technology. We know that providing our customers with best-in-class services sets us apart from our competitors. Solution like LifeLock and Reputation Defender deliver personal life service to help protect and restore your identity and reputation in the event you become a victim. By focusing on the customer journeys with us, both products have achieved top ratings, with LifeLock recognizing the best identity theft service in the marketplace and Reputation Defender with a near-perfect rating for reputation management. As the leader of the industry, we are constantly investing in innovation to stay ahead of potential threats and provide our customers with the best possible cyber safety protection.

Vincent Pilette: We don't just stop at delivering industry-leading technology to consumers. We know that providing our customers with best-in-class services sets us apart from our competitors. Solutions like LifeLock and Reputation Defender deliver personal life services to help protect and restore your identity and reputation in the event you become a victim.

Vincent Pilette: By focusing on the customer journeys with us, both products have achieved top ratings, with LifeLock recognized as the best identity-theft service in the marketplace, and Reputation Defender receiving a near-perfect rating for reputation management. As the leader of the industry, we are constantly investing in innovation to stay ahead of potential threats and provide our customers with the best possible cyber safety protection. Yesterday, we launched Northern Ultra VPN, which offers more comprehensive online protection with three different plans catering to individuals, couples, and families. Norton UltraVPN provides the best online privacy, dark web monitoring, VPN protocol support, and worldwide content access.

Speaker Change: As the leader of the industry, we are constantly investing in innovation to stay ahead of potential threats and provide our customers with the best possible cyber safety protection.

Vincent Pilette: Yesterday, we launched Northern UltraVPN, which offers more comprehensive online protection with three different plans catering to individuals, couples, and families. Northern UltraVPN provides the best online privacy, backward monitoring, VPN protocol support, and worldwide content access. In addition, it offers protection against camps, viruses, malware, and ransomware, as well as a password manager and parental control. We believe it is the best and the next generation of VPN solution, offering a modern and personalized approach to cyber safety and add another entry door into total comprehensive cyber safety. We're so excited to bring Northern Travipian to consumers. Not only is it a great product that meets the customer needs, but it also represents the promise of all the hard integration work we put into bringing two companies' technology together under a new single common architecture.

Vincent Pilette: In addition, it offers protection against scams, viruses, malware, and ransomware, as well as a password manager and parental control. We believe it is the best and the next generation of VPN solutions offering a modern and personalized approach to cyber safety and adds another entry door to total comprehensive cyber safety. We're so excited to bring Northern Ultra VPN to consumers. Not only is it a great product that meets customer needs, but it also represents the promise of all the hard integration work we put into bringing the two companies' technology together under a new single common architecture. Norton Ultra VPN is built on the new GenStack, which helps us not only with the innovation and the features we deliver but also with the speed with which we were able to bring it to market.

Vincent: Yesterday, we launched Northern Ultra VPN, which offers more comprehensive online protection with three different plans catering to individuals, couples, and families.

Speaker Change: We believe it is the best and the next generation of VPN solution offering a modern and personalized approach to cyber safety and adds another entry door into total comprehensive cyber safety.

Speaker Change: We're so excited to bring Norton UltraVPN to consumers. Not only it is a great product that meets the customer needs, but it also represents the promise of all the hard integration work we put into bringing two companies' technology together under a new single common architecture.

Vincent Pilette: Northern Ultravipian is built on the new Genstack, which helps us not only with the innovation and the future we delivered, but also with the speed with which we were able to bring it to market. And in the future, as we take those capabilities and combine them with our ever-expanding AI tools, we can only see what we can deliver in terms of customer experience and ease of use. Over time, that will result in improved customer loyalty and greater engagement, leading to more value-at, cross-cell, and upsells.

Vincent Pilette: And in the future, as we take those capabilities and combine them with our ever-expanding AI tools, we can't wait to see what we can deliver in terms of customer experience and ease of use. Over time, that will result in improved customer loyalty and greater engagement, leading to more value-add, cross-sell, and upsell. The last point I want to touch on today is that most people have heard about cyber crimes and cyber security, but most people are not fully aware of the very real risk that they are exposed to and often not adequately protected from.

Vincent: And in the future, as we take those capabilities and combine them with our ever-expanding AI tools, we can't wait to see what we can deliver in terms of customer experience and ease of use.

Vincent: Over time, that will result in improved customer loyalty and greater engagement, leading to more value-adds, cross-sell, and upsells.

Vincent Pilette: The last point I want to touch on today is that most everyone has heard about cybercrimes and cyber security, but most people are not fully aware of the very real risk that they are exposed to and often not adequately protected from. At Gen, we are hard at work every day, communicating, educating, and earning the trust of consumers around the world. Although we have a host of industry-leading brands that enables us to serve the needs of hundreds of millions of diverse customers across over 150 countries, we feel it is also our responsibility to constantly educate and inform people about cyber risk to their impact through initiatives, such as a recent scam artist campaign.

Speaker Change: The last point I want to touch on today is that most everyone has heard about cyber crimes and cyber security, but most people are not fully aware of the very real risk that they are exposed to and often not adequately protected from.

Vincent Pilette: At Gen, we are hard at work every day communicating, educating, and earning the trust of consumers around the world. We have a host of industry-leading brands that enable us to serve the needs of hundreds of millions of diverse customers across over 150 countries. We feel it is also our responsibility to constantly educate and inform people about cyber risk and its impact through initiatives such as our recent Scam Artists Campaign. This campaign uses art and psychology to demonstrate the emotional impact of cybercrime and helps people take the right steps to proactively protect themselves online.

Gen: At GEN, we are hard at work every day communicating, educating, and earning the trust of consumers around the world.

Speaker Change: Although we have a host of industry leading brands that enable us to serve the needs of hundreds of millions of diverse customers across over 150 countries.

Vincent Pilette: This campaign uses art and psychology to demonstrate the emotional impact of cybercrime and helps people take the right steps to proactively protect themselves online. This quarter, we also launched our personal data exposure scam by LifeLog, which is a comprehensive scam of millions of data points online, combining with our privacy monitoring and dark web algorithms. By simply entering a new mail address, individuals can obtain a free report card containing all their supposedly private information that may be actually publicly available. These tools are free to everyone and give consumers visibility to their digital footprint so they can better protect themselves.

Vincent Pilette: This quarter, we also launch our personal data exposure scam by LifeLog, which is a comprehensive database of millions of data points online, combined with our privacy monitoring and dark web algorithms. By simply entering an email address, individuals can obtain a free report card detailing all their supposedly private information that may be actually publicly available.

Speaker Change: This quarter we also launched our personal data exposure scam by LifeLock, which is a comprehensive scam of millions of data points online, combining with our privacy monitoring and dark web algorithms.

Speaker Change: By simply entering an email address, individuals can obtain a free report card detailing all their supposedly private information that may be actually publicly available.

Natalie Derse: These tools are free to everyone and give consumers visibility into their digital footprint so they can better protect themselves. All these types of cyber safety awareness initiatives are beginning to pay off as we grow cyber safety bookings and revenue by 4% in Q1. We had strong momentum in the identity and privacy business lines, with bookings up 6%, supported by double-digit new customer acquisition in that segment and accelerating privacy cross-sell growth. This success reflects the increasing consumer awareness of identity risk from recently reported breaches.

Speaker Change: These tools are free to everyone and give consumer visibility to their digital footprint so they can better protect themselves.

Vincent Pilette: All these types of cyber safety awareness initiatives are beginning to pay off as we grow cyber safety bookings and revenue by 4% in Q1. We had strong momentum in the identity and privacy business lines with bookings of 6%, supported by double digit new customer acquisition in that segment and accelerating privacy cross-cell growth. This success reflects the increasing consumer awareness of identity risk from recently reported bridges. Also, the identity market remains mostly U.S.-based today. We continue to make steady traction in our efforts to expand identity protection globally, introducing Northern 360 Advanced to 8 markets in Europe, providing customers additional identity protection services, such as dark web monitoring, social media monitoring, stolen wallet assistance, and ID restoration.

Speaker Change: All these types of cyber safety awareness initiatives are beginning to pay off as we grow cyber safety bookings and revenue by 4% in Q1.

Speaker Change: We had strong momentum in the identity and privacy business lines, with bookings of 6%, supported by double-digit new customer acquisition in that segment, and accelerating privacy cross-sell growth.

Speaker Change: This success reflects the increasing consumer awareness of identity risk from recently reported breaches.

Natalie Derse: Although the identity market remains mostly U.S.-based today, we continue to make steady traction in our efforts to expand identity protection globally, introducing Norton 360 Advanced to eight markets in Europe, providing customers with additional identity protection services such as dark web monitoring, social media monitoring, stolen wallet assistance, and ID restoration. Now, despite the importance of comprehensive cyber safety, most consumers mistakenly believe it won't happen to them or still believe that their digital lives are safe, basically choosing to self-insure.

Speaker Change: Also, the identity market remains mostly U.S.-based today.

Speaker Change: We continue to make steady traction in our efforts to expand identity protection globally, introducing Norton 360 ADVANCE to eight markets in Europe, providing customer additional identity protection services, such as dark web monitoring, social media monitoring, stolen wallet assistance, and ID restoration.

Vincent Pilette: Now, despite the importance of comprehensive cyber safety, most consumers mistakenly believe it won't happen to them or still believe that they digitalize our safe, basically choosing to self-insured. and two-thirds of cyber safety customers have only basic security or even just divine security. But in today's user-centric, cloud-based digital world, information and identity risk transcends personal devices. We believe that comprehensive cyber safety is paramount, and yet still massively under penetrated. And without technology, portfolio, focus on innovation, trusted brands, and channel expansion, we are well positioned to drive its adoption. This is our never-ending mission.

Speaker Change: And two-thirds of cyber safety customers have only basic security or even just device security. But in today's user-centric, cloud-based digital world, information and identity risk transcends personal devices.

Natalie Derse: And two-thirds of cyber safety customers have only basic security or even just device security. But in today's user-centric, cloud-based digital world, information and identity risk transcend personal devices. We believe that comprehensive cyber safety is paramount and yet still massively under-penetrated. And with our technology, portfolio, focus on innovation, trusted brands, and channel expansion, we are well positioned to drive its adoption. This is our never-ending mission. So, in summary, we are pleased with our Q1 results and a promising start to fiscal 2025.

Speaker Change: We believe that comprehensive cyber safety is paramount and yet still massively under-penetrated. And with our technology, portfolio, focus on innovation, trusted brands and channel expansion, we are well positioned to drive its adoption. This is our never-ending mission.

Vincent Pilette: So in summary, we are pleased with our Q1 results and promising start to fiscal 2025. We are confident that our customer centricity, innovation, and disciplined execution will enable us to deliver on our goals for not only this year, but also on our plan to accelerate long-term, profitable revenue growth to further increase shareholder value.

Speaker Change: So, in summary, we are pleased with our Q1 results and promising start to fiscal 2025.

Natalie Derse: We are confident that our customer centricity, innovation, and disciplined execution will enable us to deliver on our goals for not only this year but also on our plan to accelerate long-term profitable revenue growth to further increase shareholder value. And with that, let me pass it on to Natalie to review our performance in detail. Thank you, Vincent.

Speaker Change: We are confident that our customer centricity, innovation and discipline execution will enable us to deliver on our goals for not only this year, but also on our plan to accelerate long-term profitable revenue growth to further increase shareholder value.

Vincent Pilette: And with that, then we pass it on to Natalie to review our performance in detail.

Natalie Derse: Thank you, Vincent, and hello, everyone. On today's call, I will walk through our fiscal Q1 2025 results, followed by our outlook for Q2 and full-year fiscal year 2025. I will focus on non-GAAP financials and year-over-year growth rates unless otherwise stated. Before I begin, I want to highlight that, as disclosed in today's presentation and our recent Form 8K, we made a revision to our historical practice of when we recognize revenue for certain customers, changing from the successful bill date to the renewal date. The impact of the revision is immaterial; however, for comparative purposes, we have corrected for this in prior periods reported.

Speaker Change: And with that, let me pass it on to Natalie to review our performance in details. Thank you, Vincent, and hello, everyone. For today's call, I will walk through our fiscal Q1 2025 results, followed by our outlook for Q2 and full-year fiscal year 2025.

Natalie Derse: Thank you, Vincent, and hello, everyone. For today's call, I will walk through our fiscal Q1 2025 results, followed by our outlook for Q2 in full year fiscal year 2025. I will focus on non-GAAP financials and year-over-year growth rates unless otherwise stated.

Natalie Derse: Before I begin, I want to highlight that, as disclosed in today's presentation in our recent Form 8-K, we made a revision to our historical practice of when we recognize revenue for certain customers, changing from successful build date to renewal date. The impact of the revision is immaterial. However, for comparative purposes, we have corrected for this in prior periods reported. Please refer to the supplemental information section of today's slide presentation available on our IR website, as well as our Q1 Form 10-Q for more details. Now, turning to Q1 results. Q1 was another quarter of solid execution with financial results at the midpoint of our guidance and reflects our 20th consecutive quarter of growth.

Nathalie: The impact of the revision is immaterial, however, for comparative purposes, we have corrected for this in prior periods reported.

Natalie Derse: Please refer to the supplemental information section of today's slide presentation available on our IR website as well as our Q1 Form 10-Q for more details. Now, we turn to our Q1 results. Q1 was another quarter of solid execution with financial results at the midpoint of our guidance and reflects our 20th consecutive quarter of growth. Q1 bookings were $913 million, up 3% in USD and 4% in constant currency. Cyber safety bookings, which exclude our legacy business lines, also grew 4% year over year in constant currency.

Speaker Change: Please refer to the supplemental information section of today's slide presentation available on our IR website as well as our Q1 Form 10-Q for more details.

Natalie Derse: Total Q1 revenue was $965 million, up 2% in USD and up 3% in constant currency. Cyber safety revenue grew 4% year-over-year in constant currency, driven by our privacy and identity business lines, as well as continued cross-cell penetration into the Norton base. In the U.S., we also grew 4% with expanding demand for privacy and identity protection services, attracting new customers through direct and partner channels, and scaling cross-sells with our existing customers. We also continue to penetrate international markets with varying degrees of market maturity as we continue to seed new acquisitions and expand the reach of our cyber safety services.

Nathalie: Now turning to Q1 results. Q1 was another quarter of solid execution with financial results at the midpoint of our guidance and reflects our 20th consecutive quarter of growth.

Natalie Derse: Q1 bookings were 913 million dollars, up 3% in USD and 4% in constant currency. Cyber safety bookings, which exclude our legacy business lines, also grew 4% year-over-year in constant currency. Total Q1 revenue was 965 million dollars, up 2% in USD and up 3% in constant currency. Cyber safety revenue grew 4% year-over-year in constant currency, driven by our privacy and identity business lines, as well as continued cross-sell penetration into the Norton base. In the US, we also grew 4% with expanding demand for privacy and identity protection services, attracting new customers through direct and partner channels and scaling cross-sells with our existing customers.

Speaker Change: Q1 bookings were $913 million, up 3% in USD and 4% in Constant Currency.

Speaker Change: Cyber safety bookings, which exclude our legacy business lines, also grew 4% year over year in constant currency.

Speaker Change: Total Q1 revenue was $965 million, up 2% in USD and up 3% in Constant Currency.

Speaker Change: Cyber safety revenue grew 4% year over year in constant currency, driven by our privacy and identity business lines, as well as continued cross-cell penetration into the Norton base.

Speaker Change: In the U.S., we also grew 4% with expanding demand for privacy and identity protection services, attracting new customers through direct and partner channels, and scaling cross-sells with our existing customers.

Natalie Derse: We also continue to further penetrate international markets with varying degrees of market maturity as we continue to seed new acquisitions and expand the reach of our levers at our disposal to drive broad brace growth in a profitable manner. Direct revenue was 850 million dollars, up 3% in constant currency, supported by improvements across our key performance metrics of direct customers, average revenue per consumer, and retention. Let me share some specifics. A key ingredient to our growth strategy is driving net new customers, and in Q1, we expanded our customer base for the fourth consecutive quarter, increasing to 39.3 million, up 192 cakes sequentially, and up 1.1 million year-to-year.

Speaker Change: We also continue to further penetrate international markets with varying degrees of market maturity as we continue to seed new acquisitions and expand the reach of our cyber safety services.

Natalie Derse: We will continue to execute on all levers at our disposal to drive broad-braced growth in a profitable manner. Direct revenue was $850 million, up 3% in constant currency, supported by improvements across our key performance metrics of direct customers, average revenue per consumer, and retention rate. Let me share some specifics.

Speaker Change: We will continue to execute on all levers at our disposal to drive broad brace growth in a profitable manner.

Speaker Change: Direct revenue was $850 million, up 3% in constant currency, supported by improvements across our key performance metrics of direct customers, average revenue per consumer, and retention rate.

Natalie Derse: A key ingredient in our growth strategy is driving net new customers, and in Q1, we expanded our customer base for the fourth consecutive quarter, increasing to 39.3 million, up 192K sequentially, and up 1.1 million year over year. We continue to invest in a broad range of marketing channels to reach new audiences, generate more traffic to our sites, while optimizing conversion. We are acquiring new customers with healthy ROIs as we further penetrate international markets with our mobile offerings.

Speaker Change: Let me share some specifics. A key ingredient to our growth strategy is driving net new customers, and in Q1, we expanded our customer base for the fourth consecutive quarter, increasing to 39.3 million, up 192k sequentially, and up 1.1 million year over year.

Natalie Derse: We continue to invest in a broad range of marketing channels to reach new audiences, generate more traffic to our sites, while optimizing conversion. We are acquiring new customers with healthy ROI's as we further penetrate international markets with our mobile offerings. Leveraging our brand trust and awareness combined with our highly rated, award-winning product portfolio, we will continue to push through with our diverse set of acquisition channels to grow our customer base. On monetization, our monthly direct ARPU was $7.23 cents in USD, up 1 cent sequentially, and down 1 cent compared to last year's result. However, please note, this result absorbs 4 cents of negative effect headwind year over year, and 2 cents sequentially.

Speaker Change: We continue to invest in a broad range of marketing channels to reach new audiences, generate more traffic to our sites, while optimizing conversion.

Natalie Derse: Leveraging our brand trust and awareness combined with our highly rated, award-winning product portfolio, we will continue to push through with our diverse set of acquisition channels to grow our customer base. On monetization, our monthly direct ARPU was $7.23 in USD, up one cent sequentially and down one cent compared to last year's results. However, please note this result absorbs 4 cents of negative FX headwinds year over year and 2 cents sequential

Speaker Change: Leveraging our brand trust and awareness combined with our highly rated award-winning product portfolio, we will continue to push through with our diverse set of acquisition channels to grow our customer base.

Speaker Change: On monetization, our monthly direct ARPU was $7.23 in USD, up one cent sequentially and down one cent compared to last year's result.

Speaker Change: However, please note this result absorbs four cents of negative FX headwinds year over year and two cents sequentially.

Natalie Derse: Operationally, ARPU remains stable to slightly higher across our customer cohorts by brand and market. And as we grow our customer base, we have demonstrated the ability to further monetize through cross-sells and upsells. For example, with the Norton Base, cross-cell penetration has grown from 15% to 20% over the past year.

Natalie Derse: Operationally, ARPU remains stable to slightly up across our customer cohorts by brand-in-market, and as we grow our customer base, we have demonstrated the ability to further monetize through cross-sells and upsells. With the Norton base, cross-cell penetration has grown from 15 percent to 20 percent over the past year. We have leveraged a vast, best practices to offer the most suitable complimentary products during the right moments of truth that will further protect customers and their growing digital needs. We also continue to refine our upsell to guide our customers toward higher-tier memberships with more comprehensive protection and exciting opportunity for growth as we look to the next few years.

Speaker Change: Operationally, ARPU remains stable to slightly up across our customer cohorts by brand and market.

Speaker Change: And as we grow our customer base, we have demonstrated the ability to further monetize through cross-sells and upsells.

Speaker Change: With the Norton Base, cross-cell penetration has grown from 15% to 20% over the past year.

Natalie Derse: We have leveraged a vast best practices to offer the most suitable complementary products during the right moments of truth that will further protect customers and their growing digital needs. We also continue to refine our upsell playbook to guide our customers toward higher tier memberships with more comprehensive protection and exciting opportunities for growth as we look to the next few years. The expanded value proposition provided to our customers is also reflective of the retention increases to date.

Speaker Change: We have leveraged a vast best practices to offer the most suitable complimentary products during the right moments of truth that will further protect customers and their growing digital needs.

Natalie Derse: The expanded value proposition provided to our customers is also reflected in the retention increases to date. In Q1, our direct retention rate was nearly 78 percent, improving year over year and progressing towards our goal is 80 percent. As we move through the gen-stack simplification, we see more opportunities to drive higher customer loyalty and increased lifetime value, leveraging better targeting capabilities to create more personalized customer experiences through their journey; in turn, activating the growth flywheel, as we've previously shared. Turning to our partner business, partner revenue was $101 million in Q1, up 4 percent year over year as reported, and up 6 percent in constant currency.

Speaker Change: The expanded value proposition provided to our customers is also reflected in the retention increases to date. In Q1, our direct retention rate was nearly 78 percent, improving year over year and progressing towards our goal of 80 percent.

Natalie Derse: In Q1, our direct retention rate was nearly 78%, improving year-over-year and progressing towards our goal of 80%. As we move through the Gen Stack simplification, we see more opportunities to drive higher customer loyalty and increased lifetime value, leveraging better targeting capabilities to create more personalized customer experiences throughout their journey, in turn activating the growth flywheel, as we've previously shared. Turning to our partner business, partner revenue was $101 million in Q1, up 4% year-over-year as reported and up 6% in constant currency.

Speaker Change: As we move through the Gen Stack Simplification, we see more opportunities to drive higher customer loyalty and increased lifetime value, leveraging better targeting capabilities to create more personalized customer experiences through their journey.

Speaker Change: in turn activating the growth flywheel as we've previously shared.

Speaker Change: Turning to our partner business, partner revenue was $101 million in Q1, up 4% year-over-year as reported, and up 6% in constant currency.

Natalie Derse: Our employee benefits channel pipeline is robust, as organizations increasingly recognize the importance of protecting their workers from the identity and cyber risks they face. We continue to strengthen strategic partnerships with telcos, financial services, and insurance providers to expand our identity offerings, and we are also driving higher penetration of our private browsers and search partnerships. Scanning our partner business to half a billion dollars in annual revenue is a key component to achieving our overall growth plan, and we are confident in the progress we're making. Brown to Gunner Revenue, our legacy business lines contributed $14 million this quarter, down from $17 million the prior year.

Natalie Derse: Our employee benefits channel pipeline is robust as organizations increasingly recognize the importance of protecting their workers from the identity and cyber risks they face. We continue to strengthen strategic partnerships with telcos, financial services, and insurance providers to expand our identity offerings. And we are also driving higher penetration of our private browsers and search partnerships.

Speaker Change: Our Employee Benefits Channel Pipeline is robust, as organizations increasingly recognize the importance of protecting their workers from the identity and cyber risks they face.

Speaker Change: We continue to strengthen strategic partnerships with telcos, financial services, and insurance providers to expand our identity offerings, and we are also driving higher penetration of our private browsers and search partnerships.

Natalie Derse: Scaling our partner business to half a billion dollars in annual revenue is a key component to achieving our overall growth plan, and we are confident in the progress we're making. Rounding out our revenue, our legacy business lines contributed $14 million this quarter, down from $17 million the prior year. As a reminder, we expect our legacy revenues to continue declining double digits year over year and represent less than 2% of our revenue.

Speaker Change: Scaling our partner business to half a billion dollars in annual revenue is a key component to achieving our overall growth plan and we are confident in the progress we're making.

Speaker Change: Rounding out our revenue, our legacy business lines contributed $14 million this quarter, down from $17 million the prior year. As a reminder, we expect our legacy revenues to continue declining double digits year over year and represent less than 2% of our revenue.

Natalie Derse: As a reminder, we expect our legacy revenues to continue declining double digits year-to-year and represent less than 2% of our revenue. Turning to profitability, Q1 operating income was $564 million, a 4% year-to-year, and 5% in constant currency, translating to an operating margin of 58.4%. We continue to make disciplined investments and targeted growth opportunities to reach new customers through full-funnel marketing efforts and expand our international presence. We're also solidifying our technology capabilities, including the new gen stack simplification, to quickly adapt to ever-changing cyber threats and drive innovation through new offerings such as Norton, UltraVPN, to add to our comprehensive cyber safety product portfolio.

Natalie Derse: Turning to profitability, Q1 operating income was $564 million, up 4% year-over-year and up 5% in constant currency, translating to an operating margin of 58.4%. We continue to make disciplined investments and targeted growth opportunities to reach new customers through full-funnel marketing efforts and expand our international presence. We're also solidifying our technology capabilities, including the new Gen Stack Simplification, to quickly adapt to ever-changing cyber threats and drive innovation through new offerings such as Norton UltraVPN to add to our comprehensive cyber safety product portfolio.

Speaker Change: Turning to profitability, Q1 operating income was $564 million, up 4% year-over-year and up 5% in constant currency, translating to an operating margin of 58.4%.

Speaker Change: We continue to make disciplined investments and targeted growth opportunities to reach new customers through full-funnel marketing efforts and expand our international presence.

Speaker Change: and drive innovation through new offerings, such as Norton UltraVPN.

Speaker Change: to add to our comprehensive cyber safety product portfolio.

Natalie Derse: Within our core, we will continue to drive efficiencies and productivity that can be reinvested into additional growth levers. Q1 net income was $335 million, up 11% year-to-year. Deleted EPS was 53 cents for the quarter, up 13% year-to-year and up 15% in constant currency. Interest expense related to our debt was $146 million. Our non-GAAP tax rate remained steady at 22%, and our ending share count was 627 million, down 16 million year-to-year, reflecting the impact of share repurchases. Turning to our balance sheet and cash flow, Q1 ending cash balance was $644 million. We are supported by over $2 billion of total liquidity, consisting of our ending Q1 cash balance and a $1.5 billion revolver.

Natalie Derse: Within our core, we will continue to drive efficiencies and productivity that can be reinvested into additional growth levers. Q1 net income was $335 million, up 11% year over year. Diluted EPS was $0.53 for the quarter, up 13% year-over-year and up 15% in constant currency. Interest expense related to our debt was $146 million.

Speaker Change: Within our core, we will continue to drive efficiencies and productivity that can be reinvested into additional growth levers.

Speaker Change: Q1 net income was $335 million, up 11% year over year.

Natalie Derse: Our non-GAAP tax rate remained steady at 22%, and our ending share count was $627 million, down $16 million year-over-year, reflecting the impact of share repurchases. Turning to our balance sheet and cash flow, our Q1 ending cash balance was $644 million. We are supported by over $2 billion of total liquidity, consisting of our ending Q1 cash balance and a $1.5 billion revolver. Q1 operating cash flow was $264 million, and free cash flow was $262 million, which included approximately $187 million of cash interest payments this quarter.

Natalie Derse: Q1 operating cash flow was $264 million, and free cash flow was $262 million, which included approximately $187 million of cash interest payments this quarter. As a reminder, earlier in Q1, we successfully repriced our existing term loan fee, removing the credit spread adjustment and lowering the credit spread associated with it from 200 basis points over SOFR to 175 basis points. As we see every year, we expect Q2 to be the lowest quarter of the year for operating cash flow, given the concentration of tax payments that are due. Turning to capital allocation, we remain balanced with our capital deployment on our committed to returning 100% of excess free cash flow to shareholders.

Natalie Derse: As a reminder, earlier in Q1, we successfully repriced our existing Term Loan B, removing the credit... removing the credit spread adjustment and lowering the credit spread associated with it from 200 basis points over SOFR to 175 basis points.

Speaker Change: As a reminder, earlier in Q1, we successfully repriced our existing Term Loan B, removing

Natalie Derse: And, as we see every year, we expect Q2 to be the lowest quarter of the year for operating cash flow given the concentration of tax payments that are due. Turning to capital allocation, we remain balanced with our capital deployment and are committed to returning 100% of excess free cash flow to shareholders. We voluntarily repaid $30 million of our Term Loan B as well as $58 million under our maturity schedule and are now three and a half times net leveraged.

Speaker Change: And as we see every year, we expect Q2 to be the lowest quarter of the year for operating cash flow given the concentration of tax payments that are due.

Speaker Change: Turning to capital allocation, we remain balanced with our capital deployment and are committed to returning 100% of excess free cash flow to shareholders.

Natalie Derse: We voluntarily repaid $30 million of our term loan fee, as well as $58 million for our maturity schedule, and are now three and a half times net-levered. We also deployed $272 million for share repurchases this quarter, the equivalent of $11 million shares as part of the expanded $3 billion buyback program approved by the board in May of 2024. Since the start of fiscal year 23, we have remained committed to a balanced capital allocation strategy, paying down $2 billion worth of debt and deploying a total of $1.6 billion of share repurchases over that time period. We paid $82 million to shareholders in the form of our regular quarterly dividend of 12.5 cents per common share.

Speaker Change: We voluntarily repaid $30 million of our Term Loan B as well as $58 million for our maturity schedule and are now three and a half times net levered.

Natalie Derse: We also deployed $272 million for share repurchases this quarter, the equivalent of 11 million shares, as part of the expanded $3 billion buyback program approved by the board in May of 2024. Since the start of fiscal year 23, we have remained committed to a balanced capital allocation strategy, paying down $2 billion worth of debt and deploying a total of $1.6 billion of share repurchases over that time period. We paid $82 million to shareholders in the form of our regular quarterly dividend of $0.125 per common share.

Speaker Change: Since the start of fiscal year 23 we have remained committed to a balanced capital allocation strategy paying down two billion dollars worth of debt and deploying a total of 1.6 billion dollars of share repurchases over that time period.

Speaker Change: We paid $82 million to shareholders in the form of our regular quarterly dividend of $0.125 per common share.

Natalie Derse: For Q2 fiscal 2025, the Board of Directors approved a regular quarterly cash dividend of 12.5 cents per common share to be paid on September 11, 2024, for all shareholders of record as of the close of business on August 19, 2024. With our strong cash flow generation, we will continue to balance debt paydown and opportunistic share buyback deployment to help achieve our goals of delivering EPS growth of 12 to 15% and driving net leverage below three times EBITDA by fiscal year 2027. Now turning to our Q2 and fiscal 25 outlook. For Q2, we expect non-GAAP revenue in the range of $965 million to $975 million, translating to 3 to 4% growth in cyber safety, and Q2 non-GAAP EPS to be in the range of 53 to 55 cents, up 13% to 17%.

Natalie Derse: For Q2 fiscal 2025, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on September 11, 2024, for all shareholders of record as of the close of business on August 19, 2024.

Speaker Change: For Q2 Fiscal 2025, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on September 11, 2024, for all shareholders of record as of the close of business on August 19, 2024.

Natalie Derse: With our strong cash flow generation, we will continue to balance debt repayment and opportunistic share buyback deployment to help achieve our goals of delivering EPS growth of 12 to 15% and driving net leverage below three times EBITDA by fiscal year 2027. Now, turning to our Q2 and fiscal 25 outlook. For Q2, we expect non-GAAP revenue in the range of $965 million to $975 million, translating to 3% to 4% growth in cyber safety, and Q2 non-GAAP EPS to be in the range of $0.53 to $0.55, up 13% to 17%.

Speaker Change: With our strong cash flow generation, we will continue to balance debt paydown and opportunistic share buyback deployment to help achieve our goals of delivering EPS growth of 12 to 15 percent and driving net leverage below three times EBITDA by fiscal year 2027.

Speaker Change: For Q2, we expect non-gap revenue in the range of $965 million to $975 million, translating to 3% to 4% growth in cyber safety.

Natalie Derse: First fiscal year 2025, we are reaffirming our prior guidance. We expect full year revenue in the range of $3.89 billion to $3.93 billion, translating to 3 to 4% growth in cyber safety expressed in constant currency, supported by expected cyber safety bookings growth of 3 to 5%. We expect non-GAAP EPS to be in the range of $2.17 to $2.23 per share, representing an annual increase of 12 to 15% in constant currency. Please note that we expect continued effects headwinds to impact our reported revenue, primarily from the Japanese yen, which has depreciated over the last year. In summary, our Q1 results keep us on target for our 2025 plan, and we remain well positioned to achieve our longer term goals.

Natalie Derse: For fiscal year 2025, we are reaffirming our prior guidance. We expect full-year revenue in the range of $3.89 billion to $3.93 billion, translating to 3% to 4% growth in cybersafety expressed in constant currency, supported by expected cybersafety bookings growth of 3% to 5%. We expect non-GAAP EPS to be in the range of $2.17.

Speaker Change: For fiscal year 2025, we are reaffirming our prior guidance.

Speaker Change: We expect full-year revenue in the range of $3.89 billion to $3.93 billion.

Speaker Change: Translating to three to four percent growth in cyber safety expressed in constant currency supported by expected cyber safety bookings growth of three to five percent.

Speaker Change: We expect non-GAAP EPS to be in the range of $2.17 to $2.23 per share, representing an annual increase of 12% to 15% in constant currency.

Natalie Derse: [inaudible] Please note that we expect continued FX headwinds to impact our reported revenue, primarily from the Japanese Yen, which has depreciated over the last year. In summary, our Q1 results keep us on target for our 2025 plan, and we remain well positioned to achieve our longer-term goals. Our key performance indicators continue to trend in the right direction. We are executing our plan, and our strategic growth framework provides us with guidance points along the journey. We look forward to reporting on our progress over the year. As always, thank you for your time today, and I will now turn the call back to the operator to take your questions. Operator?

Speaker Change: Please note that we expect continued FX headwinds to impact our reported revenue, primarily from the Japanese Yen, which has depreciated over the last year.

Speaker Change: In summary, our Q1 results keep us on target for our 2025 plan, and we remain well-positioned to achieve our longer-term goals.

Natalie Derse: Our key performance indicators continue to trend in the right direction. We are executing our plan, and our strategic growth framework provides us guide points along the journey. We look forward to reporting on our progress over the year.

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

Speaker: Operator? We will now begin the question and answer session. If you would like to ask a question, please press starfall by 1 on your telephone keypad. If, for any reason at all, you would like to remove that question, please press starfall by 2. Again, to ask a question, please press star 1. As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking your question.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason at all, you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. The first question comes from Dan Bergstrom with RBC. You may proceed.

Speaker Change: We will now begin the question and answer session.

Speaker Change: If you would like to ask a question, please press star followed by one on your telephone keypad.

Speaker Change: If for any reason at all you would like to remove that question, please press star followed by 2. Again, to ask a question, please press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.

Dan Bergs: The first question comes from Dan Bergs from the RBC. You may proceed. Hey, it's Dan Bergs or from AdHead Bergs. Thanks for taking our questions. It was nice to see the uptick and retention that's quarter.

Speaker Change: The first question comes from Dan Bergstrom with RBC. You may proceed.

Dan Bergstrom: Hey, it's Dan Bergstrom from Matt Hedberg. Thanks for taking our questions. It's nice to see the uptick in retention this quarter. I guess, you know, what are some initiatives there that are working well for you from a retention perspective? And then is there maybe a good way to think about retention in the sense that, you know, there was some low-hanging fruit following the merger, and incremental gains from here may be a little more challenging, or is it more of a steady march to that 80% target?

Dan Bergstrom: Hey, it's Dan Bergstrom from At Hedberg. Thanks for taking our questions.

Vincent Pilette: I guess what are some of the issues there that are working well for you from a retention perspective, and then is there maybe a good way to think about retention in the sense of, you know, it was like some mohhing and fruit falling the merger and incremental gains from here maybe a little more challenging, or is it more of a steady march to that 80% Turgut.

Dan Bergstrom: So it's nice to see the uptick in retention this quarter, I guess

Dan Bergstrom: You know, what are some initiatives there that are working well for you from a retention perspective?

Speaker Change: And then, is there maybe a good way to think about retention in the sense of, you know, was there some low-hanging fruit following the merger and incremental gains from here may be a little more challenging or is it more of a steady march to that 80% target?

Vincent Pilette: Yeah, thanks for your question. This is Vincent. I'll take that answer.

Vincent Pilette: Yes, thanks for your question. This is Vincent.

Vincent Pilette: I'll take that answer. So, just as a context for those who were not here 18 months ago when we merged with Avast, our retention rate on an aggregated basis for all the brands and the new gen company was around 75%, and we identified about five points of overall improvement that would drive all the way to our target 80% retention rate for Gen. A big portion of that improvement was for Avast. Avast itself had around 65% retention, and we thought we could bring that business to a 75% retention rate overall.

Vincent Pilette: So just as a context for those who were not here 18 months ago, when we merged with a vast, our retention rate on an aggregated basis for all the brands and the new gen company was around 75%. And we identified about five pounds over improvement that would drive all the way to our target 80% retention rate for Gen. A big portion of that improvement was for a vast; a vast itself was around 65% retention, and we told we could bring that business to a 75% retention rate overall. And so initially, yes, we had a few low-hanging food.

Dan Bergstrom: Yes, thanks for your question. This is Vincent. I'll take that that answer. So just as a context for those who...

Vincent: We're not here 18 months ago. When we merged with Avast, our retention rate on an aggregated basis for all the brands and the new gen company was around 75%.

Vincent Pilette: And so initially, yes, we had a few low-hanging fruit, as you know, or as you remember, Norton LifeLock combined was at a retention rate closer to 85%, and we had a lot of good practices around the whole customer journey, breaking it down by the different experiences that the customer would have and trying to get the best optimal output for those. We applied those expertise and practices to the entire portfolio and improved for Gen. And then we said that the remaining will be over the next few quarters, maybe the next couple of years, as we really roll out the new Gen stack.

Vincent Pilette: As you know, or as you remember, Northern Life Log combined was at a retention rate closer to 85%, and we had a lot of good practices around the whole customer journey, breaking it down by the different experiences that the customer would have and trying to get the best optimal output for those. We applied those expertise and practices to the entire portfolio and improved for gen at first two points from 75 to 77%.

Speaker Change: And so initially, yes, we had a few low-hanging fruit, as you know, or as you remember, Norton LifeLock combined was at a retention rate closer to 85%, and we had a lot of good practices.

Vincent: around the whole customer journey, breaking it down by the different experiences that customer would have and trying to get the best optimal output for those. We applied those expertise and practices to the entire portfolio and improved for Gen at first two points from 75 to 77%.

Vincent Pilette: And then we said that the remaining will be over the next few course, maybe next couple of years, as we really rolled out the new gen stack. So this quarter, we reached 78% with actually a vast record retention rate of 72%, but also improved a lot of retention rate to a record level as well. And I think, as you see here, the benefit of two dynamics: the first one is the rollout of the new gen stack. We see much more aligned to a suite with high engagement in app communications. And that engagement and the ability to demonstrate the value to the customers has led to improved retention rate.

Jen: And then we said that the remaining will be over the next few quarters, maybe next couple of years, as we really roll out the new Gen stack.

Vincent Pilette: So this quarter, we reached 78%, with actually a vast record retention rate of 72%, but we also improved a lot of retention rates to a record level as well. And I think you see here the benefit of two dynamics. The first one is the rollout of the new Gen stack. You see, much more aligned to a suite with high engagement in app communications. And that engagement and the ability to demonstrate value to the customers have led to improved retention rates.

Speaker Change: So this quarter, we reached 78% with actually a vast record retention rate of 72%.

Vincent: but also improve a lot of retention rate to a record level as well.

Vincent: And I think you see here the benefit of two dynamics. The first one is the rollout of the new GenStack, which is much more aligned to a suite with high engagement in app communications.

Speaker Change: And that engagement and the ability to demonstrate the value to the customers has led to improved retention rate.

Vincent Pilette: And then the second component to this is the work we've done and the work we are doing in breaking down the journey of the customers through our cybersecurity cycles and really providing the right value at the right time using some of the AI and data analytics that we have built.

Vincent Pilette: And then the second component to this is the work we've done and the work we are doing in breaking down the journey of customers through our cyber safety cycles and really providing the right value at the right time using some of the AI and data analytics that we have built. And we're going to continue to roll those two, the new Gen stack migration towards a suite approach on one side, and then the buildup of new features and AI-enabled communications into that suite.

Speaker Change: And then the second component to this is the work we've done and the work we are doing in breaking down the journey of the customers through our cyber safety cycles.

Speaker Change: and really providing the right value at the right time using some of the AI and data analytics that we have built. And we're going to continue to roll those two, the new GenStack migration towards a suite approach on one side, and then the buildup of new features and AI-enabled communications into that suite.

Vincent Pilette: And we're going to continue to roll those two, the new gen stack migration towards a suite approach on one side, and then the buildup of new features and AI-enabled communications into that suite.

Vincent Pilette: That's very important. And then you called out cross sell a number of times, and it's prepared remarks, and it is one of those five or five drivers to invest today. How should we think about cross sell in the context of maybe what you've accomplished so far using?

Vincent Pilette: That's great, Vincent. And then you called out Crosstel a number of times in the prepared remarks, and it is one of those five for five drivers from Investor Day. How should we think about Crosstel in the context of maybe what you've accomplished so far using, we'll say, Avast as a template this time, and then what could still be done here on Nordman and LifeLock from a Crosstel perspective? Yeah, so as

Vincent: That's great Vincent. And then you called out CrossSell a number of times in the prepared remarks and it is one of those five for five drivers from investor day.

Speaker Change: How should we think about Crosstel in the context of maybe what you've accomplished so far using, we'll say, Avast as a template this time, and then what could still be done here on Norton and LifeLock from a Crosstel perspective?

Vincent Pilette: We'll say a vast is a 10 plate this time, and then, and then what could still be done here on, on Northern life, well, life lock from, from a cross sell perspective. Yeah, so as we discussed six, eight months ago now, and that is there, right, we say one of the five drivers was to increase the cross sell, and basically behind that is basically means moving customers that have entered cyber safety from a point product to broader comprehensive cyber safety. Privacy and some of the identity features have been a very strong cross sell discord. Before that, it was really about taking the product from the advanced portfolio that was more points products specifically and cross selling into the Northern base and using their practice of cross selling if you want.

Vincent Pilette: Yeah, so as we discussed six, eight months ago now at our analysis day, right? We said one of the five drivers was to increase cross-sell, and basically, behind that, it basically means moving customers that have entered cyber safety from a point product to a broader comprehensive cyber safety. Privacy and some of the identity features have been a very strong cross-sell discord.

Speaker Change: Yeah, so as we discussed...

Speaker Change: Six, eight months ago now at our analysis day, right, we say one of the five drivers was to increase the cross, and basically behind that.

Speaker Change: It basically means moving customers that have entered cyber safety from a point product to a broader comprehensive cyber safety.

Speaker Change: privacy and some of the identity features.

Speaker Change: have been a very strong cross-sell discord. Before that, it was really about taking the products from the Avast portfolio, that was more points products specifically, and cross-selling into the Norton base and using their practice of.

Vincent Pilette: Before that, it was really about taking the products from the Avast portfolio that were more points products specifically and cross-selling into the Norton base and using their practice of cross-selling, if you want, again, at the right time and using as much as we can data scientists to deliver the right message at the right time. I think we've seen a trend of moving more and more towards that either total comprehensive cyber safety or towards more of the privacy identity angle, and you'll see us continue to develop that.

Vincent Pilette: And again, at the right time and using as much as we can, data scientists to deliver the right message at the right time. I think we've seen a trend of moving more and more towards that either total comprehensive cyber safety or towards more that privacy identity angle. And we'll see you'll see us going to develop that we have more room into notion where we've made progress, but it will be a three-year road map, as you know.

Speaker Change: cross-selling if you want again at the right time and using

Speaker Change: As much as we can, data science is to deliver the right message at the right time.

Speaker Change: I think we've seen a trend of moving more and more towards that.

Speaker Change: either total comprehensive cyber safety or towards more that privacy identity angle.

Vincent Pilette: We have more room in Norton where we've made progress, but it will be a three-year roadmap, as you know, and then we still have a lot of room in what you didn't mention, which is the upsell, which is the migration toward the overall suite. Today, we're slightly above 40% in the total portfolio, and I think we have an opportunity to go back to where we brought the Norton LifeLock portfolio, which was 60%. Both cross-sell and upsell have made progress. Identity and privacy were essentially the focus, and cross-sell plus upsell is the big opportunity moving forward.

Speaker Change: And you'll see us continue to develop that. We have more room in 2Norton where we've made progress, but it will be a three year roadmap as you know. And then we still have a lot of room in what you didn't mention, which is the upsell, which is the migration towards the...

Vincent Pilette: And then we still have a lot of room in what you didn't mention, which is the upsell, which is the migration towards the over sweet. Today, we slightly above 40% in the total portfolio. And I think we have an opportunity to go to where we had brought the Northern Line portfolio, which was 60%. So both cross sell and upsell have made progress; identity and privacy were essentially the focus, and cross sell plus upsell is the big opportunity moving forward.

Speaker Change: the overall suite. Today we're slightly above 40% in the total portfolio. And I think we have an opportunity to go to where we had brought the Northern Line Flood portfolio, which was 60%. So both CrossFel and Upsel have made progress. Identity and privacy were essentially the focus.

Speaker Change: and Cross-Cell plus UpCell is the big opportunity moving forward.

Speaker Change: Thank you.

Speaker: Thank you.

Peter Levine: Thank you. The next question comes from Peter Levine with Evercore. Please proceed.

Peter Levine: The next question comes from Peter Levine with Evercore. You may proceed. Peter, hey. Great. Thank you for taking my question.

Speaker Change: Thank you. Bye.

Speaker Change: Thank you. The next question comes from Peter Levine with Evercore. You may proceed.

Peter Levine: Peter, hey. Great.

Natalie Derse: So, Natalie, I guess the first question for you is, as you think about the guide for the remainder of the year, what assumptions are baked into that? And then how do you think about the health of the consumer? Any color that you can give us around kind of what you're seeing from your pipeline in terms of just the overall health of the consumer into fiscal, you know, 2025 versus where you were call it six to 12 months last year?

Natalie Derse: Natalie, this is the first one for you as you think about the guy for the remainder of the year. What assumptions are baked into that? And then how do you think about the health of the consumer? Any color that can give us around kind of what you're seeing from your pipeline in terms of just the overall health of the consumer in statistical, you know, 25 versus where you were called six to 12 months last year. Yeah, thanks for the question. So the guide is very much in line with the plans that we've articulated for you guys.

Peter Levine: Peter, hey. Great, thank you for taking my questions.

Peter Levine: So, Natalie, I guess the first one for you is, as you think about the guide for the remainder of the year, what assumptions are baked into that, and then how do you think about the health of the consumer? Any color that you can give us around kind of what you're seeing from your pipeline.

Speaker Change: In terms of just the overall health of the consumer into fiscal, you know, 25 versus where you were, call it 6 to 12 months last year.

Natalie Derse: Yeah, thanks for the question. So the guide is very much in line with the plans that we've articulated for you guys. It's, you know, the five for five is the structural growth framework, and not that every one of those levers hits the same order of magnitude in the same quarters in the same years.

Natalie Derse: It's, you know, the five or five is the structural growth framework and not that every one of those levers hits the same order, magnitude, the same quarters in the same years, but that is our strategic growth framework. And we've got the business aligned to that in terms of, yes, the team's focused on gross acquisition. Very, very important to get the health at the top of the funnel. We've spent a lot of time and focus on figuring out all the different cohorts that we've got in our customer base and how we retain them at the highest rates possible.

Speaker Change: And not that every one of those levers hits the same order of magnitude at the same quarters and the same years, but that is our strategic growth framework, and we've got the business aligned to that in terms of...

Speaker Change: Yes, the team's focused on gross acquisition.

Natalie Derse: But that is our strategic growth framework. And we've got the business aligned to that in terms of, yes, the team's focused on gross acquisition, very, very important to get the health at the top of the funnel. We spend a lot of time and focus on figuring out all the different cohorts that we've got in our customer base and how we retain them at the highest rates possible. And then ARPU, right?

Speaker Change: We spend a lot of time and focus on figuring out all the different cohorts that we've got in our customer base.

Natalie Derse: And then our two, right? We've brought a product roadmap that can fuel our growth opportunities in both cross-sell as well as upsell. And again, continuously communicate with our customers that we have the most relevant, most comprehensive cyber safety protection in the market.

Speaker Change: and how we retain them at the highest.

Speaker Change: Product Roadmap that can fuel our growth opportunities in both cross-sell as well as up-sell and again continuously communicate with our customers that we have the most relevant, most comprehensive cyber safety protection in the market.

Natalie Derse: We've got to make sure that we continuously stay focused on having the most robust product roadmap that can fuel our growth opportunities in both cross-sell as well as up-sell. And again, continuously communicate with our customers that we have the most relevant, and most comprehensive cyber safety protection in the market. And so all of those things coming together as we navigate through the year is what helps us shore up not only the Q2 guide but our reiteration of the four-year guide.

Natalie Derse: And so all of those things coming together as we navigate through the year is what helps us shore up not only the Q2 guide, but our reiteration of the four-year guide.

Natalie Derse: And then in terms of the health of the consumer look, there's been a lot of movement and a lot of things in the news in the last couple of days. But what I can tell you is what I can see within our business. And so we are growing customers both from a cancellation perspective. We've seen the lowest number of cancels we've seen in the last three years. So whether that's the health of the customer or that's the awareness of the ever-increasing cyber safety threats that we've got combined with our trusted brands. From a customer count perspective, we see health and we see growth.

Natalie Derse: And then in terms of the health of the consumer, look, there's been a lot of movement and a lot of things in the news in the last couple of days. But what I can tell you is what I can see within our business. And so we are growing customers both from a gross ads perspective. We've just seen our highest Q1 that we've seen in four years. From a cancellation perspective, we've seen the lowest number of cancellations we've seen in the last three years.

Speaker Change: And then in terms of the health of the consumer, look, there's been a lot of movement and a lot of things in the news in the last couple days.

Speaker Change: But what I can tell you is what I can see within our business. And so we are growing customers, both from a gross ads perspective. We've just seen our highest Q1 that we've seen in four years.

Natalie Derse: So whether that's the health of the customer or that's the awareness of the ever-increasing cyber safety threats that we've got combined with our trusted brands, from a customer account perspective, we see health, and we see growth. And then combine that with the other two legs of the stool as I speak about it in terms of what is happening in ARPU. FX aside, we are growing ARPU consistently quarter over quarter, and we have seen increases in retention rates across our brands over the last year. And so from the measures of our customers in those three key performance indicators, I see a lot of health in our customer base.

Speaker Change: of the ever-increasing cyber safety threats that we've got combined with our trusted brands. From a customer account perspective, we see health and we see growth. And then combine that with the other two legs of the stool as I speak about it in terms of what is happening in ARPU.

Natalie Derse: And then combine that with the other two legs of the stool, as I speak about it, in terms of what is happening in ARPU. FX aside, we are growing ARPU consistently quarter over quarter. And we have seen increases in the last year across our brands in retention rate. And so, from the measures of our customer in those three key performance indicators, I see a lot of health in our customer base.

Speaker: No, thank you for the color there.

Natalie Derse: No, thank you for the color there. You know, and then if I can jump to the product side, you know, I think last quarter, you know, we talked and touched at least on the Avast, I think it was the Avast One silver member, the membership offering, and you talked about the newer Gen Stack initiative. Can you maybe just give us an update on how that's trending?

Natalie Derse: And then if I can jump to the product side, I think last quarter, we talked and we touched the list on the devast. I think it was the membership offering, and you talked about the newer Genstack initiatives. Can you just give it an update on how that's trending? Yeah, so on the roll-out of the new Genstack, we started at the end of the fiscal year with just a couple of small countries in the Asia region to test. We had very good positive results. Since then, we've expanded to a few more countries. We roll out our first new cohorts, because we're doing it by customer cohorts in the US.

Natalie Derse: Yeah, so on the rollout of the new GenStack, we started at the end of the fiscal year with just a couple of small countries in the Asia region to test it. We had very good, positive results. Since then, we've expanded to a few more countries. We rolled out our first new cohort because we're doing by customer cohort in the U.S. We're very cautious, monitoring the first, the NPS after the first 30 days of rollout, measuring the engagement, comparing that to prior.

Natalie Derse: We're very cautious monitoring the first, the NPS after the first 30 days roll out, measuring the engagement, comparing that to prior. And we said it will take the full year to roll out the new stack. And I think we're on track to that, and we're not changing that timeline. We're pleased by what we see so far. There's up and down, obviously. We roll out new adjustments, and as we get customers' feedback, but overall, pretty positive.

Natalie Derse: And we said it would take the full year to roll out the new stack, and I think we're on track to that, and we're not changing that timeline. We're pleased by what we see so far. There's ups and down, obviously, but we rolled out new adjustments as we got customers' feedback, but overall, pretty positive.

Speaker: Right, now, thank you for taking my question. Thank you.

Peter Levine: Thank you for taking my question.

Tomer Zilberman: Thank you. The following comes from Tomer Zilberman with Bank of America. You may proceed.

Toma Zulberman: The following comes from Toma Zulberman with Bank of America. You may proceed. Hey, guys, maybe just two quick questions for me. So this quarter, you know, your sequential direct customer came in pretty strong, and you also talked about cross cell penetration, now nearing the 20%. With your guidance, or excuse me, with your performance falling in line with your guidance. My question is, you know, how did the difference between existing customers and new customers play in per your expectation or versus your expectation three months ago? Is it in line, or did you see one of the two performing better than expected?

Tomer Zilberman: Hey guys, maybe just two quick questions for me. So this quarter, you know, your sequential direct customer ads came in pretty strong, and you also talked about cross-sell penetration now nearing 20%. With your guidance, or excuse me, with your performance falling in line with your guidance, my question is, you know, how did the difference between existing customers and new customers play out per your expectation or versus your expectation three months ago? Was it in line, or did you see one of the two performing better than expected?

Vincent Pilette: Yeah, I would say it's a balance across the metrics, and we've got different teams aligned to different segments of that five to five strategic growth framework. In terms of how the customers performed, we are honestly working extremely, really hard and from a disciplined fashion to free up as much capacity for investment for growth as we can. And so we've made it a commitment, and we stand behind that commitment in operation and execution to continue to invest in marketing. That marketing goes to the top of the funnel. So we are not surprised by the growth in customer count on a sequential basis.

Natalie Derse: Yeah, I would say it's a balance across the metrics, and we've got different teams aligned to different segments of that five-for-five strategic growth framework. In terms of how the customers performed, we are honestly working extremely, really hard in a disciplined fashion to free up as much capacity for investment in growth as we can. And so we've made a commitment, and we stand behind that commitment in operation and execution to continue to invest in marketing.

Speaker Change: Honestly, working extremely, really hard from a disciplined fashion.

Natalie Derse: That marketing goes to the top of the funnel, so we are not surprised by the growth in customer count on a sequential basis. And so from a gross ads perspective, like I said, it's the highest gross ads we've seen in several years. And then from a retention perspective, an ARPU perspective, the levers of cross-sell, we are just getting started, quite honestly. We're very, very proud of the performance that our teams have driven in cross-sell penetration of the Norton base, moving from 15% to 20% in the last year.

Speaker Change: surprised by the growth in customer count on a sequential basis. And so, from a gross ads perspective, like I said, it's the highest gross ads we've seen in several years.

Vincent Pilette: And so from a growth ads perspective, like I said, it's the highest growth ads we've seen in several years. And then from a retention perspective and our perspective, the levers of cross cell, we are just getting started, quite honestly. We're very, very proud of the performance that our teams have driven in cross cell penetration of the Norton base, moving from 15% to 20% in the last year. But we are at 20%, and we feel like we have a ways to go, especially because we're not dealing, or we're not selling into a stagnant customer base with a stagnant product portfolio; both are growing.

Speaker Change: We are just getting started, quite honestly. We're very, very proud of the performance that our teams have driven in cross-cell penetration of the Norton base, moving from 15% to 20% in the last year.

Natalie Derse: But we are at 20%, and we feel like we have a ways to go, especially because we're not dealing with, or selling to, a stagnant customer base with a stagnant product portfolio. Both are growing. And so we will continuously invest in product and technology to enhance our value proposition. We will continuously work to cut through the message with our trusted brand and services to our customers, and we'll continue to focus on retention to make sure that the customers that we've got want to stay with us, and they're getting world-class customer service and are protected by a product and technology value creation that is ever-increasing.

Vincent Pilette: And so we will continuously invest in product and technology and enhance our value proposition. We will continuously work to cut through the message with our trusted brand services to our customers.

Speaker Change: We will continuously invest in product and technology.

Vincent Pilette: And we'll continue to focus on retention and make sure that the customers that we've got want to stay with us and they're getting world-class customer service and protected by a product and technology value creation that is ever-increasing.

Vincent Pilette: And so we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue to focus on retention and we'll continue I don't, I don't, I don't hedge against the end, um, from a, from a currency rate perspective.

Natalie Derse: Got it. So maybe, as a follow-up moving to ARPU and some of the FX headwinds, what sort of hedging activities are you putting in place to protect against the weakening yen?

Natalie Derse: I don't I don't I don't hedge against the end from a currency rate perspective. We fix a rate at the beginning, and that's why we report USD versus constant currency.

Tomer Zilberman: Got it. Thank you.

Speaker: Um, we, we fix a rate at the beginning, and that's why we report USD versus his constant currency. Got it.

Speaker Change: Currency Rate Perspective. We fix a rate at the beginning and that's why we report USD versus constant currency.

Speaker: Thank you.

Speaker: Sure. Thank you.

Speaker Change: Got it. Thank you.

Saket Kalia: Thank you. The next question comes from Saket Kalia of Barclays. Please proceed.

Hamza Fodderwala: The next question comes from Saket Kalia with Barclays. You may proceed. Okay. Thank you, guys. Thanks for taking my questions here. Hey, Vincent. Hey, Natalie. Yeah.

Speaker Change: Sure.

Speaker Change: Thank you. The next question comes from Saket Kalia with Barclays. You may proceed.

Saket Kalia: Hey guys, thanks for taking my questions here.

Saket Kalia: Hey, Vincent. Hey, Natalie. Hi. Hey, I joined late, so apologies. Hey, I joined late, so apologies if some of these have been asked already. But, Vincent, maybe just to start with you on just another part of the business. I think we get into the benefits enrollment season next quarter. And I know that last year there was a little bit of lumpiness there. Can you just talk a little bit about how that pipeline looks and maybe anything that you think about doing differently this time versus last year?

Saket Kalia: Okay guys, thanks for taking my questions here. Hey Vincent, hey Natalie, I joined late so apologies if some of these have been asked, but Vincent, maybe just to start with you on just another part of the business.

Speaker: Um, hi, I, I, I joined late, so apologies.

Vincent Pilette: Hey, I'm certainly so apologies if some of these have been asked, but Vincent, maybe just to, maybe just to start with you, um, on, on just another part of the business, you know, I think we get into the benefits enrollment fees and, um, next quarter, and, and I know that last year, there was a little bit of lumpiness there. And can you just talk a little bit about how that pipeline looked and maybe anything that you would, you think about doing differently this time versus last year? Absolutely, Saket. And no worries about joining late. So the good news is we're recording the call.

Saket Kalia: You know, I think we get into the benefits enrollment season next quarter, and I know that last year there was a little bit of lumpiness there. Can you just talk a little bit about how that pipeline looks, and maybe anything that you think about doing differently this time versus last year?

Vincent Pilette: We gave a lot of good information on where we stand with our business overall, and I feel pretty good. You may have heard or you may have already joined our partner, this core partner business, which is 10% of our overall business, 6% constant currency. As you know, it's made up of four categories, and I'm summarizing the context to give everybody context to your question, and it's about telcos, selling our solutions through telcos, our employee benefits, strategic relationships, and then retail.

Speaker Change: Absolutely, Saket, and no worries about joining late. The good news is we're recording the call, and we gave a lot of good information on where we stand with our business overall. It feels pretty good. You may have heard or you may have already joined our partner, this quarterly partner business, which is 10% of our overall business. It grows 6% in constant currency. As you know, it's made of four categories, and I'm summarizing the context to give everybody context to your question, and it's about telcos, selling through telcos as solutions, employee benefits, strategic relationships, and then retail. Both telcos and EB will continue to grow double digits within that partnership revenue. And what you referred to is the fact that we signed a set of new accounts

Vincent Pilette: And we gave a lot of good information on where we stand with our business overall. Feel pretty good. You may have heard, or you may have already joined our partner, this core partner business, which is 10% up over dinner, go 6% constant currency. As you know, it's made up for categories, and I'm summarizing the context to give everybody context to your question. And it's about tell course selling through tell course solutions, employee benefit, strategic relationships, and then retail. Both Tell course and eb will continue to grow double digit within that partnership revenue. And what you refer to is the fact that we sign a new set of new accounts, and then ahead of the enrollment time for employee benefit, which start normally around October, October to February time zone, we may or may not close some bigger deals into new accounts.

Vincent Pilette: Both telcos and EB, we continue to grow double digits within that partnership revenue, and what you referred to is the fact that we signed a set of new accounts, and then ahead of the enrollment time for employee benefits, which start normally around October to February time zone, we may or may not close some bigger deals into new accounts. We continue to invest in building up our overall coverage of the entire set of companies working through brokers.

Saket Kalia: ahead of the enrollment time for employee benefit.

Speaker Change: which start normally around October , October to February time zone, we may or may not close some bigger deals into new accounts. So we've continued to invest into building up our overall coverage of the entire set of companies working through brokers. We have a very healthy funnel and I think not different than last year, we will try to as aggressively as we can close as many deals as we can.

Vincent Pilette: So we've come here to invest into building up our overall coverage of the entire set of companies working through brokers. We have a very healthy funnel. And I think not different than last year, we will try to, as aggressively as we can, close as many deals as we can. Now, obviously, when it comes to estimating which deal forcing to the full annual guidance, we feel we definitely have a very healthy funnel to cover the forecast for the year. Got it.

Vincent Pilette: We have a very healthy funnel, and, not different from last year, we will try to close as many deals as we can. Now, obviously, when it comes to estimating which deals fall into the full annual guidance, we feel we definitely have a very healthy funnel to cover the forecast for the year.

Speaker Change: Now, obviously, when it comes to estimating which deal falls into the full annual guidance, we feel we definitely have a very healthy funnel to cover the forecast for the year.

Vincent Pilette: Got it. Got it.

Speaker: That's very helpful.

Natalie Derse: Natalie, maybe for my follow-up for you, listen, the operating margin, all this speaks for itself. My question was just maybe on the gross margin. You know, last couple quarters, it's just, I don't know, maybe like a hundred basis points lower than it's been, you know, from the prior, from the prior few quarters. So maybe the question is can you talk to just any investments that are going across the sales or anything that we should continue there. Anything that we should, anything that we should think about as we model gross, the, you know, the difference between gross margin and op-x going forward.

Speaker Change: Got it. Got it. That's very helpful.

Saket Kalia: That's very helpful. Natalie, maybe for my follow-up question for you, listen, the operating margin always speaks for itself. My question was just maybe on the gross margin. You know, the last couple of quarters, it's just, I don't know, maybe like 100 basis points lower than it was from the prior few quarters. So maybe the question is, can you talk about just any investments that are going into cost of sales or anything that we should continue there or anything that we should think about as we model gross, you know, the difference between gross margin and OPEX going forward?

Saket Kalia: Natalie, maybe for my follow-up for you.

Speaker Change: Listen, the operating margin always speaks for itself. My question was just maybe on the gross margin. You know, last couple quarters, it's just, I don't know, maybe like 100 basis points lower than it's been, you know, from the prior few quarters. So maybe the question is, can you talk to just any investments that are going at the cost of sales or anything that we should continue there or anything that we should think about as we model the difference between gross margin and OPEX going forward?

Natalie Derse: Yeah, hi, Socket. Thanks for the question. Yes, I think it is definitely appropriate to pull out just what high margins we operate the business from both the gross margin and the operating margin. Operating margin has improved seven points over the last three years, up five points over the last two years. So I think that is the real measure of how we operate. It's a disciplined approach. It is, it is one of very, very high margin, and we are committed to that. However, we also said, as we navigate the business forward, although we're going to operate the core at those very high margins that we've been increasing to.

Natalie Derse: Yeah, hi, Saket. Thanks for the question.

Speaker Change: Yeah, hi Saket. Thanks for the question. Yes, I think it is definitely appropriate to call out just what high margins we operate the business from, both the gross margin and the operating margin.

Speaker Change: Operating margin has improved 7 points over the last 3 years, up 5 points over the last 2 years. So I think that is the real measure.

Saket Kalia: of how we operate. It's a disciplined approach.

Speaker Change: It is one of very, very high margin and we are committed to that. However, we also said as we navigate the business forward, although we are going to operate the core at those very high margins that we have been increasing to, we also reserve the right to invest in areas of growth that we believe

Natalie Derse: We also reserved the right to invest in areas of growth that we believe are healthy and that will lead us to supporting the five to five growth strategy because everyone wants to see an accelerating rate of growth on the top line. And so, although you, you know, you see 86.3% gross margin is quarter, that's flat quarter of a quarter. Down year of a year, yes, but I would ask that you just zoom out a bit further. Gross margin is relatively stable. If you look back at 22, you look back at 23; it's incredibly stable. I would say the only pop that I would say, you know, that we've seen is honestly just P&L geography of our investments.

Speaker Change: are healthy and that will lead us to supporting the 5 for 5 growth strategy because everyone wants to see an accelerating rate of growth on the top line.

Speaker Change: And so although you see 86.3% gross margin this quarter, that's flat quarter over quarter, down year over year, yes, but I would ask that you just zoom out a bit further.

Speaker Change: Gross margin is relatively stable. If you look back at 22, you look back at 23.

Saket Kalia: It's incredibly stable.

Saket Kalia: I would say the only pop that I would say, you know, that we've seen is honestly just P&L geography of our investments.

Natalie Derse: We will continue to put firepower behind profitable, healthy ROI marketing investment to drive the top of the funnel. And that's all you're seeing with the gross margin variability. I would say zoom out, look at the overall 86 to 87% range of gross margin and look to the operating margin health and stability that we've delivered over the last few years.

Saket Kalia: We will continue to put firepower behind profitable, healthy ROI marketing investment to drive the top of the funnel, and that's all you're seeing with the gross margin variability. I would say zoom out, look at the overall 86% to 87% range of gross margin.

Natalie Derse: Yes, I think it is definitely appropriate to call out just what high margins we operate the business from, both the gross margin and the operating margin. Operating margin has improved seven points over the last three years, and it is up five points over the last two years. So I think that is the real measure of how we operate. It's a disciplined approach. It is one of very, very high margins, and we are committed to that. I would say zoom out, look at the overall 86 to 87% range of gross margin, and look at the operating margin health and stability that we've delivered over the last few years.

Saket Kalia: and look to the operating margin health and stability that we've delivered over the last few years.

Speaker: Thank you very clear. Thanks, guys.

Saket Kalia: Very clear. Thanks, guys.

Speaker Change: Very clear. Thanks, guys.

Hamza Fodderwala: Thank you. The final question comes from Hamza Fodderwala of Morgan Stanley. You may proceed.

John Eisenson: The final question comes from Hamza Fodderwala with Morgan Stanley. He may proceed.

Speaker Change: Thank you.

Speaker Change: Thank you. The final question comes from Hamza Fodderwala with Morgan Stanley . You may proceed.

Speaker: Hey, this is John Eisenson on for Hamza. Hey, how are you? Good. Thanks for taking my question and great results in a very tough environment.

Jonathan Eisenson: Hey, this is Jon Eisenson on behalf of Hamza.

Jonathan Eisenson: Hey, how are you?

Speaker Change: Hey, this is Jon Eisenson on for Hamza. Hey, how are you?

Vincent Pilette: Thanks for taking my question and great results in a very tough environment. Vincent, just for you, can you just talk about how you mentioned Gen AI in the prepared remarks, but can you just touch a little deeper into kind of what's driving growth there in terms of maybe brand awareness across different geos and just what the opportunity overall there looks like?

Jon Eisenson: Good. Thanks for taking my question and great results in a very tough environment. Vincent, just for you, can you just talk about how you mentioned Gen AI in the prepared remarks, but can you just touch a little deeper into kind of what's driving growth there in terms of maybe brand awareness across

Vincent Pilette: Vincent just just for you. Can you just talk about how you mentioned Gen AI in the prepared remarks, but can you just touch a little deeper into kind of which driving growth there in terms of maybe brand awareness across different geos and just what the opportunity overall there looks like. Yeah, definitely we've seen, first of all, on the upstream, we've seen definitely a very strong double g course increase on data breaches and data getting into the hands of the overall hacking community. We've seen a surge of increased scam stacks and other things using some of those social engineering techniques to combine data breached with other private information that may sit.

Saket Kalia: different geos and just what the opportunity overall there looks like.

Vincent Pilette: Yeah, definitely. We've seen, first of all, on the upstream, a very strong double-jig growth increase in data breaches and data getting into the hands of the overhacking community. We've seen a surge of increased scams, techs, and other things using some of those social engineering techniques to combine data breaches with other private information that may sit on the web and make the scams more and more relatable, personable, and with that, obviously, increasing the risks for consumers.

Speaker Change: Yeah definitely we've seen first of all on the on the upstream we've seen definitely a very strong the budget growth increase on data breaches and data getting into

Speaker Change: We've seen a surge of increased scans, texts, and other things using some of those social engineering techniques to combine.

Vincent Pilette: In the on the web and making the scams more and more relatable, personable and with that obviously increasing the risk full consumers. As you know, we've decided to use AI to combat AI, and we had launched Northern Genie to detect those scams more and more. We have now well over one million users are download of that Northern Genie app and we're merging for the second half, we're migrating that to integrate a basic anti-scam AI supported features into multiple product sets. So you see more and more chefs towards using AI to detect AI generated scams today.

Saket Kalia: data breached with other private information that may sit on the web, and making the scans more and more relatable, personable, and with that obviously increasing the risks for consumers.

Vincent Pilette: As you know, we've decided to use AI to combat AI, and we launched Node and Genie to detect those scams more and more. We now have well over 1 million users download of that Node and Genie app, and we're merging for the second half, and we're migrating that to integrate a basic anti-scam AI-supported features into multiple product sets. So you'll see more and more shifts towards using AI to detect AI-generated scams today.

Speaker Change: As you know, we've decided to use AI to combat AI, and we had launched Northern Genie.

Saket Kalia: to detect those scams more and more. We have now well over 1 million users for download of that Norton Genie app. And we're merging for the second half. We're migrating that to integrate a basic anti-scam.

Saket Kalia: AI-supported features into multiple product sets. So you see more and more shifts towards using AI to detect AI-generated scams today.

Speaker: Got it.

Natalie Derse: Got it. That's very helpful. And just for my follow-up for Natalie, so net ads were obviously very strong again this quarter. Can you just talk a little bit about the contribution across different geographies and maybe any color on how you're thinking about net ads tracking throughout the year, if you have any visibility? Thank you.

Natalie Derse: It's very helpful, and just for my follow-up for Natalie, so net ads were obviously very strong again this quarter. Can you just talk a little bit about the contribution across different geographies and maybe any color on how you're thinking about net ads tracking throughout the year if you have any visibility. Thank you. Sure, I would say it's pretty broad based. We look at it both online as well as mobile. We look at it by geography. We look at it by it. We look at it across brands, and I would say when we look at the multi-year trending, we are headed in the right direction.

Speaker Change: Got it. It's very helpful. And just for my follow-up for Natalie.

Speaker Change: So, NetAds, we're obviously very strong, again, this quarter. Can you just talk a little bit about the contribution across different geographies, and maybe any color on how you're thinking about NetAds tracking throughout the year, if you have any visibility? Thank you.

Natalie Derse: Sure, I would say it's pretty broad-based. We look at it both online as well as on mobile. We look at it by geography. We look at it across brands. And I would say when we look at the multi-year trending, we are headed in the right direction.

Natalie: Sure, I would say it's pretty broad-based. We look at it both online as well as mobile. We look at it by geography. We look at it across brands.

Natalie Derse: And so I would say it's broad based. We have to call out the, you know, as we expand in the global expansion portion of our five for five and focus on acquisition, not only direct into, you know, I would say low penetrated markets or under develop markets, as well as through our partner channels. We know that the customers that we are able to acquire come in all shapes and sizes, so to speak. And so we've got to figure out a way to balance those through our model. But what we really focus on is the acquisition coming through with economics that we like and that point to help and sustainability.

Speaker Change: And I would say, when we look at the multi-year trending, we are headed in the right direction. And so, I would say it's broad-based. We have called out...

Natalie Derse: And so I would say it's broad-based. We have called out the, you know, as we expand in the global expansion portion of our 5 for 5 and focus on acquisition, not only direct into, you know, I would say low penetrated markets or underdeveloped markets, as well as through our partner channels. We know that the customers that we are able to acquire come in all shapes and sizes, so to speak. And so we've got to figure out a way to balance those through our model.

Speaker Change: As we expand in the global expansion portion of

Saket Kalia: are five for five and focus on acquisition, not only direct.

Saket Kalia: into, you know,

Saket Kalia: I would say, low penetrated markets or underdeveloped markets, as well as through our partner channels, we know that the customers that we are able to acquire come in all shapes and sizes, so to speak.

Saket Kalia: And so we've got to figure out a way to balance those through our model.

Natalie Derse: But what we really focus on is the acquisition coming through with economics that we like and that point to health and sustainability. And the answer is yes, no matter which pivot that you look at, whether it's geography, whether it's brand, or whether it's the way that consumers engage with us. That's great.

Saket Kalia: But what we really focus on is the acquisition coming through with economics that we like and that point to health and sustainability, and the answer is yes, no matter which pivot that you look at, whether it's

Natalie Derse: And the answer is yes, no matter which pivot that you look at, whether it's... Geography, whether it's brand, or whether it's the way that consumers engage with us. And so that's great.

Saket Kalia: Geography, whether it's brand or whether it's the way the consumers engage with us.

Jonathan Eisenson: Then in terms of where we're going, I don't guide customer accounts quarter in, quarter out, but what I would really, really point you to is our commitment to continue to create the capacity to invest for growth. We are here to accelerate the rate of growth of this business, and there's no way we can do that if we don't really focus that fair share at the top of the funnel with net new acquisitions.

Natalie Derse: And then in terms of where we're going, I don't guide customer count quarter in, quarter out, but what I would really, really point you to is our commitment to continue to create the capacity to invest for growth. We are here to accelerate the rate of growth in this business, and there's no way we can do that if we don't really focus that fair share at the top of funnel with net new acquisition. Gross ads, yes, but also net customer ads as we continue to focus on delighting our customers, and therefore increasing the retention rate of our existing customers.

Saket Kalia: And so that's great. And then in terms of where we're going, I don't guide customer account quarter in, quarter out, but what I would really, really point you to is our commitment to continue to create the capacity to invest for growth.

Saket Kalia: We are here to accelerate the rate of growth of this business.

Saket Kalia: And there's no way we can do that if we don't really focus that fair share at the top of the funnel with net new acquisition. Gross ads, yes.

Jonathan Eisenson: Growth ads, yes, but also net customer ads as we continue to focus on delighting our customers and, therefore, increasing the retention rate of our existing customers. Both are so, so critically important for our business model, and we will continue to invest in growing the top of the funnel and then servicing our customers all the way through their journey to make sure that they retain at the highest rate possible.

Saket Kalia: but also net customer ads as we continue to focus on delighting our customers and therefore increasing the retention rate of our existing customers.

Speaker: Both are so, so critically important for our business model, and we will continue to invest in growing the top of the funnel, and then servicing our customers all the way through their journey to make sure that they retain at the highest rate possible. It's very helpful.

Saket Kalia: Both are so, so critically important for our business model.

Saket Kalia: And we will continue to invest in growing the top of the funnel and then servicing our customers all the way through their journey to make sure that they retain at the highest rate possible.

Jonathan Eisenson: I got it. It's very helpful. Thank you very much.

Speaker: Thank you very much. Thank you.

Speaker Change: Got it. It's very helpful. Thank you very much.

Vincent Pilette: Thank you. There are no further questions at this time. I would now like to turn the call back to Vincent Pilette for closing remarks. Thank you.

Speaker Change: Thank you.

Speaker: There are no further questions at this time.

Vincent Pilette: I would now to turn the call back to Vincent Palette for closing remarks. Thank you, operator. As a leading company in consumer cybersecurity, we have a bold vision to provide digital freedom for everyone. The threat landscape is more dynamic than ever, and our investments in technology, AI, and product innovation are key to our success and future opportunities. We have a compelling AI-enabled product roadmap focused on security, financial safety, personal data control, and verification. Our good to market strategy is effective, and we have a long track record of serving our customers. We are well positioned to expand the adoption of cybersecurity globally with our trusted brands and omnichannel expertise.

Speaker Change: Thank you. There are no further questions at this time. I would now like to turn the call back to Vincent Pilette for closing remarks.

Operator: Thank you, operator. As the leading company in consumer cyber safety, we have a bold vision to provide digital freedom for everyone. The threat landscape is more dynamic than ever, and our investments in technology, AI, and product innovation are key to our success and future opportunities. We have a compelling AI-enabled product roadmap focused on security, financial safety, personal data control, and verification. Our go-to-market strategy is effective, and we have a long track record of serving our customers. We are well positioned to expand the adoption of cyber safety globally with our trusted brands and omnichannel expertise. Thank you for your interest and your support.

Vincent Pilette: As a leading company in consumer cyber safety, we have a bold vision to provide digital freedom for everyone.

Vincent Pilette: The Threat Landscape is more dynamic than ever, and our investments in technology, AI, and product innovation are key to our success and future opportunities.

Speaker Change: We have a compelling AI-enabled product roadmap focused on security, financial safety, personal data control, and verification.

Speaker Change: Our go-to-market strategy is effective, and we have a long track record of serving our customers. We are well positioned to expand the adoption of cyber safety globally with our trusted brands and omni-channel expertise. Thank you for your interest and your support.

Vincent Pilette: Thank you for your interest and your support.

Speaker: This concludes the conference call. Thank you for your participation. You may now disconnect your loss.

Operator: This concludes the conference call. Thank you for your participation. You may now disconnect your line.

Speaker Change: This concludes the conference call. Thank you for your participation. You may now disconnect your line.