Q2 2025 Gen Digital Inc Earnings Call

Hello everyone. Thank you for standing by. My name is Victoria and I will be your conference operator, Jay. This call is being reported and all lines are in place on mute for any background noise. After the speakers remarks, there will be a question and answer session. At this time for opening our marks, I would like to pass the call over to Jason Starr. Head of the Investor Relations.

Thank you Victoria, and good afternoon everyone. Welcome to Jen's second quarter fiscal year 2025 earnings call. Joining me today are Vincent Pilette CEO and Natalie Derse, CFO. As a reminder, there will be a replay of this call posted on the investor relations website along with our slides and press release.

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

A reconciliation of non-gap to gattonizers is included in our press release and earnings presentation. Both of which are available on our our website at investor.gen digital.com.

We encourage investors to monitor this website as we routinely post investor-oriented information such as news and events in 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 different materialies from our current expectations.

Those statements are based on current beliefs, assumptions, and expectations as of today's date, October 30, 2024. 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 statement in our press release and the risk factors in our findings with the SEC and in particular our most recent reports on Form 10K and Form 10K.

and now, I'll turn the call of the Vincent. Thank you, Jason. Future was another study court of consistently executing an astralogy, meeting our commitments for profitable growth while continuing our investment to meet the long-term consumer needs of ever-expanding digital lives.

We delivered another quarter of missing of digit bookings growth of 5% our highest growth rates since the avast acquisition and a double digit earnings per share growth of 16%.

We also grew a direct pain customers by 400,000 in the quarter, not a record 39.7 million.

Those results are testament to the solid discipline and consistent execution of our team. On top of that, it is also a clear reflection of what we have talked about for many quarters.

People are being exposed to an accelerating threat environment and their awareness is growing with every new breach and scam, text or email.

Those trends are here to stay and are being enhanced by the use or mid-use of AI. As consumer awareness grows, we stand ready to empower you digital life with the most innovative and easy-to-use solutions that secure and protect your identity and your art-turned assets.

It is easy to get the sensitized to news of yet another bridge, but the impact recently is truly staggering.

In August, the US National Public Data Bridge exposed an estimated 270 million social security numbers, practically two-thirds of all social security numbers ever issued, leaving one out of three Americans at risk of identity attacks.

The scale and the frequency of bridges along with the sophistication and volume of fishing emails and scans makes everyone vulnerable.

As we shared in our last report around rising election scams, even young adults who are expected to be the safest online are proving to be susceptible at higher rates.

This unfortunate reality is a big part of why our team agenda is so mission driven.

We believe that no matter how good the cybercriminals get, our goal is to give you the tools and the solutions that empower you to live your digital life without worry.

The delivering digital freedom and peace of mind is no small task, so every day we are focused on a thing our game.

Just about a year ago, a threat team and technology detected the growing threats of personalized scans at high volumes and quickly delivered our genealogy and Thai scan product.

powered by AI, Ginny was the first embodiment of the future of digital freedom. Not only does it interact with you in an accessible and intuitive way, it also continually learns and adapts with every interaction.

So there we have over 1.6 million downloads and its overall efficacy is approaching 100%.

Jean is a great example of how we continue to put innovative solutions in the hands of consumers, but it is just the start. In the coming course, we'll run to enhance the product and expand this anti-scam technology into our core offerings. More to come on that front.

Protecting consumers from scans is one of the biggest attack vectors, but as I mentioned earlier, reachyeth.

and the other two are the same.

and are also on the rise, which is for you, your information and your art and assets address and it generally happens to know for the view on.

Data you provided to you favorite stores, you healthcare provider, you banks and the government is being put on the dark web.

and as the bridge is proliferate, fibre criminals are stitching together different pieces of information to increase their ability to successfully steal your identity or target you for sophisticated and personalized scams.

No one is immune and if you don't believe me, I challenge you to go out and try our free life-locked data exposure scan and I'm sure you will be surprised at how much of your information is out there and available.

That constant growing threat is why we are continuously investing in and innovating around how we keep your financial assets, your personal information and your reputation safe.

No one is better at helping a victim recover from identity theft than last log. We invented the category and we have a world class restoration team that helps repair the damage.

But we want you also be sure that we can stop things earlier. That's why we have alert algorithm and food spend tracking through financial monitoring features to keep you aware and safe in real time.

We recently released critic insights to a large rock customers as part of our strategy to address the customer needs to keep the finances safe online.

This new live-lob feature provides customer service contextual information to better understand what factors impact their credit score with actionable insights to build or improve the credit rating all the time.

From Spent Trucking to helping you better manage your subscription spending or virtual secure credit card with an increase in demand for trust-based services and will continue to expand what we do for consumers in that area.

So they feel empowered to manage their finances confidently, achieve financial freedom and thrive in their digital journeys.

Hello, everyone.

We see a long runway of growth with meaningful opportunities to expand in each pillar of our consumer cybersecurity portfolio as we continue to innovate and execute.

In Q2, we grew to cyber-saving's bookings over 5% driven by strong momentum in identity where bookings are 8% lower over year.

We also drove double digit growth in new customer acquisitions, maintain solid momentum in upsetting into identity memberships and continue expanding our partnership network.

We so much opportunity in front of us will continue to invest to serve the expanding needs of consumer. Whether that be adding to our AI capabilities to better match our services to our customers and deliver more into it is an engaging experience is found in them.

or through innovation into new and existing products or even expanding our reach to new markets for services like identity theft protection.

Even with the most comprehensive solutions in the market, we know we can't rest, so expect us to deliver in innovation and more engaging experiences to our customers.

While we remain focused on the future and innovation operating with discipline and meeting our commitments are core parts of our Gen DNA

Our pointing KPIs remain very healthy, supporting yet another quarter of WDG growth in non-gap earnings per share, which includes many of our investments for long-term growth.

Sinta University last year where we laid out our long-term goals of accelerating growth to the mid-single digits and driving non-gap EPS growth of 12 to 15 percent. We have consistent take-sacreded and delivered on our commitments.

We are pleased with our future results and excited about what we can deliver in the future. As a result, we strengthened our annual guidance and we are making steady progress towards achieving the three year financial goals we shared at our investor day last November.

We are passionate about our mission to empower and protect every aspect of digital life and we're confident that our focus on the customers are based on innovation and our discipline and execution we'll enable us to achieve our goals to drive share over their value

and with that the need pass is on to Natalie to review our financial performance in detail.

and Hello everyone. For today's call, I will walk through our fiscal Q2 2025 results followed by our outlook for Q3 and 4 year, fiscal year 2025.

I will focus on non-gapsic and your viewer growth rates, unless otherwise stated.

Natalie: Q2 was another quarter of solid execution with strong financial results at or above the mid-point of our guidance and reflects our 21st consecutive quarter of growth.

Q2 bookings were $964 million up 5% in constant currency and up 4% in USD.

Cyber Safety Bookings, which excluded our legacy business lines, also grew 5% year every year in Constring Currency, our highest growth rates since the Avast acquisition.

This quarter there was a surge in consumer awareness, interest and demand for identity theft protection after the national public data breach.

This is when our brand awareness and vast life-lock protection offerings really cut through and we drove stronger customer acquisition and bookings as a result, helping to shore up the higher bookings to screw it in the quarter.

Moving to revenue. Total Q2 revenue was $974 million up 3% in the USD and Constincurrency.

Cyber Safety Revenue Group 4% year over year, driven by broad-based growth across our consumer security and identity and privacy business lines.

Natalie: Stable growth in our security business lines reflects the success of our cross-cell program. As our Norton 360 security customers continue to add more adjacent offerings, and we drive improved monetization.

Natalie: Identity and Privacy Growth was more pronounced with faster growth in our Norton 360 with light-lock product as consumers increasingly adopt comprehensive cyber safety membership with identity solutions.

Direct revenue was $860 million up 3% supported by improvements across our key performance metrics of direct customers, RPU and retention.

Let me share some specifics.

A key ingredient to our growth strategy is driving net new customers and in two two we expanded our customer base for the fifth consecutive quarter, increasing to 39.7 million up 389 k-sequentially and up over 1.1 million year over year.

We continue to leverage our broad range of marketing channels and vast product portfolio, dynamically shifting and increasing marketing investments based on demand while optimizing our sites to drive improved traffic conversion.

This quarter, our net new customer count growth was mostly driven by continued international and mobile expansion efforts. And we had the additional opportunity to further drive our identity offerings with the increased market demand.

On monetization, our monthly direct RPU was $7.26 in USD, up 3 cents to 1 cent compared to last year's result.

Note that FX helped this metric by too many sequentially but had no impact every year.

Operation Lee R. Poo remains stable to slightly up across our customer cohorts by brand and by market.

As we grow our customer base, we have demonstrated the ability to further monetize after their first purchase, whether through cross-selling complementary products or upselling to higher tier memberships, both avenues providing additional customer value and enhanced cybersecurity protection coverage.

Natalie: Our efforts to better customize and personalize offerings at the right moments of truth or working. And as we add new features and expand our portfolio, we will continue to feed this flywheel.

The expanded values and services provided to our customers is also reflected in the retention increases to date.

In Q2, our director-tension rate was 78% in line with the prior quarter and improving by a point year every year. Steadily progressing towards our goal of 80%.

Natalie: Well, each point of retention will get harder to achieve as we continue to drive new customer growth. Our teams are focused on driving gains at the cohort and product level.

Natalie: and as Jen Stack gets rolled out to more customers, we are driving better targeting and in-product messaging with the goal to create more personalized customer experiences that one turn drive higher customer loyalty, retention, and increase lifetime value.

As we look forward, we will continue to focus on keeping our already high retention rates in our Norton and Lifelock Brandstable and drive increases with our mobile customers and our vast brands.

Natalie: Turning to our partner business, partner revenue was $102 million in Q2, up 7% year-to-year as reported in up 8% in constant currency, as we grow our identity and privacy offers offerings.

Our Employee Benefits Channel continues to scale, helping over 10,000 companies protect their employees from identity and cyber threats.

As consumer awareness of identity theft grows and companies turn to offering more comprehensive benefits to their employees, our pipeline is strengthening.

Natalie: Our Telco partnerships are also helping us scale our identity membership offerings internationally. Leveraging the partner scale in broad customer base to drive adoption and targeted expansion markets.

And as consumers increasingly gravitate towards identity and privacy solutions, our private browsers have also been an accelerator for partner growth as we see strong adoption in our customer base.

Across our diverse set of partner channels, we are making steady progress towards half a billion annual partner revenue over the next years.

Natalie: Round the outer revenue, our legacy business lines contributed $12 million to $12 million, down from $16 million in the prior year.

As a reminder, we expect our legacy revenue to continue declining double digits year-to-year and represents approximately 1% of our total revenue.

Turning to profitability, Q2 operating income was $567 million, up 4% year over year, and translating to an operating margin of 58.2%.

As I noted earlier, we're making focused investments to capitalize on the growth opportunities we see in the market, and that's reflected in our strong first half-booking results.

We continue to invest in marketing across all channels with an always on optimization of existing funds and deployment of incremental funds to expand our customer base and accelerate growth.

Natalie: We're also investing in R&D in our longer-term foundational technology capabilities while launching new offerings to fortify our comprehensive cyber safety product portfolio and stay ahead of emerging threats.

Natalie: And as we've demonstrated in prior quarters we will continue to fund these investments through our operating leverage and by operating lean across the GNA organizations. Now at a record low of approximately 2% of revenue.

Building on the strength of our KPIs, along with our solid execution against expectations in the first half, we will continue to invest in our business with the same discipline to approach as we focus on driving sustainable mid-single-digit growth.

Q2 net income was $336 million of 12% year every year.

The Luded EPS was 54 cents for the quarter up 16% year every year in line with our guidance.

Interest expense related to our debt was $142 million. Our non-gap tax rate remains steady at 22%. Our ending share count was $622 million down 22 million year every year reflecting the impact of share repurchases.

Turning to our balance sheet and cash flow, Chiu-Tu ending cash balance with $737 million.

We are supported by over 2.2 billion of total liquidity consisting of our ending Q2 cash balance and a billion 5 of revolver.

Q2 operating cash will was $158 million and free cash will was $156 million, which included approximately $70 million of cash interest payments to this quarter.

As a reminder, Q2 is seasonally high, or highest use of cash given to concentration of tax payments that are due in the quarter. And as a result, we did not purchase any stock or pay down additional debt to the quarter.

Natalie: Also important to note, due to the timing of a quarter-end being on September 27th this year, our Q2 ending balance does not reflect our $89 million in cash interest and $58 million paid for our maturity schedule on September 30th.

As we look forward, we remain committed to our capital allocation strategy, returning 100% of excess free cash flow to shareholders, maintaining our dividend and balancing our capital allocation to both debt paid down and opportunistic share-by-back.

In the quarter we paid $77 million to share holders in the form of a regular, quarterly dividend of 12.5 cents per comm share.

For Q3 fiscal 2025, the Board of Directors approved a quarterly cash dividend of 12.5 cents per common share to be paid on December 11, 2024 for all shareholders of record as of the close of business on November 18, 2024.

Since the start of fiscal year 2023, we have paid down over $2 billion worth of debt and have deployed a total of $1.6 billion of share purchase is over that time period.

With our strong cash flow generation, we will continue to deploy our capital to achieve the long-term objectives laid out in our analyst day.

Now turning to our Q3 and fiscal 25 outlook for Q3 we expect non-gap revenue in the range of 980 to 990 million dollars, translating to approximately 4% growth in cyber safety.

and Q3 non-gap EPS to be in the range of 54 to 56 cents.

For fiscal year 2025, we are strengthening our prior guidance range and now expect full year revenue in the range of 3.905 billion to 3.93 billion.

Translating to 3% to 4% growth in cybersecurity.

Expressing Conson Currency, supported by expected cyber safety booking-scroath of 45%

Natalie: We have raised the lower end of our EPS guidance and now expect non-gap EPS.

to be in the range of $2.18 to $2.23 per share, representing an annual increase of 12 to 15% in constant currency, and in line with the EPS growth objectives we shared last November.

In summary, our Q2 results keep us on target for our 2025 plan, and we remain well positioned to achieve our long 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 guide points along the journey.

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

of course we will now begin the question and answer session. If you would like to ask a question please press start followed by one on your telephone keypad. It's for any reason. You'd like to remove that question please press start followed by two. Again, to ask a question press start one.

As a reminder, if you are using this speakerphone, please remember to pick up your handset before I ask you a question. We'll pause here briefly at questions or registered.

Natalie: Thank you.

Episode 2

Our first question comes along as Andrew Nolinsky with Wolfardo.

You'll like it now, we'll be in.

Okay, good afternoon and thank you for taking the questions and congrats on the strong Q2 results here.

Absolutely, what I want to call and welcome to cover it.

Natalie: Thank you very much.

I wanted to dig into the net ads of this quote which I thought were very impressive. I mean it seems like it's almost a guarantee that every adult in the US now has their personal data on the dark web. Thanks to all the breaches we saw that some are including that national public data breach.

So do you think the net ads will improve particularly in the U.S. going forward? Because I think you said it was more influenced by the international growth of this quarter.

So, definitely the National Databritch helped making people more aware of the risks.

But this quarter we grew our cohorts across all of our brands and across the continent's American and Europe.

So we've seen a kind of a broad base. Granted it was a bit more pronounced in the identity and in the US for that reason. And you write that.

Natalie: Today we believe that about one American out of three has enough of the personal data out there on the dark web for any criminals to stitch together for falling to an identity test.

We know everybody should be protected and that the awareness is something that we explain to you to work on to ensure that everyone understands the risk. It's a bit like an insurance service if you want. You need to have a first catastrophe to never skip a skip skip protection.

I think last quarter you talked about the Norton Cross-Self Penentration at increased to 20% I didn't catch it this quarter if you gave that.

Speaker Change: But I was really wondering, also, did you see an improvement in the life lock, a attach rate, or customers' upgrading to that higher end membership that includes life lock, this quarter, given all the breach activity?

Thank you for the question, Neda Smedley. So for sure, we saw an increase in our cross-ill penetration. It's been a growth driver for us and with us for several consecutive quarters. We laid that out as one of the five or five levers of a what you have to believe for sustainable accelerated growth in the mid-single digits.

And we definitely needed and wanted to show you guys and share with you guys what our starting point was and the milestone achievements that we would need to achieve mid-symbol digit rate of growth over the long term. So it won't be a specific metric that we give you every single quarter, but absolutely consistent performance and driver of our not only our booking skills but our Arpoo coming from Cross-L.

And then from a life-fuck attack rate, yes, I mean you probably heard it more than a handful of times in my script because

Natalie: You know, the lifelapht customers are such high value, highly retaining customers for us.

This has been a very healthy quarter for our business. We did see more life-locked acquisition. We saw more up.

Stell into membership tiers with the Life Lock Identity Protection.

Value, and we saw acquisition into higher tiered lifelock offerings this quarter, especially even more fuel by that NPD bridge.

Natalie: The name increased demand in the market.

Speaker Change: and I thank you, keep up the good work.

Thank you.

Thank you for your question.

Speaker Change: Our next question comes from Ryan on Sacate Kelly L. with Barclays.

and I'll be back.

Hey Team Good evening, this is Ryan Paraly on for second night. Thanks for taking the question. I'm going to grab some nice quarter.

Natalie: um

and Natalie, maybe first for you. You know, that was some helpful commentary just around the bibex and delivery activity this quarter of the standing big cash restrictions.

You know just going forward as we take a look at the next near midterm. He talks about how you're going to be bouncing by a vaccine delivering over the next few course.

Yeah, I would say it's going to be a consistent approach that we've taken to the last handful of quarters. Of course, we all know what's happening in the debt market and the cost of debt now is very different than the environment that we were in a year ago.

But both are very important for us in terms of capital allocation strategy. We'll strike the right balance, quarter in, quarter out, not a specific percentage.

Natalie: because we flex based on the macroeconomic.

Natalie: Indicators. So, you know, everything from the cost of that, the timing of the cash, you know, Q2 is our highest use of cash, so we were...

Natalie: Largely constricted in terms of what else we could do for additional capital allocation. But we also know we're highly, highly cash generators. So the back half of capital allocation will be very, very balanced and very interesting.

Natalie: The End

Good, that's super helpful. Thank you for my follow-up. I just want to dig into one of the part of NetAd, that was really interesting to see. I'm talking about first year attention and how that's been trending. I think we talked about that in a little bit. What do you think is, are there any improvements there and, you know, how has that been trending?

Yes, so our first retention rate is very consistent to up and I point that to our...

Continuously innovative product roadmap, the range of values and services that we are bringing to market.

Natalie: is very, very competitive.

Natalie: Very relevant in highly in demand.

and we make sure that we're not only bringing great products and services to market, but that we're competitively priced and are messaging in our personalization.

is as cut through to the customers as possible so that they understand what we can be for them in their ever increasing risk of cybersecurity.

Natalie: And so, yes, we see very, very solid results in all of our retention rates, which is why we've been able to scale up to 78% overall. But yes, the first year renewal rates are higher than they have been in the past.

Speaker Change: Very helpful, thanks guys.

Speaker Change: Thank you.

Thank you for your question.

and the next question comes from line of peer-leveling with ever-core.

Speaker Change: You are the best.

Speaker Change: Thank you for taking my questions. Vincent, maybe you're not. I think you talked about GNI. I know how you. So with, I think you mentioned that I think that 1.6, 1.7 downloads, but you know, Vincent, your commentary, you called out. I think...

said more to come on that front but we'll enable that AI across your core offerings. Can you maybe just...

Parkle about your kind of what the aspirations are there in terms of putting that across the platform and then maybe explain to us the monetization opportunities or if it's more of our experience will just take kind of be more competitive just tell us kind of balance and sort of all of it.

It will be all of our other bulletin techniques, but definitely we can see a very strong rising scam, personalised scam and volume personalised scams to the use of AI. When we came out with Gini, we were thinking of focusing on really developing our LLMs to be able to spot those scams and then help our consumers detect what is the scam and what is not. And we did that also with a conversational interface, you can also decide on what's the next step with you scams.

Speaker Change: We've had 1.6 million downloads, very strong models and I think we're now ready to move that into our overall portfolio. We'll start first with the Northern 360.

Membership being the core genie assistant or the anti-scam assistant.

Speaker Change: in the first three level of our known 360 planned.

and then we'll run up in features moving from text cams to voice cams to call blocks to scam insurance.

Speaker Change: Through the different...

Speaker Change: and the first part of monetization is to help our customers to move and upgrade to the next level of plan that not only...

Provided the current features of safety but extend to all of those that just mentioned and there will be a genie pro cross that if you want for those who want to stay into their whole plan and just want to have a standard own entice can too.

Thank you for that. And we're going to take the question of call out there. Better fixing enrollment, I know this is the quarter. I think most would sign up for it.

is giving us an update on how that pipeline kind of closed after the quarter versus expectations. And then kind of if you think about how this season ended, any changes that you're making to be going to market or to your partners to kind of accelerate that from next year.

So we continue to grow an arm-plowing benefit channel double digit. It's both growing on acquiring a new account, but also we're working with each account and putting the right marketing and communication engagement materials to have more signups in those accounts.

We've seen growth through the last few cores. We have a very strong funnel. We've always had a very strong funnel. Now it comes more to another jump in growth if you want. When it comes to the enrollment view where we can subscribe more customers if you want within those accounts.

We obviously integrate everything we see, the strong funnel and the activities in marketing I've just mentioned into our forecast.

and I think we feel very good about the continued development of that channel.

In which we've, and we're also on new products and go all the way to a food reputation defender service for executive senby law.

It's a character that says one more.

These agreements when you go into a company and often the benefits, is it an enterprise agreement? How does that get prices the consumer model? Just curious in terms of the pricing model versus the other.

Speaker Change: The pricing is kind of an enterprise agreement, but it's on a perceived basis. It either is fully sponsored or partially sponsored by the employer benefit plans. And the pricing is slightly below, but not much, or what we charge from the consumers.

Speaker Change: [inaudible]

Thank you for the call. Thank you.

Speaker Change: Yep.

Thank you for your questions.

Our next question comes from the line of Tomer Zilberman with Bank of America.

Your line is now open.

Great, hi guys. I wanted to go back to the direct customer net ads. So when we look at the 389,000, how much of that would you say is coming from the ads of international and mobile versus what you said the better identity sales on the back of the national data breach?

Speaker Change: And really what I'm trying to ask here is what do you think is the normalized customer growth in the remainder of the year?

Speaker Change: Thanks for watching!

Speaker Change: Hey, this is Natalie. So I'll take that one. The majority of our customer count net ads sequentially has consistently been coming from as we expand and broaden our solutions available on mobile and as well as our international market expansion. So both of those have been

consistent levers and consistent drivers of growth for us in customer acquisition as we expand and increase the penetration, increase the value proposition that we've got with our mobile users.

And that stayed consistent in Q2, and then on top of that, we saw the increased demand coming from the identity offerings.

Customer Acquisition. We do that on a global basis across all of our brands, across all of our platforms.

And we will continue to expand internationally as we identify new markets of healthy customer acquisition. And yes, we're just getting started in terms of expanding the value proposition and the engagement that we've got with the ever-growing mobile users and customers in our portfolio. In addition, we will continue to foster all of the brands.

across our portfolio. All of them are critical.

And on a go-forward basis, we're going to be balancing our investments, whether it's the product roadmap and the technology solutions that we bring.

Speaker Change: as well as combined with the different marketing channels that we've got to optimize a healthy customer acquisition that feeds our flywheel, feeds our increase in ARPU, feeds our cross-sell, feeds our up-sell, and therefore feeds our retention and accelerated bookings growth.

Thank you.

Got it. Excuse me. And maybe as a follow-up, looking at the guidance raised this year for the full year, I saw in the quarter your negative currency impacts went down to about $1 million from $7 million over the last few quarters.

How much of that is driving your guidance raised versus just the better business trends that you're seeing?

It's immaterial for us and then when we revise our guide we just use the current currency rates that we all know as of right now. We don't predict or project any currency fluctuations.

Thanks for watching!

Got it. Okay. Thank you.

Speaker Change: Thank you for watching!

Thank you for your questions.

Speaker Change: www.cdc.gov.au

Our next question comes from the line of Hamzah Sotawalla with Morgan Stanley.

Speaker Change: You're live now, Ben.

Hey, good evening. Thank you for taking my question.

Speaker Change: Right.

Thank you. Bye. Bye.

Hamzah Sotawalla: Hey, so I wanted a solid quarter in terms of top line, you know

really strong sort of record net ads. I wanted to ask a question on the cost side of the equation. The EBIT margin, I think, was slightly higher than it was in recent quarters. I'm just curious, on the cost side, what are you seeing in terms of advertising costs? I know in the past it's kind of gone up and down, so I'm curious what you're seeing currently.

Yeah, it varies across all the brands, quite honestly, and all the different channels. And we've got such a diverse set of channels and increasing marketing spend going to those channels. I think you're specifically talking about the gross margin rates, and yes, we do see shifts across our marketing portfolio. We optimize for healthy ROI, customer acquisition, and we leverage the different channel diversification that we've got.

In terms of what's, you know, there is different accounting treatment depending on what marketing channels there are. So I would encourage...

you to consider that when you think about the gross margin versus the op margin versus the EBITDA margin. And that's why we're able to hold the operating margin so consistently quarter of a quarter. It's just P&L profile of where the marketing channel expense for this quarter actually hit.

Speaker Change: Thanks for watching!

Speaker Change: Can I be more specific? In the direct to consumer side of the business, how would you say advertising costs have been trending in the last few quarters, up or down?

Speaker Change: Yeah, so overall, I would say it is definitely getting more competitive. Now keep in mind, our CACs by brand and CACs by channel are very, very different. And so overall, it's stable to up in terms of cost of acquisition. But when you think about a side-by-side and when we talk about our business sequentially, when we talk about taking and leveraging the increased market demand for LifeLock, that's obviously going to be a much, much higher absolute dollar CAC.

to acquire that much higher valued customer than if you were to think about a lower AV security customer ad in a new growth market internationally.

Speaker Change: Thanks for watching!

It says higher lifetime value subscriber, but maybe initially it might be a little bit higher check. Does that make sense? Okay. Thank you.

Hamzah Sotawalla: Yep.

Thank you for your question.

Our final question comes from the line of Dean Bergstrom with RBC.

Speaker Change: Thank you.

Your line is now open. Hey, it's him.

Hamzah Sotawalla: Hey, it's Dan Berkshire from iHEADBIRD. Thanks for taking our questions.

Speaker Change: Natalie you just mentioned accelerating bookings growth and your answer to one of the last questions that five percent constant currency number really nice to see especially following you know the uptick to four percent last quarter

And then it looks like the key assumptions moved up to 4% to 5% from 3% to 5%.

Hamzah Sotawalla: last quarter.

Maybe just what could that 5% portend for revenue growth over the next year? Should we think of maybe the difference between bookings and revenue growth that's maybe narrowing or maybe solidifying a potential around revenue acceleration? Just any further thoughts around accelerating bookings growth here?

Speaker Change: Yeah, a large, the majority of our portfolio or our book of business

is going to be ratable. And so it's about rolling off the balance sheet relatively consistently. We don't have a ton of seasonality in terms of the size of our quarters. And so largely speaking, super high level, it'll roll off over the next 12 months.

Hamzah Sotawalla: We do have our monthly subscribers, which is still a small share of our business. You would see that hitting bookings and revenue in the same period because we recognize the revenue as we deliver on the service, so monthly. But largely speaking, our portfolio and our book of business is on annual subscription. The majority of that is routable over the next four quarters.

Speaker Change: That's helpful, thanks. And then maybe a little more on any action that you maybe undertook following that social security number breach. I mean.

Speaker Change: did you change marketing messaging channels it seems like you had pretty prescient timing around the personal data exposure product any specifics you may have done to lean into it a little further

Speaker Change: Yes, we did a we did a full reallocation in terms of assessing where to put the marketing dollars, a reallocation into the LifeLock

Hamzah Sotawalla: business for sure and the brands and services.

Hamzah Sotawalla: And with that, we did a healthy balance across the different channels to go where the demand was. There's a lot of demand for identity, obviously, in SEO as well as paid search. And then also, the affiliate channels really helped us with referral traffic to bring them to our platform on the LifeLog side.

Thanks for watching!

Speaker Change: That's great. Thank you.

Hamzah Sotawalla: Thanks.

Thank you for your questions.

That concludes our Q&A session. I would now like to pass the conference to Vincent Pilette, CEO of GenDigital Inc. for closing remarks.

Hamzah Sotawalla: www.cdc.gov.au

Vincent Pilette: Thank you. As the leader 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 other trust-based solutions.

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.

Hamzah Sotawalla: Thank you. Bye.

That concludes today's call. Thank you for your participation and enjoy the rest of your day.

Hamzah Sotawalla: Music