Revenue Growth - Direct customer revenues increased to 818millioninQ32022,upfrom624 million in Q3 2021, reflecting a 31% growth[177] - Total Cyber Safety revenues reached 913millioninQ32022,comparedto692 million in Q3 2021, a 32% increase[177] - Net revenues for Q3 2022 were 936million,a33702 million in Q3 2021[164] - Net revenues increased by 234million(3334 million in foreign exchange headwinds[175] - Net revenues increased by 311million(1592 million in foreign exchange headwinds[176] - Net revenues for the three months ended December 30, 2022, were 936million,a33.3702 million in the same period in 2021[11] Customer Growth - Direct customer count rose to 38.4 million at the end of Q3 2022, up from 24.2 million in Q3 2021, a 59% growth[177] Operating Expenses - Operating expenses increased by 32% to 390millioninQ32022,drivenbyhigherheadcountandITcostsrelatedtotheAvastmerger[185]−Researchanddevelopmentexpensesincreasedby5291 million in Q3 2022, driven by investments in new products and technologies[185] - Sales and marketing expenses increased by 23millioninQ32022,primarilyduetoa21 million increase in headcount, IT, and facility costs[186] - Research and development expenses increased by 31millioninQ32022,drivenbya23 million increase in headcount, IT, and facility costs[186] - The company's total operating expenses for the nine months ended December 30, 2022, were 1,122million,a25.1897 million in the same period in 2021[11] Net Income and Profitability - Net income for Q3 2022 was 165million,downfrom202 million in Q3 2021, reflecting a 18% decline[164] - Net income for the three months ended December 30, 2022, was 165million,adecreasefrom202 million in the same period in 2021[11] - The company's comprehensive income for the nine months ended December 30, 2022, was 410million,comparedto691 million in the same period in 2021[14] - Net income for the nine months ended December 31, 2021, was 716million[27]CashFlowandLiquidity−Cash,cashequivalents,andshort−terminvestmentsdecreasedto812 million as of December 30, 2022, from 1,891millionasofApril1,2022[164]−Cashflowsfromoperatingactivitiesdecreasedby215 million in the nine months ended December 30, 2022, primarily due to increased payments for taxes, debt interest, and merger-related costs[207] - Cash flows used in investing activities increased by 6,862million,primarilyduetothe6,547 million cash consideration paid for the Avast merger[208] - Cash flows from financing activities increased by 5,180million,drivenbyproceedsfromdebtissuance,partiallyoffsetbydebtrepaymentsandstockrepurchases[209]−NetcashprovidedbyoperatingactivitiesfortheninemonthsendedDecember31,2021,was648 million[27] - Net cash used in investing activities for the nine months ended December 31, 2022, was 6,546million,primarilyduetopaymentsforacquisitions[27]−NetcashprovidedbyfinancingactivitiesfortheninemonthsendedDecember31,2022,was5,064 million, mainly from proceeds from the issuance of debt[27] Merger with Avast - The company completed the merger with Avast on September 12, 2022, issuing 94.2 million shares and paying 6.91billionincashconsideration[162]−ThecompanycompletedamergerwithAvastforatotalcashconsiderationofapproximately6,547 million, net of 363millionofcashacquiredand2,141 million non-cash consideration transferred[218] - The company expects to incur total restructuring costs up to 280million,with180 million and 100millionestimatedtobeincurredwithinthefirstandsecondfullyears,respectively,followingthecompletionofthemerger[224]DebtandFinancing−Thecompanyenteredintoa1,500 million revolving credit facility, a 3,910milliontermloanAfacility,a3,690 million term loan B facility, and a 750millionbridgeloanaspartoftheMergerwithAvast[213]−Thecompanyissued1,500 million in senior notes, consisting of 6.75% Senior Notes due 2027 and 7.125% Senior Notes due 2030[214] - The company paid 145millionindebtissuancecostsassociatedwiththeseniorcreditfacilitiesduringtheninemonthsendedDecember30,2022[213]−Thecompanypaid14 million in debt issuance costs associated with the senior notes during the nine months ended December 30, 2022[214] - Total outstanding principal amount of indebtedness as of December 30, 2022, was 10,207million,comprising7,600 million in Term Loans, 2,600millioninSeniorNotes,and7 million in Mortgage Loans[221] - The company has 2,600millioninfixed−rateSeniorNotesoutstanding,withacarryingamountandfairvalueof2,552 million as of December 30, 2022[230] - A hypothetical 1% change in SOFR would result in a 76millionincreaseinannualizedinterestexpenseon7,600 million of variable-rate debt[231] - The company has a 1,500millionrevolvingcreditfacilitywithvariableinterestratesbasedonSOFR,exposingittorisksfromadverseSOFRchanges[231]ShareRepurchasesandDividends−Thecompanyrepurchased23millionsharesfor500 million in Q3 2022 and 40 million shares for 904millionintheninemonthsendedDecember30,2022[217]−Thecompanyrepurchased500 million worth of common stock during the three months ended December 30, 2022[18] - The remaining balance of the stock repurchase authorization as of December 30, 2022, was 870million[223]−Thecompanyannouncedacashdividendof0.125 per share of common stock to be paid in March 2023[222] Tax and Financial Obligations - The effective tax rate for Q3 2022 was 24%, slightly higher than the 23% rate in Q3 2021, due to state taxes and U.S. taxation on foreign earnings[196] - Total contractual obligations as of December 30, 2022, were 14,271million,including10,207 million in debt principal payments and 3,166millionininterestpaymentsondebt[227]−614 million in long-term income taxes payable has been excluded from the quarterly review of timing of contractual obligations due to uncertainty in cash flow timing[228] Foreign Exchange and Currency Risks - The company conducts business in multiple currencies, including Euro, Japanese Yen, British Pound, Australian Dollar, Czech Koruna, and Canadian Dollar, exposing it to foreign exchange rate fluctuations[232] - Growth in international operations increases exposure to foreign currency fluctuations and volatile market conditions, potentially negatively affecting USD-denominated revenue[233] - The company uses monthly foreign exchange forward contracts to manage currency exposure on assets and liabilities denominated in non-functional currencies[234] - The company does not use derivative financial instruments for speculative trading and does not fully hedge foreign currency exposure[235] - The company’s cash flow and operating results may be materially impacted by foreign exchange gains or losses and related hedging activities[232] Equity and Stockholders' Equity - The company's total stockholders' equity as of December 30, 2022, was 1,310million,comparedto1,698 million as of September 30, 2022[18]
Gen Digital (GEN)2023-02-05 16:00