Gen Digital (US:GEN)2023-02-05 16:00Revenue Growth - Direct customer revenues increased to $818 million in Q3 2022, up from $624 million in Q3 2021, reflecting a 31% growth[177] - Total Cyber Safety revenues reached $913 million in Q3 2022, compared to $692 million in Q3 2021, a 32% increase[177] - Net revenues for Q3 2022 were $936 million, a 33% increase from $702 million in Q3 2021[164] - Net revenues increased by $234 million (33%) in Q3 2022 compared to Q3 2021, driven by Avast revenue and identity protection product sales, offset by $34 million in foreign exchange headwinds[175] - Net revenues increased by $311 million (15%) in the nine months ended December 30, 2022, compared to the same period in 2021, primarily due to Avast revenue and identity protection product sales, offset by $92 million in foreign exchange headwinds[176] - Net revenues for the three months ended December 30, 2022, were $936 million, a 33.3% increase from $702 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 $390 million in Q3 2022, driven by higher headcount and IT costs related to the Avast merger[185] - Research and development expenses increased by 52% to $91 million in Q3 2022, driven by investments in new products and technologies[185] - Sales and marketing expenses increased by $23 million in Q3 2022, primarily due to a $21 million increase in headcount, IT, and facility costs[186] - Research and development expenses increased by $31 million in Q3 2022, driven by a $23 million increase in headcount, IT, and facility costs[186] - The company's total operating expenses for the nine months ended December 30, 2022, were $1,122 million, a 25.1% increase from $897 million in the same period in 2021[11] Net Income and Profitability - Net income for Q3 2022 was $165 million, down from $202 million in Q3 2021, reflecting a 18% decline[164] - Net income for the three months ended December 30, 2022, was $165 million, a decrease from $202 million in the same period in 2021[11] - The company's comprehensive income for the nine months ended December 30, 2022, was $410 million, compared to $691 million in the same period in 2021[14] - Net income for the nine months ended December 31, 2021, was $716 million[27] Cash Flow and Liquidity - Cash, cash equivalents, and short-term investments decreased to $812 million as of December 30, 2022, from $1,891 million as of April 1, 2022[164] - Cash flows from operating activities decreased by $215 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 $6,862 million, primarily due to the $6,547 million cash consideration paid for the Avast merger[208] - Cash flows from financing activities increased by $5,180 million, driven by proceeds from debt issuance, partially offset by debt repayments and stock repurchases[209] - Net cash provided by operating activities for the nine months ended December 31, 2021, was $648 million[27] - Net cash used in investing activities for the nine months ended December 31, 2022, was $6,546 million, primarily due to payments for acquisitions[27] - Net cash provided by financing activities for the nine months ended December 31, 2022, was $5,064 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 $6.91 billion in cash consideration[162] - The company completed a merger with Avast for a total cash consideration of approximately $6,547 million, net of $363 million of cash acquired and $2,141 million non-cash consideration transferred[218] - The company expects to incur total restructuring costs up to $280 million, with $180 million and $100 million estimated to be incurred within the first and second full years, respectively, following the completion of the merger[224] Debt and Financing - The company entered into a $1,500 million revolving credit facility, a $3,910 million term loan A facility, a $3,690 million term loan B facility, and a $750 million bridge loan as part of the Merger with Avast[213] - The company issued $1,500 million in senior notes, consisting of 6.75% Senior Notes due 2027 and 7.125% Senior Notes due 2030[214] - The company paid $145 million in debt issuance costs associated with the senior credit facilities during the nine months ended December 30, 2022[213] - The company paid $14 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 $10,207 million, comprising $7,600 million in Term Loans, $2,600 million in Senior Notes, and $7 million in Mortgage Loans[221] - The company has $2,600 million in fixed-rate Senior Notes outstanding, with a carrying amount and fair value of $2,552 million as of December 30, 2022[230] - A hypothetical 1% change in SOFR would result in a $76 million increase in annualized interest expense on $7,600 million of variable-rate debt[231] - The company has a $1,500 million revolving credit facility with variable interest rates based on SOFR, exposing it to risks from adverse SOFR changes[231] Share Repurchases and Dividends - The company repurchased 23 million shares for $500 million in Q3 2022 and 40 million shares for $904 million in the nine months ended December 30, 2022[217] - The company repurchased $500 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 $870 million[223] - The company announced a cash dividend of $0.125 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 $14,271 million, including $10,207 million in debt principal payments and $3,166 million in interest payments on debt[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 $1,310 million, compared to $1,698 million as of September 30, 2022[18]