Gen Digital Inc 10-Q for FY2024 Q3

Gen Digital Inc. (GEN)

10-Q 2024-02-05 For: 2023-12-29

Added on April 06, 2026

About this 10-Q

Gen Digital Inc filed this 10-Q on February 5, 2024, covering the quarter ended December 29, 2023 (FY2024 Q3).

Headline figures

Quarter ended December 29, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $951M; up 1.6% from $936M a year earlier
Net income: $144M; down 12.7% from net income of $165M a year earlier
Diluted EPS: $0.22; down 12.0% from $0.25 a year earlier

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Title of each class		Trading symbol(s)	Name of each exchange on which registered
Common Stock,	par value $0.01 per share	GEN	The Nasdaq Stock Market LLC


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	35
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51


	December 29, 2023		March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	490	$	750

Accounts receivable, net	160		168
Other current assets	1,055		284
Assets held for sale	15		31
Total current assets	1,720		1,233
Property and equipment, net	76		76
Operating lease assets	34		43
Intangible assets, net	2,745		3,097
Goodwill	10,231		10,217
Other long-term assets	1,476		1,281
Total assets	$	16,282	$	15,947
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	62	$	77
Accrued compensation and benefits	64		102
Current portion of long-term debt	175		233
Contract liabilities	1,666		1,708
Current operating lease liabilities	16		26
Other current liabilities	580		703
Total current liabilities	2,563		2,849
Long-term debt	9,081		9,529
Long-term contract liabilities	78		80
Deferred income tax liabilities	265		395
Long-term income taxes payable	1,210		820
Long-term operating lease liabilities	28		31
Other long-term liabilities	639		43
Total liabilities	13,864		13,747
Commitments and contingencies (Note 18)
Stockholders’ equity (deficit):
Common stock and additional paid-in capital, $0.01 par value: 3,000 shares authorized; 637 and 640 shares issued and outstanding as of December 29, 2023 and March 31, 2023, respectively	2,502		2,800
Accumulated other comprehensive income (loss)	19		(15)
Retained earnings (accumulated deficit)	(103)		(585)
Total stockholders’ equity (deficit)	2,418		2,200
Total liabilities and stockholders’ equity (deficit)	$	16,282	$	15,947


	Three Months Ended				Nine Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Net revenues	$	951	$	936	$	2,845	$	2,391
Cost of revenues	182		178		541		399
Gross profit	769		758		2,304		1,992
Operating expenses:
Sales and marketing	184		183		552		506
Research and development	77		91		252		225
General and administrative	110		11		559		225
Amortization of intangible assets	61		61		183		111
Restructuring and other costs	2		44		36		55
Total operating expenses	434		390		1,582		1,122
Operating income (loss)	335		368		722		870
Interest expense	(165)		(154)		(508)		(233)
Other income (expense), net	11		2		30		3
Income (loss) before income taxes	181		216		244		640
Income tax expense (benefit)	37		51		(238)		206
Net income (loss)	$	144	$	165	$	482	$	434

Net income (loss) per share - basic	$	0.23	$	0.26	$	0.75	$	0.72
Net income (loss) per share - diluted	$	0.22	$	0.25	$	0.75	$	0.70

Weighted-average shares outstanding:
Basic	639		647		640		605
Diluted	645		651		644		617


	Three Months Ended				Nine Months Ended
	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Net income (loss)	$	144	$	165	$	482	$	434
Other comprehensive income (loss), net of taxes:
Foreign currency translation gain (loss)	32		(13)		28		(24)
Net unrealized gain (loss) on interest rate derivative instruments	(19)		—		6		—

Other comprehensive income (loss), net of taxes	13		(13)		34		(24)
Comprehensive income (loss)	$	157	$	152	$	516	$	410


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Three months ended December 29, 2023	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of September 29, 2023	641	$	2,655	$	6	$	(247)	$	2,414
Net income (loss)	—	—		—		144		144
Other comprehensive income (loss), net of taxes	—	—		13		—		13

Shares withheld for taxes related to vesting of stock units	—	(6)		—		—		(6)
Repurchases of common stock	(4)	(100)		—		—		(100)
Cash dividends declared ($0.125 per share of common stock) and dividend equivalents accrued	—	(82)		—		—		(82)
Stock-based compensation	—	35		—		—		35



Balance as of December 29, 2023	637	$	2,502	$	19	$	(103)	$	2,418


Nine months ended December 29, 2023	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of March 31, 2023	640	$	2,800	$	(15)	$	(585)	$	2,200
Net income (loss)	—	—		—		482		482
Other comprehensive income (loss), net of taxes	—	—		34		—		34
Common stock issued under employee stock incentive plans	5	6		—		—		6
Shares withheld for taxes related to vesting of stock units	(1)	(25)		—		—		(25)
Repurchases of common stock	(7)	(141)		—		—		(141)
Cash dividends declared ($0.375 per share of common stock) and dividend equivalents accrued	—	(245)		—		—		(245)
Stock-based compensation	—	107		—		—		107



Balance as of December 29, 2023	637	$	2,502	$	19	$	(103)	$	2,418


Three Months Ended December 30, 2022	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of September 30, 2022	661	$	3,378	$	(15)	$	(1,665)	$	1,698
Net income (loss)	—	—		—		165		165
Other comprehensive income (loss), net of taxes	—	—		(13)		—		(13)
Common stock issued under employee stock incentive plans	1	—		—		—		—
Shares withheld for taxes related to vesting of stock units	—	(1)		—		—		(1)
Repurchases of common stock	(23)	(500)		—		—		(500)
Cash dividends declared ($0.125 per share of common stock) and dividend equivalents accrued	—	(81)		—		—		(81)
Stock-based compensation	—	42		—		—		42



Balance as of December 30, 2022	639	$	2,838	$	(28)	$	(1,500)	$	1,310


Nine months ended December 30, 2022	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of April 1, 2022	582	$	1,851	$	(4)	$	(1,940)	$	(93)
Net income (loss)	—	—		—		434		434
Other comprehensive income (loss), net of taxes	—	—		(24)		—		(24)
Common stock issued under employee stock incentive plans	4	6		—		—		6
Shares withheld for taxes related to vesting of stock units	(1)	(17)		—		—		(17)
Repurchases of common stock	(40)	(904)		—		—		(904)
Cash dividends declared ($0.375 per share of common stock) and dividend equivalents accrued	—	(227)		—		—		(227)
Stock-based compensation	—	95		—		—		95
Extinguishment of convertible debt	—	(100)		—		—		(100)
Cumulative effect adjustment from adoption of ASU 2020-06 (1)	—	(7)		—		6		(1)
Merger consideration	94	2,141		—		—		2,141
Balance as of December 30, 2022	639	$	2,838	$	(28)	$	(1,500)	$	1,310


(In millions)	September 12, 2022
Assets:
Accounts receivable	$	63
Other current assets	17
Property and equipment	33
Operating lease assets	18
Intangible assets	2,383
Goodwill	7,335
Other long-term assets	11
Total assets acquired	9,860
Liabilities:
Current liabilities	180
Contract liabilities	509
Operating lease liabilities	18
Long-term deferred tax liabilities	419
Other long-term obligations	46
Total liabilities assumed	1,172
Total purchase price	$	8,688


(In millions)
Remainder of 2024	$	107
2025	401
2026	395
2027	382
2028	379
Thereafter	342
Total	$	2,006


	December 29, 2023		March 31, 2023
Weighted-average remaining lease term	4.0 years		2.8 years
Weighted-average discount rate	5.82	%	4.38	%


(In millions, except percentages)	December 29, 2023		March 31, 2023		Effective Interest Rate
5.00% Senior Notes due April 15, 2025	$	1,100	$	1,100	5.00	%
Term A Facility due September 12, 2027	3,715		3,861		SOFR + % (2)
6.75% Senior Notes due September 30, 2027	900		900		6.75	%
Term B Facility due September 12, 2029	3,053		3,431		SOFR + % (3)
1.29% Avira Mortgage due December 30, 2029 (1)	4		4		1.29	%
7.125% Senior Notes due September 30, 2030	600		600		7.13	%
0.95% Avira Mortgage due December 30, 2030 (1)	3		3		0.95	%
Total principal amount	9,375		9,899
Less: unamortized discount and issuance costs	(119)		(137)
Total debt	9,256		9,762
Less: current portion	(175)		(233)
Total long-term debt	$	9,081	$	9,529


	December 29, 2023						March 31, 2023
(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	1,643	$	(726)	$	917	$	1,641	$	(549)	$	1,092
Developed technology	1,343		(331)		1,012		1,462		(279)		1,183
Other	90		(13)		77		91		(8)		83
Total finite-lived intangible assets	3,076		(1,070)		2,006		3,194		(836)		2,358
Indefinite-lived trade names	739		—		739		739		—		739
Total intangible assets	$	3,815	$	(1,070)	$	2,745	$	3,933	$	(836)	$	3,097


(In millions)	December 29, 2023		March 31, 2023
Land	$	13	$	13
Computer hardware and software	496		498
Office furniture and equipment	18		17
Buildings	28		28
Leasehold improvements	40		28
Construction in progress	4		1
Total property and equipment, gross	599		585
Accumulated depreciation and amortization	(523)		(509)
Total property and equipment, net	$	76	$	76


	December 29, 2023						March 31, 2023
(In millions)	Fair Value		Level 1		Level 2		Fair Value		Level 1		Level 2
Assets:
Money market funds	$	118	$	118	$	—	$	174	$	174	$	—

Interest rate swaps (1)	6		—		6		—		—		—
Total	$	124	$	118	$	6	$	174	$	174	$	—


	Notional Amount				Fair Value of Derivative Assets				Fair Value of Derivative Liabilities
(In millions)	December 29, 2023		March 31, 2023		December 29, 2023		March 31, 2023		December 29, 2023		March 31, 2023
Foreign exchange contracts not designated as hedging instrument (1)	$	306	$	291	$	—	$	—	$	—	$	—
Interest rate swap contracts designated as cash flow hedge	1,000		1,000		6		1		—		2
Total	$	1,306	$	1,291	$	6	$	1	$	—	$	2


(in millions)	Liability Balance as of March 31, 2023		Costs, Net of Adjustments		Cash Payments		Non-Cash Items		Liability Balance as of December 29, 2023
Severance and termination benefit costs	$	7	$	21	$	(23)	$	—	$	5
Contract cancellation charges	—		5		(5)		—		—
Stock-based compensation charges	—		1		—		(1)		—
Asset write-offs and impairments	—		1		—		(1)		—
Other exit and disposal costs	—		7		(7)		—		—
Total	$	7	$	35	$	(35)	$	(2)	$	5


	Three Months Ended				Nine Months Ended
(In millions, except per share amounts)	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Number of shares repurchased	5		23		7		40
Average price per share	$	21.54	$	21.91	$	19.88	$	22.63
Aggregate purchase price	$	100	$	500	$	141	$	904


(In millions)	Foreign Currency Translation Adjustments		Unrealized Gain (Loss) On Derivative Instruments		Total
Balance as of March 31, 2023	$	(15)	$	—	$	(15)
Other comprehensive income (loss), net of taxes	28		6		34
Balance as of December 29, 2023	$	13	$	6	$	19


	Nine Months Ended
(In millions, except per grant data)	December 29, 2023		December 30, 2022
Restricted stock units (RSUs):
Weighted-average fair value per award granted	$	17.37	$	22.48
Awards granted	6		7
Total fair value of awards released	$	73	$	64
Outstanding and unvested	9		9
Performance-based restricted stock units (PRUs):
Weighted-average fair value per award granted	$	22.83	$	27.07
Awards granted	2		2
Total fair value of awards released	$	19	$	4
Outstanding and unvested at target payout	5		5


	December 29, 2023		March 31, 2023
E-commerce partner A	15	%	13	%
E-commerce partner B	14	%	14	%


	Three Months Ended				Nine Months Ended
(In millions, except for per share amounts)	December 29, 2023		December 30, 2022		December 29, 2023		December 30, 2022
Net revenues	$	951	$	936	$	2,845	$	2,391
Operating income (loss)	$	335	$	368	$	722	$	870
Net income (loss)	$	144	$	165	$	482	$	434
Net income (loss) per share - diluted	$	0.22	$	0.25	$	0.75	$	0.70


	As Of
(In millions)	December 29, 2023		March 31, 2023
Cash and cash equivalents	$	490	$	750
Contract liabilities	$	1,744	$	1,788


	Three Months Ended						Nine Months Ended
(In millions, except for percentages)	December 29, 2023		December 30, 2022		Change in %		December 29, 2023		December 30, 2022		Change in %
Net revenues	$	951	$	936	2	%	$	2,845	$	2,391	19	%


	Three Months Ended (1)
(In millions, except for per user amounts)	December 29, 2023			December 30, 2022
Direct customer revenues	$	837		$	818
Partner revenues	$	99		$	95
Total Cyber Safety revenues	$	936		$	913
Legacy revenues	$	15		$	23

Direct customer count (at quarter end)	38.9			38.4
Direct average revenue per user (ARPU)	$	7.21		$	7.09
Retention rate	77		%	75		%


(In millions)	December 29, 2023
Term Loans	$	6,768
Senior Notes	2,600
Mortgage Loans	7
Total debt	$	9,375


(In millions, except per share data)	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
Sep 30, 2023 to Oct 27, 2023	—	$	—	—	$	829
Oct 28, 2023 to Nov 24, 2023	1	$	21.21	1	$	808
Nov 25, 2023 to Dec 29, 2023	4	$	21.63	4	$	729
Total number of shares repurchased	5			5



†			This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.


			GEN DIGITAL INC.
			(Registrant)

			By:			/s/ Vincent Pilette
						Vincent Pilette Chief Executive Officer

			By:			/s/ Natalie Derse
						Natalie Derse Chief Financial Officer