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Gen Digital

Gen DigitalGEN财报

Nasdaq · Information Technology · software industry

Gen Digital Inc. is a multinational software company co-headquartered in both Tempe, Arizona (USA) and Prague, Czech Republic (EU). The company provides cybersecurity software, financial technology, and services. Gen is a Fortune 500 company and a member of the S&P 500 stock-market index. It is listed at both NASDAQ and Prague Stock Exchange. Its portfolio includes Norton, Avast, LifeLock, Avira, AVG, ReputationDefender, MoneyLion and CCleaner.

What changed in Gen Digital's 10-K — 2022 vs 2023

Top changes in Gen Digital's 2023 10-K

456 paragraphs added · 370 removed · 232 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

70 edited+59 added−28 removed8 unchanged
Over time, we plan to drive further growth as we add additional offerings and services for our customers. • Draw strength from our world-class customer service support: We have the largest consumer Cyber Safety customer support organization in the world.
Over time, we plan to drive further growth as we add additional offerings and services for our customers. • Draw strength from our world-class customer service support: We have the largest consumer Cyber Safety customer service support organization in the world.
Governmental Regulation We collect, use, store or disclose an increasingly high volume, variety, and velocity of personal information, including from employees and customers, in connection with the operation of our business, particularly, in relation to our identity and information protection offerings, which rely on large data repositories of personal information and consumer transactions.
Governmental Regulation We collect, use, store or disclose an increasingly high volume, and variety of personal information, including from employees and customers, in connection with the operation of our business, particularly, in relation to our identity and information protection offerings, which rely on large data repositories of personal information and consumer transactions.
Innovation and Research & Development NortonLifeLock has a long history of innovation, and we plan to continue to invest in research and development to drive our long-term success. As cyber threats evolve, we are focused on delivering a portfolio that protects each element of our customers’ digital lives.
Innovation, Research & Development Gen has a long history of innovation, and we plan to continue to invest in research and development to drive our long-term success. As cyber threats evolve, we are focused on delivering a portfolio that protects each element of our customers’ digital lives.
As a result, they may be able to devote greater resources to develop, promote and sell their offerings; deliver competitive offerings at lower prices or for free; and introduce new solutions and respond to market developments and customer requirements more quickly than we can.
As a result, they may be able to devote greater resources to develop, promote and sell their offerings; deliver competitive offerings at lower prices or for free; and introduce new solutions and respond to market developments and customer requirements and preferences more quickly or cost effectively than we can.
Seasonal behavior in orders primarily reflects consumer spending patterns where our fiscal third and fourth quarters are higher due to the holidays in our third quarter, as well as follow-on holiday purchases and the U.S. tax filing season in our fourth quarter.
Seasonal behavior in orders primarily reflects consumer spending patterns where our fiscal third and fourth quarters are higher due to the holidays in our third quarter, as well as follow-on holiday purchases and the U.S. tax filing season which typically is in our fourth quarter.
We believe that the competitive factors in our market include access to a breadth of identity and consumer transaction data, broad and effective service offerings, brand recognition, technology, effective and cost-efficient customer acquisition, having a large customer base and strong retention rate, customer satisfaction, price, convenience of purchase, ease of use, frequency of upgrades and updates, and quality and reliable customer service.
We believe the competitive factors in our market include innovation, access to a breadth of identity and consumer transaction data, broad and effective service offerings, brand recognition, technology, effective and cost-efficient customer acquisition, having a strong retention rate, customer satisfaction, price, convenience of purchase, ease of use, frequency of upgrades and updates and quality and reliable customer service.
The key elements of our strategy include the following: • Extend our leadership position through continued enhancement of our solutions and services: The Cyber Safety industry is large and expanding, which we believe provides a significant growth opportunity.
The key elements of our strategy include the following: • Extend our leadership position through new products and continued enhancement of our solutions and services: Cyber Safety is large and expanding, which we believe provides a significant growth opportunity.
Within Norton Labs, our global technology research organization is focused on applied research projects, with the goal of rapidly creating new products to address consumer trends and grow the business, including defending consumer digital privacy and identity.
Our global technology research organization is focused on applied research projects, with the goal of rapidly creating new products to address consumer trends and grow the business, including defending consumer digital privacy and identity.
We continuously target to release new products and features at an accelerated pace, and find synergies to integrate current and future technology acquisitions. Our full portfolio provides protection across three Cyber Safety categories in multiple channels and geographies, including security, identity, and privacy.
We continuously target to release new products and features at an accelerated pace and find synergies to integrate current and future technology acquisitions. Our Cyber Safety portfolio provides protection across three key categories in multiple channels and geographies, including security and performance, identity protection, and online privacy.
Cyber crime encompasses any crime committed digitally over the internet and includes crimes where (i) malicious software or unauthorized access is detected on a device, network or online account (such as email, social media, online banking, online retail, gaming, online entertainment, etc.), and unauthorized access or connection to cloud service accounts; (ii) an individual is digitally victimized through a data breach, cyber theft, cyber extortion, or fraud (stolen personally identifiable information, identity theft, etc.); (iii) online stalking, bullying, or harassment is inflicted; or (iv) attacks related to privacy or disinformation (such as online tracking protection, identity impersonation, disinformation on social media, DeepFakes, non-trustworthy WiFis, EvilTwin attacks, etc.).
Cybercrime encompasses any crime committed with devices over the internet and includes crimes where (i) malicious software or unauthorized access is detected on a device, network or online account (such as email, social media, online banking, crypto currency, online retail, gaming, online entertainment, etc.), and unauthorized access or connection to cloud service accounts; (ii) an individual is digitally victimized through a data breach, cyber theft, cyber extortion, or fraud (stolen personally identifiable information, identity theft, etc.); (iii) online stalking, bullying, or harassment is inflicted; or (iv) attacks related to privacy or disinformation (such as online tracking protection, identity impersonation, disinformation on social media, deepfakes, unsecured WiFi, EvilTwin attacks, etc.).
We make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission (SEC) on our investor relations website located at https://investor.nortonlifelock.com .
We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission (SEC) on our investor relations website located at Investor.GenDigital.com .
We use free versions of our products to reach the broadest set of customers globally and bring Cyber Safety to a larger audience, especially in international markets. The free solution offers a baseline of protection and presents premium functionalities based on the risk profile and device-type of the user.
We use free versions of our products to reach the broadest set of consumers globally and bring Cyber Safety to a larger audience, especially in international markets. The free solution offers a baseline of protection and presents premium functionalities based on the risk profile and specific needs of the user.
We are positioned across three key Cyber Safety categories: • Security (Norton and Avira offerings): Our Norton 360 and Avira offerings provide real-time protection for PCs, Macs and mobile devices against malware, viruses, adware, ransomware and other online threats.
We are well positioned across three key Cyber Safety categories: • Security and Performance (Norton, Avast, Avira, AVG, and CCleaner offerings): Our offerings provide real-time protection for PCs, Macs and mobile devices against malware, viruses, adware, ransomware and other online threats.
In the last three years, the expenses we have incurred from information security breach incidences were immaterial. This includes penalties and settlements, of which there were none.
In the last fiscal three years, we have not experienced any material information security breach incidences and the expenses we have incurred from information security breach incidences were immaterial. This includes penalties and settlements, of which there were none.
We developed and implemented a global partner sales organization that targets new, as well as existing, partners to enhance our partner distribution channels. These channels include retailers, telecom service providers, hardware OEMs, and employee benefit providers.
We developed and implemented a global partner sales organization that targets new, as well as existing, partners to enhance our partner distribution channels. These channels include retailers, telecom service providers, hardware OEMs, employee benefit providers, strategic partners, and small office, home offices and very small businesses.
We protect and empower consumers by providing solutions and services in two main ways: 5 Table of Contents • Comprehensive membership plans: Providing a complete Cyber Safety portfolio of solutions for a membership fee.
We protect and empower consumers by providing solutions and services in two main ways: • Comprehensive membership plans: Providing a comprehensive and all-in-one Cyber Safety portfolio of solutions for a membership fee.
We believe that continued investments in these areas, as well as our product offerings and infrastructure, will allow us to further enhance our leading brands and superior products, increase awareness of our consumer services and enhance our ability to efficiently acquire new customers. • Continue our focus on customer retention: We plan to invest in increasing customer retention by optimizing and expanding the value we provide to customers.
We believe that continued investments in these areas, as well as our product offerings and infrastructure, will allow us to further enhance our leading brands and superior products, increase awareness of our consumer services and enhance our ability to efficiently acquire new customers. • Continue our focus on customer retention: We continue to optimize and expand the value we provide to customers which we believe can positively impact retention.
Physical retail and OEM partners represent a small portion of our distribution, which minimizes the impacts of supply chain disruptions. • Freemium channel: With the acquisition of Avira, we have expanded our go-to-market with a freemium channel.
Physical retail and OEM partners represent a small portion of our distribution, which minimizes the impact of supply chain disruptions. 5 Table of Contents • Freemium channels: With the acquisition of Avast and Avira, we have expanded our go-to-market with multiple freemium channels.
Additionally, our Head of Cyber Security meets at least twice annually with the Board of Directors or the Audit Committee of the Board of Directors to brief them on technology and information security matters. We carry insurance that provides protection against the potential losses arising from a cybersecurity incident.
Additionally, our CISO attends each Technology and Cybersecurity Committee meeting and meets regularly with the Board of Directors or the Audit Committee of the Board of Directors to brief them on technology and information security matters. We carry insurance that provides protection against the potential losses arising from a cybersecurity incident.
Our competitors vary by offering, geography, and channel.
Our competitors may vary by offering, geography, business model and channel.
Revenue generally reflects similar seasonal patterns but to a lesser extent than orders because of our subscription business model and because a large portion of our in-period revenues are recognized ratably from our deferred revenue balance. Our Strategy Our strategy is focused on profitable growth, allowing consumers to experience Cyber Safety.
Revenue generally reflects similar seasonal patterns but to a lesser extent than orders because of our subscription business model, as the majority of our in-period revenues are recognized ratably from our deferred revenue balance. Our Strategy Our strategy is focused on long-term profitable growth.
Available information Our Internet home page is located at https://www.nortonlifelock.com .
Available Information Our internet home page is located at GenDigital.com .
As cyber crime becomes an intensifying threat to our world, consumers are increasingly concerned. Our annual Norton Cyber Safety Insights Report examines the impact of cyber crime and consumers’ online behaviors and concerns related to their online security, privacy and identity.
As cybercrime becomes an intensifying threat to our world, consumers are increasingly concerned. Our annual Norton Cyber Safety Insights Report examines the impact of cybercrime and consumers’ online behaviors and concerns related to their online security, privacy and identity. Our report can be found at Newsroom.GenDigital.com/2023-Norton-Cyber-Safety-Insights-Report-Special-Release-Online-Creeping .
Circumstances outside our control could pose a threat to our intellectual property rights. Effective intellectual property protection may not be available, and the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete.
Effective intellectual property protection may not be available, and the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. In addition, protecting our intellectual property rights is costly and time consuming.
We have a direct billing relationship with these customers. • Indirect partner distribution channels: We use strategic and affiliate partner distribution channels to refer prospective customers to us and expand our reach to our partners’ and affiliates’ customer bases.
Our direct subscriptions are primarily sold through our e-commerce platform and mobile apps, and we have a direct billing relationship with the majority of these customers. • Indirect partner distribution channels: We use strategic and affiliate partner distribution channels to refer prospective customers to us and expand our reach to our partners’ and affiliates’ customer bases.
Our global support team seeks to ensure the voice of the consumer is heard, and that we put our customers first.
Our global support team seeks to ensure the voice of the consumer is heard and that we put our customers first. We leverage frequent communication and feedback from our customers to continually improve our solutions and services.
Setting strategic, achievable, and business-aligned corporate responsibility objectives helps to guide our work and improves our company performance. We aligned our objectives with the company’s business goals and focused on the unique impact we can make on the world.
Setting strategic, achievable, and business-aligned corporate responsibility objectives helps to guide our work and improves our company performance. We align our objectives with the company’s financial goals and focus on the unique positive social and environmental impacts that our business model can have on the world.
Our strategy is to grow our business by investing in research and development and pursuing acquisitions, where appropriate, to expand the solutions and services we offer into new cohorts, territories and sectors.
Our strategy is to grow our business through innovation and acquisitions to expand the solutions and services we offer into new cohorts, territories and sectors.
To fuel our growth, our consumer-centric strategy is to provide a comprehensive and easy-to-use integrated platform, which we have built in-house. By combining and leveraging our entire portfolio of Norton, LifeLock, and Avira offerings, we are able to deliver an industry-leading set of Cyber Safety solutions.
To fuel our growth, our consumer-centric strategy is to provide comprehensive and easy-to-use integrated platforms, which we have built in-house or acquired. By combining and leveraging our family of trusted consumer brands, including offerings from Norton, Avast, LifeLock, Avira, AVG, Reputation Defender and CCleaner, we deliver an industry-leading set of Cyber Safety solutions.
We are committed to our innovation and research & development efforts. Norton Labs, a global team of experts, is leading the company’s future technology and helping guide the consumer cybersecurity industry.
We are committed to our innovation and research & development efforts. The Technology team at Gen is driving the company’s future technologies and innovations, and helping guide the consumer cybersecurity industry.
We maintain a global, multi-channel direct acquisition and brand marketing program. This program is designed to grow our customer base by increasing brand awareness and understanding of our products and services, and maximizing our global reach to prospective customers. We help prevent, detect and restore potential damages caused by many cyber criminals.
This program is designed to grow our customer base by increasing brand awareness and understanding of our products and services and maximizing our global reach to prospective customers. We help prevent, detect and restore potential damages caused by many cybercriminals. We also make it easy for consumers to find, buy and use our products and services.
Of the total users, we have 23 million direct customers with whom we have a direct billing relationship, and we have 30 million free users. • Direct-to-consumer channel: We use advertising and direct response marketing to elevate our brand, attract new customers, and generate significant demand for our services.
Of these total users, we have approximately 65 million paid Cyber Safety customers including over 38 million direct customers with whom we have a direct billing relationship. • Direct-to-consumer channel: We use advertising to elevate our family of brands, attract new customers and generate significant demand for our services.
Our board is invested in us; the Compensation and Leadership Development Committee of our Board of Directors oversees workforce and senior management compensation and development, and our Board of Directors is invested in our talent management strategies, culture, leadership quality development and overall engagement. • Diversity, Equity and Inclusion (DEI): Our mission is to increase our global representation of underrepresented groups at all levels (diversity), where everyone has an opportunity for development and advancement (equity) and is able to bring their whole selves to work and feel valued every day (inclusion).
Our mission is to increase our global representation of underrepresented groups at all levels (diversity), where everyone has an opportunity for development and advancement (equity) and can bring their whole selves to work and feel valued every day (inclusion).
We leverage frequent communication and feedback from our customers to continually improve our solutions and services. • Leverage our global brands to drive growth: We will work to keep building our trusted brands in markets globally as we strive to bring protection and empowerment to all consumers when it comes to their digital lives.
We embrace end-to-end customer experience and aim to continue to improve our Net Promoter Scores and overall customer satisfaction. • Leverage our global brands to drive growth: We will work to keep building our family of trusted brands in markets globally as we strive to bring protection and empowerment to all consumers when it comes to their digital lives.
Our VPN solution enhances security and online privacy by providing an encrypted data tunnel. This allows customers to securely transmit and access private information such as passwords, bank details and credit card numbers when using public Wi-Fi on PCs, Macs and mobile iOS and Android devices.
This allows customers to securely transmit and access private information, such as passwords, bank details and credit card numbers, when using public Wi-Fi on PCs, Macs and mobile iOS and Android devices. Norton Privacy Monitor Assistant is an on-demand, white glove service where our agents help our members delete personal information from Data brokers online.
We work actively in the U.S. and internationally to ensure the enforcement of copyright, trademark, trade secret, and other protections that apply to our software products and services. The term of the patents we hold is, on average, twelve years.
We protect our intellectual property rights and investments in a variety of ways to safeguard our technologies and our long-term success. We work actively in the U.S. and internationally to ensure the enforcement of copyright, trademark, trade secret and other protections that apply to our software products and services.
The user can choose to add specific premium features or upgrade to our Norton 360 integrated platform, at which point, becoming a member of our paid customer base. 4 Table of Contents Seasonality As is typical for many consumer technology companies, portions of our business are impacted by seasonality. However, we believe the net impact to our business is limited.
The user can choose to add specific premium solutions or upgrade to suites that provide security, identity, and privacy across multiple platforms and devices, thereby becoming a paid customer. Seasonality As is typical for many consumer technology companies, portions of our business are impacted by seasonality. However, we believe the net impact on our business is limited.
For more information on the risks associated with our intellectual property, please see “Risk Factors” in Item 1A included in this Annual Report on Form 10-K.
Those companies may request license agreements, threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights. For more information on the risks associated with our intellectual property, please see “Risk Factors” in Item 1A included in this Annual Report on Form 10-K.
This mission is built upon four foundational pillars: (1) measurement and accountability; (2) fostering an inclusive environment; (3) diversifying our workforce; and (4) employee development and retention, which are designed to support our ability to attract, retain and develop the best talent in cybersecurity. 8 Table of Contents Diversifying our workforce was a strategic talent goal for fiscal year 2021, and we have made progress in increasing representation.
This mission is built upon four foundational pillars: (1) measurement and accountability; (2) fostering an inclusive environment; (3) diversifying our workforce; and (4) employee development and retention, which are designed to support, attract, retain and nurture our talent. Clear and actionable multi-year representation goals are set at the leadership level to support accountability and progress, against our goals.
We regularly perform evaluations of our security program and continue to invest in our capabilities to keep customers, employees, and critical assets safe. Our Head of Cyber Security is ultimately responsible for our cybersecurity program, which includes the implementation of controls aligned with industry guidelines and applicable statutes and regulations to identify threats, detect attacks, and protect these information assets.
Our Chief Information Security Officer (CISO) leads our cybersecurity program, which includes the implementation of controls aligned with industry guidelines and applicable statutes and regulations to identify threats, detect attacks and protect these information assets.
In addition, protecting our intellectual property rights is costly and time consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.
Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results. In addition, a large number of patents, copyrights and trademarks are owned by other companies in the technology industry.
The Technology and Cybersecurity Committee is comprised entirely of independent directors, two of whom have significant work experience related to information security issues or oversight. Management will report security 9 Table of Contents instances to the committee as they occur, if material, and will provide a summary multiple times per year to the Committee.
Management will report security instances to the Technology and Cybersecurity Committee as they occur, if material, and will provide a summary multiple times per year to the Technology and Cybersecurity Committee.
In support of our Diversifying our Workforce pillar, we became approved as a Work180 partner company, a women-focused recruitment site that only lists career opportunities from employers that support diversity, inclusion, and flexibility. In addition to WORK180, we post positions on several diverse recruiting sites, including Black Tech Jobs, Jobs for Her, and Women Who Code.
We partner with Work180, a women-focused recruitment site that only lists career opportunities from employers that support diversity, inclusion and flexibility. We post positions on several diverse recruiting sites and have dedicated budget to support increasing diverse candidate pipelines.
In addition, employees participate in ongoing mandatory annual trainings and receive communications regarding the cybersecurity environment to increase awareness throughout the firm. We also implement enhanced annual trainings for specific specialized employee populations, including secure coding training.
In addition, employees participate in an ongoing program of mandatory annual training and receive communications regarding the cybersecurity environment to increase awareness throughout the company.
We aim to continue to increase customer engagements through actionable alerts, education on timely topics, and introducing new product capabilities. We plan to also continue investing in enhancing both desktop and mobile customer experiences throughout a customer’s journey with NortonLifeLock, from purchase, to onboarding and beyond.
We aim to continue to increase customer engagements through actionable alerts, education on timely topics and introducing new product capabilities.
We also have a global threat response and security technology organization that is made up of leading threat and security researchers, supported by advanced systems to innovate security technology and threat intelligence. Industry Overview & Market Opportunity Cyber Safety is a growing market, fueled by the increase in activities online over the years, as well as the years ahead.
Industry Overview Cyber Safety is a growing market, fueled by the increase in activities online over the years as well as the years ahead. The core markets that we participate in are security, identity and privacy.
Recently, our Board of Directors established a Technology and Cybersecurity Committee of the Board with direct oversight to the Company’s (1) technology strategy, initiatives and investments and (2) key cybersecurity information technology risks against both internal and external threats.
We also implemented an enhanced annual training program for specific specialized employee populations, including secure coding training. 11 Table of Contents The Technology and Cybersecurity Committee of the Board has direct oversight to the Company’s (1) technology strategy, initiatives and investments and (2) key cybersecurity information technology risks against both internal and external threats.
We believe we compete favorably with our competitors on the strength of our technology, people, product offerings, and integration across all of the key Cyber Safety categories. However, some of our competitors have substantially greater financial, technical, marketing, distribution, and other resources than we possess that afford them competitive advantages.
We believe we compete favorably with our competitors on the strength of our technology, people, product offerings and presence in all of the current key Cyber Safety categories.
Almost every aspect of a person’s life has a digital component. Unfortunately, many of those activities are left unprotected, and attackers are exploiting this larger opportunity and the inherent security and privacy vulnerabilities. Cyber criminals have not only expanded their reach, but the sophistication of digital threats and attacks are becoming increasingly more consumer-related.
Consumer demands and behaviors are rapidly changing and driving more activities online, from shopping, socializing, working, banking, to other activities in healthcare, entertainment and so much more. Almost every aspect of a person’s life has a digital component. Unfortunately, many of those activities are left unprotected, and attackers are exploiting this larger opportunity and the inherent security and privacy vulnerabilities.
Intellectual Property We are a leader amongst Cyber Safety solutions for consumers in pursuing patents and currently have a portfolio of over 1,000 U.S. and international patents issued with many pending. We protect our intellectual property rights and investments in a variety of ways to safeguard our technologies and our long-term success.
Intellectual Property Our intellectual property is an important and vital asset that enables us to develop, market, and sell our software products and services and enhance our competitive position. We are a leader among consumer Cyber Safety solutions in pursuing patents and currently have a portfolio of over 1,000 U.S. and international patents issued with many pending.
The core markets that we participate in are security, identity, and privacy. We believe the Cyber Safety market will continue to expand beyond these core markets and grow significantly – driven by the growing number of people connected to the Internet who have a digital life.
We believe the Cyber Safety market will continue to expand beyond these core markets and grow significantly, driven by the growing number of people globally connected to the internet and their expanding digital lives. The cyber threat landscape is larger and more complicated than ever before, exposing consumers to an increased risk to their digital lives.
In the event of identity theft, we assign an Identity Restoration Specialist to work directly with customers to help restore their identities. Customers are further protected by our Million Dollar Protection Package, which provides reimbursement for stolen funds and coverage for personal expenses.
In the event of identity theft, we assign an Identity Restoration Specialist to work directly with customers to help restore their identities. Norton Dark Web Monitoring looks for personal information of our LifeLock, Norton 360 and Norton Identity Advisor Plus members on the Dark Web. Avast Secure Identity provides advanced identity protection including credit monitoring and alerts.
Our principal competitors are set forth below: • Security: Our principal competitors in this market are Avast, Kaspersky, McAfee, Microsoft, Bitdefender, and Trend Micro. 7 Table of Contents • Identity Protection: Our principal competitors in this market are credit bureaus Equifax, Experian, and TransUnion, as well as certain credit monitoring and identity theft protection solutions from others such as Allstate, and Credit Karma. • Online Privacy: Our principal competitors in this market are Avast, Kape, ExpressVPN, NordVPN, and Pango. • Other Competitors: In addition to competition from large consumer security companies such as Avast and McAfee, we also face competition from smaller companies that may develop competing products, emerging competition from ISPs, operating systems, insurance companies, and financial service organization.
Our principal competitors are set forth below: 8 Table of Contents • Security: Our principal competitors in this segment include Apple, Bitdefender, Google, Kaspersky, McAfee, Microsoft, Trend Micro, Webroot, Malwarebytes and F-Secure. • Identity Protection: Our principal competitors in this segment include credit bureaus such as Equifax, Experian and TransUnion, as well as certain credit monitoring and identity theft protection solutions from others such as Allstate, Generali (Iris), Aura and Intuit (Credit Karma). • Online Privacy: Our principal competitors in this segment include Apple, Aura, Kape, Nord Security, IPVanish, Mozilla, Brave, and DuckDuckGo. • Other Competitors: In addition to competition from independent software vendors such as Bitdefender, Kaspersky, McAfee and Trend Micro, and from OS providers such as Apple, Google and Microsoft, we also face competition from other companies that currently focus on one or a few Cyber Safety or adjacent segments but are developing additional competing products and expanding their portfolios into new segments, such as ‘pure play’ companies such as Life360, Bark, Dashlane, LastPass, internet service providers, big tech platform providers, insurance companies and financial service organizations.
We are invested in providing a productive, supportive, and inclusive environment for our teams with a focus on learning and development across all levels where flexibility and choice are guiding principles. • Human Capital Governance: We partner closely with our Board of Directors and the Compensation and Leadership Development Committee on our strategies and objectives related to talent management, talent acquisition, leadership development, retention and succession, DEI, and employee engagement.
Our commitment to overall health and wellness are centered around having an integrated and equitable wellness program that supports body, mind and financial health. • Human Capital Governance: We partner closely with our Board of Directors and the Compensation and Leadership Development Committee on executive compensation, our broader reward strategies and objectives related to talent management, talent acquisition, leadership development, retention and succession, DEI and employee engagement.
Our success in helping achieve this mission depends, in a large part, on the success of our employees.
Our success in helping achieve this mission depends, in large part, on the success of our employees. • General Employee Demographics: As of March 31, 2023, we employed just under 3,700 employees in nearly 30 countries worldwide.
According to our most recent research, Norton has 89% global brand awareness. We are also the best positioned brand in device security and #1 top of mind brand in consumer Cyber Safety, according to the 2020 NortonLifeLock Brand Impact study.
According to our most recent research, Norton has 84% global brand awareness, and we are best positioned and number one top of mind in consumer Cyber Safety, according to the 2022 Gen Brand Impact study. 6 Table of Contents Our Cyber Safety Solutions and Services Our broad portfolio of products and services is developed from consumer insights to help us bring to market real solutions to real problems and to engage and educate consumers about Cyber Safety.
The cyber threat landscape is larger and more complicated than ever before, exposing consumers to an increased risk to their digital lives. The digitization of the world and the overlap between the physical and digital world is growing at a fast pace.
The digitization of the world and the overlap between the physical and digital world is growing at a fast pace. New technologies, smart devices, digital identities and an increasingly more connected world means consumers will encounter a range of new Cyber Safety challenges.
For more information on the risks associated with our competitors, please see “Risk Factors” in Item 1A included in this Annual Report on Form 10-K.
For more information on the risks associated with our competitors, please see “Risk Factors” – Risks Related to Our Business Strategy and Industry – “We operate in a highly competitive and dynamic environment, and if we are unable to compete effectively, we could experience a loss in market share and a reduction in revenue” and “We may need to change our pricing models to compete successfully,” in Item 1A included in this Annual Report on Form 10-K.
None of our U.S. employees are represented by a labor union or covered by a collective bargaining agreement. We are focused on attracting, developing, rewarding and retaining a diverse global team.
With dual headquarters in Tempe, Arizona, and in Prague, Czech Republic, we have over 1,100 active employees located in the U.S. and nearly 900 active employees in the Czech Republic. None of our U.S. employees are represented by a labor union or covered by a collective bargaining agreement.
Our Home Title Protect product detects fraud and notifies members if we find changes made to their Home Title. If a member becomes a victim of identity theft, we provide a dedicated Identity Restoration Specialist to work with the customer until their case is closed.
LifeLock Home Title Protect detects fraud and notifies members if we find changes made to their Home Title.
We strive to be a diverse, vibrant community with strong values and a shared commitment to each other, the work we do, and the world we all share. • General Employee Demographics: As of April 2, 2021, we employed more than 2,800 employees in 26 countries worldwide, 1,216 in the U.S. and 1,592 in the rest of world.
In addition, as of March 31, 2023, women represented 40% of our Board of Directors and half of our independent board membership. • Diversity, Equity and Inclusion (DEI): We strive to be a diverse, vibrant community with strong values and a shared commitment to our customers, to each other, the work we do and the world we all share.
Most of our subscriptions are sold on either annual or monthly terms. As of April 2, 2021, we have nearly 80 million total users, which come from direct, indirect, and freemium channels.
To this end, we offer both free and paid subscription-based Cyber Safety solutions primarily direct-to-consumer through our family of brands and indirectly through partner relationships. Most of our subscriptions are offered on annual terms, but we also provide monthly subscriptions. As of March 31, 2023, we have approximately 500 million total users, which come from direct, indirect and freemium channels.
We maintain the Norton 360 platform, with multiple tiers of membership, and we are actively engaging with customers of standalone products to move them into a Norton 360 membership. We also believe a substantial opportunity exists to increase the penetration of our premium-level consumer solutions.
We maintain the Norton 360 and Avast One platforms that have multiple tiers of membership, and we continue to engage customers with standalone products to offer membership options and show the value proposition of our premium solutions.
Cyber crime, and the ways in which cyber criminals target consumers, continue to evolve along with behaviors and technology.
Cybercriminals have not only expanded their reach, but the sophistication of digital threats and attacks are becoming increasingly more consumer-related. Cybercrime, and the ways in which cybercriminals target consumers, continue to evolve along with behaviors and technology.
As part of ongoing focus on employee and development, we have participated in McKinsey & Company’s Black Leadership Academy since November 2020 to help accelerate the progression of Black leaders in the company.
Over 200 participants have enrolled in this program to date. 10 Table of Contents As part of our ongoing focus on diverse employee development, we continue to extend our participation in McKinsey & Company’s Connected Leaders Academy for our Asian, Black and Hispanic-Latino leaders.
Our objectives include: • Data Privacy and Protection: Raise awareness of NortonLifeLock as a privacy leader. • Education and Training for Cyber Safety: Leverage NortonLifeLock’s leading expertise and technology in Cyber Safety to protect communities. • Diversity, Equity & Inclusion: Invest in high-impact nonprofits to bring more women and under-represented groups into cybersecurity and tech. • Volunteering & Giving: Drive opportunities for employee volunteering and giving and increase employee participation rate. • Environmental Stewardship: Establish NortonLifeLock as an environmentally responsible business.
We also provide Cyber Safety training to help empower victims and survivors to reduce their vulnerability. • Diversity, Equity & Inclusion in Technology: We invest in high-impact non-profits to bring more women and under-represented groups into cybersecurity and technology. • Environment: Our goal is to establish Gen as an environmentally responsible business.
ITEM 1. Business Vision & Mission Our vision is to protect and empower people to live their digital lives safely. Our mission is to build a comprehensive and easy-to-use integrated portfolio that prevents, detects, and responds to cyber threats and cyber crimes in today’s digital world.
Risk Factors and elsewhere in this Annual Report on Form 10-K. Our annual ESG and Corporate Responsibility Report can be found at Investor.GenDigital.com/ESG . Human Capital Management At Gen, our mission is to build a comprehensive and easy-to-use integrated portfolio that prevents, detects and responds to cyber threats and cybercrimes in today’s digital world.
Our Values Protecting people is what inspires us, and our people are at the core of what we do.
ITEM 1. Business Purpose and Mission Purpose: Powering Digital Freedom. Mission: We create technology solutions for people to take full advantage of the digital world, safely, privately, and confidently so together, we can build a better tomorrow. Our Values Protecting people is what inspires us, and our people are at the core of what we do.
We aim to build long-term relationships with our customers, and to provide our customers with the peace of mind and confidence they need to protect their digital lives. • Increase sales to existing customers: We believe strong customer satisfaction will provide us with the opportunity to engage customers in new services offerings.
We plan to also continue investing in enhancing both desktop and mobile customer experiences throughout a customer’s journey with Gen, from purchase, to onboarding and beyond. • Increase value to existing customers: We believe strong customer satisfaction will provide us with the opportunity to engage customers in new services offerings.
They monitor and block unauthorized traffic from the internet to the device to help protect private and sensitive information when customers are online. For mobile devices, Norton 360 for Mobile alerts customers of risky apps, safeguards against fraudulent and malicious websites, identifies Wi-Fi networks that are under attack, enables stolen device recovery, and blocks unwanted spam and potential fraud calls.
These offerings monitor and block unauthorized traffic from the internet to the device to help protect private and sensitive information when customers are online.
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We seek to attract talent that embraces the following values: • Advocate: think consumer first – ensure the customer’s voice is heard and consider how our actions benefit our customers’ digital lives. • Be Empowered: own it – take initiative to lead and speak up when we see an opportunity to delight our customers or improve the business, regardless of job title. • Communicate: be open and authentic – being true to ourselves and our mission; we build cross-functional and inclusive connections to stay aligned and move faster, and we operate with integrity. • Execute - smart and scrappy: be a leader, quick to adapt, willing to take risks and put yourself out there; be agile in adapting to meet new challenges and continue a constant learning journey. • Win Together: innovate and grow – welcome diverse perspectives and seek and act on feedback; champion the unique value of every individual; diversity fuels innovation.
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We seek to attract talent that embraces the following values: • Customer Driven. Community Minded. We are advocates for our customers and are dedicated to making their lives simpler and safer. We are driven by the positive impact we can have on all the communities in which we live and work. • Think Big. Be Bold.
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Company Overview NortonLifeLock has the largest Consumer Cyber Safety platform in the world, empowering nearly 80 million users in more than 150 countries. Our business is built around consumers, we are the trusted and number one top of mind brand in consumer Cyber Safety, according to the 2020 NortonLifeLock brand tracking study.
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We empower and inspire one another to think in new ways and to embrace change. We take calculated risks and learn fast to drive innovation across the business. • Keep it real. Make it Happen. We are authentic, open, and treat one another with respect.
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Today’s world is increasingly digital, and this digital world has changed the way we live our lives every day. Between the massive shift to working and learning from home, and the ever-growing utility and opportunities to play and transact online, people’s digital lives have become the norm.
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We do what we say and say what we do with integrity. • Play to win. Together. We act with passion, purpose, and energy to win with customers and in the marketplace. We leverage the strength of our global team, knowing we’re more powerful together. Company Overview On September 12, 2022, we completed the merger with Avast (the Merger).
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With each new digital interaction comes increased risk for consumers, as cyber criminals look to take advantage of this accelerating trend. This is why we view ourselves as a trusted ally for our customers in a complex digital world and are committed to advancing our mission of protecting each element of their digital lives.
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In connection with the Merger, effective November 7, 2022, we changed our company name from NortonLifeLock, Inc. to Gen Digital, Inc. (Gen). The Merger accelerated our transformation of consumer Cyber Safety, and increased our user reach and geographic footprint globally.
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We also make it easy for consumers to find, buy and use our products and services. To this end, we sell subscription-based Cyber Safety solutions primarily direct-to-consumer through our Norton and Avira websites, and indirectly through partner relationships with retailers, telecom service providers, hardware original equipment manufacturers (OEMs), and employee benefit providers.
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The combined strengths of Gen created a broader and complementary product portfolio that spans beyond core security, into identity and privacy, and towards adjacent trust-based solutions. Gen is a global company powering Digital Freedom with a family of trusted brands including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender and CCleaner.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously, fraud, or security attacks.
For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, fraud, security attacks, or capacity constraints due to an overwhelming number of users accessing our websites simultaneously.
If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected. Additionally, we must continually address the challenges of dynamic and accelerating market trends and competitive developments. Customers may require features and capabilities that our current solutions do not have.
If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected. We must continually address the challenges of dynamic and accelerating market trends and competitive developments. Customers may require features and capabilities that our current solutions do not have.
In addition to competing with these vendors directly for sales to end-users of our solutions, we compete with them for the opportunity to have our solutions bundled with the offerings of our strategic partners, such as computer hardware original equipment manufacturers (OEMs) and internet service providers (ISPs) and operating systems.
In addition to competing with these vendors directly for sales to end-users of our solutions, we compete with them for the opportunity to have our solutions bundled with the offerings of our strategic partners, such as computer hardware original equipment manufacturers (OEMs), internet service providers (ISPs), operating systems and telecom service providers.
As a result, we are dependent on Broadcom for services and technology that are critical to our Norton business, and if Broadcom fails to deliver these Engine-Related Services it would result in significant business disruption, and our business and operating results and financial condition could be materially and adversely affected.
As a result, we are dependent on Broadcom for services and technology that are critical to our business, and if Broadcom fails to deliver these Engine-Related Services it would result in significant business disruption, and our business and operating results and financial condition could be materially and adversely affected.
If the ultimate determination of our taxes owed in any of these jurisdictions is for an amount in excess of the tax provision we have recorded or reserved for, our operating results, cash flows, and financial condition could be adversely affected.
If the ultimate determination of our taxes owed in any of these jurisdictions is for an amount in excess of the tax provision we have recorded or reserved for, our operating results, cash flows, and financial condition could be materially and adversely affected.
A portion of our revenues is derived from sales through indirect channels, including, but not limited to, distributors that sell our products to end-users and other resellers, and OEM partners that incorporate our products into, or bundle our products with, their products.
A portion of our revenues is derived from sales through indirect channels, including, but not limited to, distributors that sell our products to end-users and other resellers, and partners that incorporate our products into, or bundle our products with, their products.
Additionally, third parties with whom we work, such as vendors or developers, may violate applicable laws or our policies and such violations can place personal information of our customers at risk.
Additionally, third parties with whom we work, such as vendors or developers, may violate applicable laws or our policies and such violations can place the personal information of our customers at risk.
The personal information we process is subject to an increasing number of federal, state, local, and foreign laws regarding privacy and data security, as well as contractual commitments.
The confidential and personal information we process is subject to an increasing number of federal, state, local, and foreign laws regarding privacy and data security, as well as contractual commitments.
Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data.
Additionally, the Federal Trade Commission (the FTC) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data.
Declining customer retention rates could cause our revenue to may grow more slowly than expected or decline; and our operating results, gross margins and business will be harmed.
Declining customer retention rates could cause our revenue to grow more slowly than expected or decline, and our operating results, gross margins and business will be harmed.
Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose customer data or experience material adverse interruptions to our operations or delivery of solutions to our clients in a disaster recovery scenario.
Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose customer data or personal information, or experience material adverse interruptions to our operations or delivery of solutions to our clients in a disaster recovery scenario.
These channels involve a number of risks, including: • Our resellers, distributors and OEMs are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers; • Our reseller and distributor agreements are generally nonexclusive and may be terminated at any time without cause and our OEM partners may terminate or renegotiate their arrangements with us and new terms may be less favorable due to competitive conditions in our markets and other factors; • Our resellers, distributors and OEMs may encounter issues or have violations of applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions; • Our resellers and distributors frequently market and distribute competing solutions and may, from time to time, place greater emphasis on the sale of these competing solutions due to pricing, promotions, and other terms offered by our competitors; • Any consolidation of electronics retailers can increase their negotiating power with respect to software providers such as us and any decline in the number of physical retailers could decrease the channels of distribution for us; • The continued consolidation of online sales through a small number of larger channels has been increasing, which could reduce the channels available for online distribution of our solutions; and • Sales through our partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in a reduction of sales, or cause our partners to suffer financial difficulty which could delay payments to us, affecting our operating results.
These channels involve risks, including: • Our resellers, distributors and telecom service providers are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers; • Our reseller and distributor agreements are generally nonexclusive and may be terminated at any time without cause and our partners may terminate or renegotiate their arrangements with us and new terms may be less favorable due to competitive conditions in our markets and other factors; • Our resellers, distributors and OEMs may encounter issues or have violations of applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions; • Our resellers and distributors frequently market and distribute competing solutions and may, from time to time, place greater emphasis on the sale of competing solutions due to pricing, promotions, and other terms offered by our competitors; • Any consolidation of electronics retailers can increase their negotiating power with respect to software providers such as us and any decline in the number of physical retailers could decrease the channels of distribution for us; • The consolidation of online sales through a small number of larger channels has been increasing, which could reduce the channels available for online distribution of our solutions; and • Sales through our partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in fewer sales, or cause our partners to suffer financial difficulty which could delay payments to us, affecting our operating results.
Despite our precautions and significant ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional disruptions of our solutions, we expect to be an ongoing target of attacks specifically designed to impede the performance and availability of our offerings and harm our reputation as a leading cyber security company.
Despite our precautions and significant ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional disruptions of our solutions, we expect to continue to be a target of attacks specifically designed to impede the performance and availability of our offerings and harm our reputation as a leading cyber security company.
Our endpoint security solution has historically relied upon certain threat analytics software engines and other software (the Engine-Related Services) that have been developed and provided by engineering teams that have transferred to Broadcom as part of the Broadcom sale.
Our Norton branded endpoint security solution has historically relied upon certain threat analytics software engines and other software (the Engine-Related Services) that have been developed and provided by engineering teams that have transferred to Broadcom as part of the Broadcom sale.
The expense of initiating and defending, and in some cases settling, such litigation may be costly and divert management’s attention from the day-to-day operations of our business, which could have a materially adverse effect on our business, results of operations, and cash flows.
The expense of initiating and defending, and in some cases settling, such matters may be costly and divert management’s attention from the day-to-day operations of our business, which could have a materially adverse effect on our business, results of operations, and cash flows.
Our international operations are subject to risks in addition to those faced by our domestic operations, including: • Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced; 14 Table of Contents • Requirements of foreign laws and other governmental controls, including tariffs, trade barriers and labor restrictions, and related laws that reduce the flexibility of our business operations; • Potential changes in trade relations arising from policy initiatives or other political factors; • Regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications; • Local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations; • Central bank and other restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash in international subsidiaries into cash available for use in the U.S.; • Fluctuations in currency exchange rates, economic instability, and inflationary conditions could make our solutions more expensive or could increase our costs of doing business in certain countries; • Limitations on future growth or inability to maintain current levels of revenues from international sales if we do not invest sufficiently in our international operations; • Difficulties in staffing, managing, and operating our international operations; • Difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations; • Costs and delays associated with developing software and providing support in multiple languages; and • Political unrest, war, or terrorism, or regional natural disasters, particularly in areas in which we have facilities.
Our international operations are subject to risks in addition to those faced by our domestic operations, including: • Difficulties staffing, managing, and coordinating the activities of our geographically dispersed and culturally diverse operations; • Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced; • Requirements of foreign laws and other governmental controls, including tariffs, trade barriers and labor restrictions, and related laws that reduce the flexibility of our business operations; • Fluctuations in currency exchange rates, economic instability, and inflationary conditions could make our solutions more expensive or could increase our costs of doing business in certain countries; • Potential changes in trade relations arising from policy initiatives or other political factors; • Regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications; • Local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations; • Central bank and other restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash in international subsidiaries into cash available for use in the United States; • Limitations on future growth or inability to maintain current levels of revenues from international sales if we do not invest sufficiently in our international operations; • Difficulties in staffing, managing, and operating our international operations; • Costs and delays associated with developing software and providing support in multiple languages; • Political, social or economic unrest, war, or terrorism, regional natural disasters, or export controls and trade restrictions, particularly in areas in which we have facilities; and • Multiple and possibly overlapping tax regimes.
LifeLock has previously entered into consent decrees and similar arrangements with the FTC and the attorney generals of 35 states as well as a settlement with the FTC relating to allegations that certain of LifeLock’s advertising, marketing and security practices constituted deceptive acts or practices in violation of the FTC Act, which impose additional restrictions on our business, including prohibitions against making any misrepresentation of “the means, methods, procedures, effects, effectiveness, coverage, or scope of” our solutions.
We have previously entered into consent decrees and similar arrangements with the FTC and the attorney generals of 35 states as well as a settlement with the FTC relating to allegations that certain of LifeLock’s advertising, marketing and security practices constituted deceptive acts or practices in violation of the FTC Act, which impose additional restrictions on our business, including prohibitions against making any misrepresentation of “the means, methods, procedures, effects, effectiveness, coverage, or scope of” our solutions.
Numerous factors, however, may impede our ability to retain and convert these users into paying customers. If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.
Numerous factors, however, may impede our ability to attract free users, convert these users into paying customers and retain them. If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.
Our solutions are subject to a high degree of regulation, including a wide variety of federal, state, and local laws and regulations, such as the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act (FTC Act), and comparable state laws that are patterned after the FTC Act.
Our solutions are subject to a high degree of regulation, including a wide variety of international and U.S. federal, state, and local laws and regulations, such as the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act (the FTC Act), and comparable state laws that are patterned after the FTC Act.
Global privacy and data protection legislation, enforcement, and policy activity are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction. We may be or become subject to data localization laws mandating that data collected in a foreign country be processed and stored only within that country.
Global privacy and data protection legislation and enforcement are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction. We may be or become subject to data localization laws mandating that data collected in a foreign country be processed and stored only or primarily within that country.
These activities can involve a number of risks and challenges, including: • Complexity, time, and costs associated with managing these transactions, including the integration of acquired and the winding down of divested business operations, workforce, products, IT systems, and technologies; • Challenges in retaining customers of acquired businesses, or providing the same level of service to existing customers with reduced resources; • Diversion of management time and attention; • Loss or termination of employees, including costs associated with the termination or replacement of those employees; • Assumption of liabilities of the acquired and divested business or assets, including pending or future litigation, investigations or claims related to the acquired business or assets; • The addition of acquisition-related debt; • Difficulty in entering into or expanding in new markets or geographies; • Increased or unexpected costs and working capital requirements; • Dilution of stock ownership of existing stockholders; • Unanticipated delays or failure to meet contractual obligations; • Substantial accounting charges for acquisition-related costs, asset impairments, amortization of intangible assets, and higher levels of stock-based compensation expense; and • Dif ficulty in realizing potential benefits, including cost savings and operational efficiencies, synergies and growth prospects from integrating acquired businesses.
These activities have and may continue to involve a number of risks and challenges, including: • Complexity, time and costs associated with managing these transactions, including the integration of acquired and the winding down of divested business operations, workforce, products, IT systems and technologies; • Challenges in retaining customers of acquired businesses, or providing the same level of service to existing customers with reduced resources; • Diversion of management time and attention; 13 Table of Contents • Loss or termination of employees, including costs associated with the termination or replacement of those employees; • Assumption of liabilities of the acquired and divested business or assets, including pending or future litigation, investigations or claims related to the acquired business or assets; • Addition of acquisition-related debt; • Difficulty in entering into or expanding in new markets or geographies; • Increased or unexpected costs and working capital requirements; • Dilution of stock ownership of existing stockholders; • Ongoing contractual obligations and unanticipated delays or failure to meet contractual obligations; • Substantial accounting charges for acquisition-related costs, asset impairments, amortization of intangible assets and higher levels of stock-based compensation expense; and • Difficulty in realizing potential benefits, including cost savings and operational efficiencies, synergies and growth prospects from integrating acquired businesses.
If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and, to the extent such indebtedness is secured in the future, proceed against any collateral securing that indebtedness.
If a default occurs, the relevant lenders could declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and, to the extent such indebtedness is secured, proceed against any collateral securing that indebtedness.
Our ability to meet expenses, remain in compliance with the covenants under our debt instruments, pay interest, and repay principal for our substantial level of indebtedness depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by financial, business, economic, and other factors.
Our ability to meet expenses, comply with the covenants under our debt instruments, pay interest and repay principal for our substantial level of indebtedness depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by financial, business, economic and other factors.
Because of constant technological change in the segments in which we compete, the 17 Table of Contents extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow.
Because of constant technological change in the segments in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow.
For example, the European Union General Data Protection Regulation imposes more stringent data protection requirements and provides for greater penalties for noncompliance of up to the greater of €20 million or four percent of our worldwide annual revenues. Data protection legislation is also becoming increasingly common in the U.S. at both the federal and state level.
For example, the European Union General Data Protection Regulation imposes more stringent data protection requirements and provides for greater penalties for noncompliance of up to the greater of €20 million or four percent of our worldwide annual revenues. Data protection legislation is also increasing in the U.S. at both the federal and state level.
Negative publicity regarding our brand, solutions and business could harm our competitive position. 15 Table of Contents Our brand recognition and reputation as a trusted service provider are critical aspects of our business and key to retaining existing customers and attracting new customers.
Negative publicity regarding our brand, solutions and business could harm our competitive position. Our brand recognition and reputation as a trusted service provider are critical aspects of our business and key to retaining existing customers and attracting new customers.
Such attempts are increasing in number and in technical sophistication, and if successful could expose us and the affected parties, to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations.
Such attempts are increasing in number and in technical sophistication, and could expose us and the affected parties, to risk of loss or misuse of proprietary, personal or confidential information or disruptions of our business operations.
Several recent, highly publicized data security breaches, including a large-scale attack on SolarWinds customers by a foreign nation state actor and a significant uptick in ransomware/extortion attacks at other companies have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our strategic partners or enterprise customers.
Several recent, highly publicized data security breaches, including large-scale attacks by foreign nation state actors and a significant uptick in ransomware/extortion attacks at other companies, have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our strategic partners or enterprise customers.
If our competitors offer deep discounts on certain solutions or provide offerings, or offer free introductory products (freemium products) that compete with ours, we may need to lower prices or offer similar freemium products in order to compete successfully.
If our competitors offer deep discounts on certain solutions or provide offerings, or offer free introductory products that compete with ours, we may need to lower prices or offer similar free introductory products to compete successfully.
The burdens imposed by the CCPA, CPRA and other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices and policies, adapt our goods and services and incur substantial expenditures in order to comply.
The burdens imposed by the new state privacy laws and other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices and policies, adapt our goods and services and incur substantial expenditures in order to comply.
RISKS RELATED TO OUR BUSINESS STRATEGY AND INDUSTRY If we are unable to develop new and enhanced solutions, or if we are unable to continually improve the performance, features, and reliability of our existing solutions, our business and operating results could be adversely affected.
Item 1A. Risk Factors RISKS RELATED TO OUR BUSINESS STRATEGY AND INDUSTRY If we are unable to develop new and enhanced solutions, or if we are unable to continually improve the performance, features, and reliability of our existing solutions, our business and operating results could be adversely affected.
Our solutions are highly regulated, which could impede our ability to market and provide our solutions or adversely affect our business, financial position, and results of operations.
LEGAL AND COMPLIANCE RISKS Our solutions are highly regulated, which could impede our ability to market and provide our solutions or adversely affect our business, financial position, and results of operations.
A disruption or failure of these systems or operations because of a disaster, cyber-attack or other business continuity event, such as the COVID-19 pandemic, could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers.
A disruption or failure of these systems or operations because of a disaster, cyberattack or other business continuity event, such as a pandemic, could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers.
All of these covenants may adversely affect our ability to finance our operations, meet or otherwise address our capital needs, pursue business opportunities, react to market conditions, or otherwise restrict activities or business plans. A breach of any of these covenants could result in a default in respect of the related indebtedness.
These covenants may adversely affect our ability to finance our operations, meet or otherwise address our capital needs, pursue business opportunities, react to market conditions, or may otherwise restrict activities or business plans. A breach of any of these covenants could result in a default.
We collect, use, process, store, transmit or disclose (collectively, process) an increasingly large amount of confidential information, including personally identifiable information, credit card information and other critical data from employees and customers, in connection with the operation of our business, particularly in relation to our identity and information protection offerings.
We collect, use, process, store, transmit or disclose (collectively, process) an increasingly large amount of confidential information, including personal information (which includes credit card information and other critical data from employees and customers), in connection with the operation of our business, particularly in relation to our identity and information protection service offerings.
Our competitors could gain market share from us if any of these strategic partners replace our solutions with those of our competitors or if these partners more actively promote our competitors’ solutions than our own.
Our competitors could gain market share from us if any of these strategic partners replace our solutions with those of our competitors or with their own solutions. Similarly, they could gain market share from us if these partners promote our competitors’ solutions or their own solutions more than our solutions.
The occurrence of a natural disaster, an act of terrorism, a pandemic, and similar events could result in a decision to close the facilities without adequate notice or other unanticipated problems, which in turn, could result in lengthy interruptions in the delivery of our products and services, which could negatively impact our sales and operating results.
The occurrence of a natural disaster, an act of terrorism state-sponsored attacks, a pandemic, geopolitical tensions or armed conflicts, and similar events could result in a decision to close the facilities without adequate notice or other unanticipated problems, which in turn, could result in lengthy interruptions in the delivery of our products and services, which could negatively impact our sales and operating results.
Our term loan and revolving credit facility agreement contain covenants that limit our ability and the ability of our restricted subsidiaries to: • Incur additional debt; • Create liens on certain assets to secure debt; • Enter into certain sale and leaseback transactions; • Pay dividends on or make other distributions in respect of our capital stock or make other restricted payments; and • Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.
Our Amended and Restated Credit Agreement contains covenants that limit our ability and the ability of our restricted subsidiaries to: • Incur additional debt; • Create liens on certain assets to secure debt; • Enter into certain sale and leaseback transactions; • Pay dividends on or make other distributions in respect of our capital stock or make other restricted payments; and • Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.
Similarly, if external factors require us to raise our prices, our ability to acquire new customers and retain existing customers may be diminished. Any such changes may reduce revenue and margins and could adversely affect our financial results. Additionally, our business may be affected by changes in the macroeconomic environment.
Similarly, if external factors, such as economic conditions, market trends, or business combinations require us to raise our prices, our ability to acquire new customers and retain existing customers may be diminished. Any such changes may reduce revenue and margins and could adversely affect our financial results. Additionally, our business may be affected by changes in the macroeconomic environment.
We derive a portion of our revenues from customers located outside of the U.S., and we have significant operations outside of the U.S., including engineering, finance, sales and customer support.
Following the Merger with Avast, we derive a significant portion of our revenues from customers located outside of the U.S., and we have substantial operations outside of the U.S., including engineering, finance, sales and customer support.
Our solutions are discretionary purchases, and customers may reduce or eliminate their discretionary spending on our solutions during a difficult 11 Table of Contents macroeconomic environment.
Our solutions are discretionary purchases, and customers may reduce or eliminate their discretionary spending on our solutions during a difficult macroeconomic environment.
We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source, but we cannot be sure that all open source is submitted for approval prior to use in our products.
We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source. However, we cannot be sure that all open source, including open source that incorporates or relies on generative AI, is submitted for approval prior to use in our products.
Our level of indebtedness could have other important consequences, including the following : • We must use a substantial portion of our cash flow from operations to pay interest and principal on the term loans and revolving credit facility, our existing senior notes, and other indebtedness, which reduces funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, and potential acquisitions; • We may be unable to refinance our indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes; • We are exposed to fluctuations in interest rates because borrowings under our senior secured credit facilities bear interest at variable rates; • Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions; • We may be more vulnerable to an economic downturn or recession and adverse developments in our business; • We may be unable to comply with financial and other covenants in our debt agreements, which could result in an event of default that, if not cured or waived, may result in acceleration of certain of our debt and would have an adverse effect on our business and prospects and could force us into bankruptcy or liquidation; • Changes by any rating agency to our outlook or credit rating could negatively affect the value of our debt and/or our common stock, adversely affect our access to debt markets, and increase the interest we pay on outstanding or future debt; and • Conversion of our convertible note could result in significant dilution of our common stock, which could result in significant dilution to our existing stockholders and cause the market price of our common stock to decline. 18 Table of Contents There can be no assurance that we will be able to manage any of these risks successfully.
Our level of indebtedness could have other important consequences, including the following : • We must use a substantial portion of our cash flow from operations to pay interest and principal on the Amended and Restated Credit Agreement, our existing Senior Notes, and other indebtedness, which reduces funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, and potential acquisitions; • We may be unable to refinance our indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes; 21 Table of Contents • We have significant exposure to fluctuations in interest rates because borrowings under our senior secured credit facilities bear interest at variable rates; • Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions; • We may be more vulnerable to an economic downturn or recession and adverse developments in our business; • We may be unable to comply with financial and other covenants in our debt agreements, which could result in an event of default that, if not cured or waived, may result in acceleration of certain of our debt and would have an adverse effect on our business and prospects and could force us into bankruptcy or liquidation; and • Changes by any rating agency to our outlook or credit rating could negatively affect the value of our debt and/or our common stock, adversely affect our access to debt markets, and increase the interest we pay on outstanding or future debt.
Additionally, changes in immigration laws could impair our ability to attract and retain highly qualified employees. If we fail to attract, retain and motivate new or existing personnel, our business, results of operations and future growth prospects could suffer. The volatility in our stock price may from time to time adversely affect our ability to recruit or retain employees.
If we fail to attract, retain and motivate new or existing personnel, our business, results of operations and future growth prospects could suffer. Volatility in our stock price may from time to time adversely affect our ability to recruit or retain employees.
Techniques used to obtain unauthorized access or to sabotage systems change frequently, are constantly evolving and generally are difficult to recognize and react to effectively. We may be unable to anticipate these techniques or to implement adequate preventive or reactive measures.
Techniques used to obtain unauthorized access or to sabotage systems change frequently, are constantly evolving and generally are difficult to recognize and react to effectively. We are not always able to anticipate these techniques or to implement adequate or timely preventive or reactive measures.
In addition, an unfavorable outcome in such litigation could result in significant fines, settlements, monetary damages, or injunctive relief that could negatively and materially impact our ability to conduct our business, results of operations, and cash flows.
Any unfavorable outcome in a matter could result in significant fines, settlements, monetary damages, or injunctive relief that could negatively and materially impact our ability to conduct our business, results of operations, and cash flows.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software.
In addition to risks related to license requirements, using open source software, including open source software that incorporates or relies on generative AI, can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software.
We have made and expect to continue making significant expenditures to investigate, defend, and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk. In addition, we license and use software from third parties in our business.
We have made and expect to continue making significant expenditures to investigate, defend, and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk.
However, these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Third parties may copy all or portions of our products or otherwise obtain, use, distribute, and sell our proprietary information without authorization. Third parties may also develop similar or superior technology independently by designing around our patents.
However, these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Third parties may copy all or portions of our products or otherwise obtain, use, distribute, and sell our proprietary information without authorization.
Factors associated with our industry, the operation of our business, and the markets for our solutions may cause our quarterly financial results to fluctuate, including but not limited to: • Fluctuations in demand for our solutions; • Disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, outbreaks of disease, such as the COVID-19 pandemic, or earthquakes, floods, or other natural disasters; • Entry of new competition into our markets; • Our ability to achieve targeted operating income and margins and revenues; • Competitive pricing pressure or free offerings that compete with one or more of our solutions; • Our ability to timely complete the release of new or enhanced versions of our solutions; • The amount and timing of commencement and termination of major marketing campaigns; • The number, severity, and timing of threat outbreaks and cyber security incidents; • Loss of customers or strategic partners; • Changes in the mix or type of solutions and subscriptions sold and changes in consumer retention rates; 19 Table of Contents • The rate of adoption of new technologies and new releases of operating systems, and new business processes; • Consumer confidence and spending changes; • The impact of litigation, regulatory inquiries, or investigations; • The impact of acquisitions and divestitures and our ability to achieve expected synergies or attendant cost savings; • Fluctuations in foreign currency exchange rates and interest rates; • The publication of unfavorable or inaccurate research reports about our business by cybersecurity industry analysts; • The success of our corporate responsibility initiatives; • Changes in tax laws, rules, and regulations; and • Changes in consumer protection laws and regulations.
Factors associated with our industry, the operation of our business, and the markets for our solutions may cause our quarterly financial results to fluctuate, including but not limited to: • Fluctuations in demand for our solutions; • Disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, outbreaks of disease, or earthquakes, floods, or other natural disasters; • Entry of new competition into our markets; • Technological changes in our markets; • Our ability to achieve targeted operating income and margins and revenues; • Competitive pricing pressure or free offerings that compete with one or more of our solutions; • Our ability to timely complete the release of new or enhanced versions of our solutions; • The amount and timing of commencement and termination of major marketing campaigns; • The number, severity, and timing of threat outbreaks and cyber security incidents; • Loss of customers or strategic partners or the inability to acquire new customers or cross-sell our solutions; • Changes in the mix or type of solutions and subscriptions sold and changes in consumer retention rates; • The rate of adoption of new technologies and new releases of operating systems, and new business processes; • Consumer confidence and spending changes; • The outcome or impact of litigation, claims, disputes, regulatory inquiries, or investigations; • The impact of acquisitions (and our ability to achieve expected synergies or attendant cost savings), divestitures, restructurings, share repurchase, financings, debt repayments and investment activities; • Changes in U.S. and worldwide economic conditions, such as economic recessions, the impact of inflation, fluctuations in foreign currency exchange rates and changes in interest rates, conflicts including Russia’s invasion of Ukraine, and other global macroeconomic factors on our operations and financial performance; 23 Table of Contents • The publication of unfavorable or inaccurate research reports about our business by cybersecurity industry analysts; • The success of our ESG initiatives; • Changes in tax laws, rules, and regulations; • Changes in tax rates, benefits, and expenses; and • Changes in consumer protection laws and regulations.
Our quarterly financial results have fluctuated in the past and are likely to vary in the future due to a number of factors, many of which are outside of our control.
Fluctuations in our quarterly financial results have affected the trading price of our stock in the past and could affect the trading price of our stock in the future. Our quarterly financial results have fluctuated in the past and are likely to vary in the future due to a number of factors, many of which are outside of our control.
Any of the foregoing factors could cause the trading price of our outstanding securities to fluctuate significantly. Changes to our effective tax rate could increase our income tax expense and reduce (increase) our net income (loss), cash flows and working capital.
Any of the foregoing factors could cause the trading price of our outstanding securities to fluctuate significantly. Changes to our effective tax rate, including through the adoption of new tax legislation or exposure to additional income tax liabilities, could increase our income tax expense and reduce (increase) our net income (loss), cash flows and working capital.
Changes in industry structure and market conditions could lead to charges related to discontinuance of certain of our products or businesses and asset impairments. In response to changes in industry structure and market conditions, we may be required to strategically reallocate our resources and consider restructuring, disposing of, or otherwise exiting certain businesses.
In response to changes in industry structure and market conditions, we may be required to strategically reallocate our resources and consider restructuring, disposing of, or otherwise exiting certain businesses.
Our customer retention rates may decline or fluctuate due to a variety of factors, including the following: • Our customers’ levels of satisfaction or dissatisfaction with our solutions and the value they place on our solutions; • The quality, breadth, and prices of our solutions; • Our general reputation and events impacting that reputation; • The services and related pricing offered by our competitors; • Disruption by new services or changes in law or regulations that impact the need for efficacy or of our products and services; • Changes in autorenewal regulations; • Our customer service and responsiveness to the needs of our customers; and • Changes in our target customers’ spending levels as a result of general economic conditions or other factors.
Our customer retention rates may decline or fluctuate due to a variety of factors, including the following: • Our customers’ levels of satisfaction or dissatisfaction with our solutions and the value they place on our solutions; • The quality, breadth, and prices of our solutions; • Our general reputation and events impacting that reputation; • The services and related pricing offered by our competitors; including increasing availability and efficacy of free solutions; • Disruption by new services or changes in law or regulations that impact the need for efficacy of our products and services; • Changes in auto-renewal and other consumer protection regulations; • Our customers’ dissatisfaction with our efforts to market additional products and services; • Our customer service and responsiveness to the needs of our customers; • Changes in our target customers’ spending levels as a result of general economic conditions, inflationary pressures or other factors; and • The quality and efficacy of our third-party partners who assist us in renewing customers’ subscriptions.
In addition, we conduct a significant portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness will be dependent in part on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment, or otherwise, which may not always be possible.
Accordingly, repayment of our indebtedness will be dependent in part on the generation of cash flow by our subsidiaries and their respective abilities to make such cash available to us by dividend, debt repayment, or otherwise, which may not always be possible.
In addition, in January 2021, we acquired Germany-based Avira. Many of Avira’s users are freemium subscribers, meaning they do not pay for its basic services. Much of our anticipated growth in connection with the Avira acquisition is attributable to converting Avira’s freemium users to a paid subscription option.
Many of Avira’s and Avast’s users are freemium subscribers, meaning they do not pay for its basic services. Much of our anticipated growth in connection with the Avira acquisition and the Merger with Avast is attributable to attracting and converting Avira’s and Avast’s freemium users to a paid subscription option.
This could also result in decreased demand for our solutions, decreased revenue, and harm to our reputation, and adversely affect our business, financial condition, results of operations, and cash flows.
This could delay the development of our solutions or our solutions may be unable to operate effectively. This could also result in decreased demand for our solutions, decreased revenue, harm to our reputation, and adversely affect our business, financial condition, results of operations, and cash flows.
Our failure to develop 10 Table of Contents new solutions and improve our existing solutions to satisfy customer preferences and effectively compete with other market offerings in a timely and cost-effective manner may harm our ability to retain our customers and attract new customers. A loss of customers would adversely impact our business and operating results.
Our failure to develop new solutions and improve our existing solutions to satisfy customer preferences and effectively compete with other market offerings in a timely and cost-effective manner may harm our ability to retain our customers and attract new customers.
In addition, such third parties could expose us to compromised data or technology, or be the target of cyberattack and other data breaches which could impact our systems or our customers’ records. Further, we could be the target of a cyberattack or other action that impacts our systems and results in a data breach of our customers’ records.
In addition, such third parties could expose us to compromised data or technology, or be the target of cyberattack and other data breaches which could impact our systems or our customers’ records and personal information.
If we are not successful in managing these risks and challenges, or if our new or improved solutions are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected. We operate in a highly competitive environment, and our competitors may gain market share in the markets for our solutions.
If we are not successful in managing these risks and challenges, or if our new or improved solutions are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.
We are not able to control many of these factors. Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on our debt, including the notes, and meet our other obligations.
We are not able to control many of these factors. Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on our debt, including our 5.0% Senior Notes due 2025, 6.75% Senior Notes due 2027 and 7.125% Senior Notes due 2030 (collectively, the Senior Notes), and meet our other obligations.
RISKS RELATED TO OUR SOLUTIONS Our solutions, systems, websites and the data on these sources may be subject to intentional disruption that could materially harm to our reputation and future sales.
Our solutions, systems, websites and the data on these sources have been and may continue to be subject to cybersecurity events that could materially harm our reputation and future sales.
Further, the new California Privacy Rights Act (the CPRA) significantly modifies the CCPA. These modifications may result in additional uncertainty and require us to incur additional costs and expenses in our effort to comply.
Further, the new California Privacy Rights Act (the CPRA) significantly modifies the CCPA and there are new similar and overlapping state privacy laws in Colorado, Connecticut, Virginia, Utah, and Iowa. These new laws may result in additional uncertainty and require us to incur additional costs and expenses in our effort to comply.
Our officers and other key personnel are “at will” employees and we generally do not have employment or non-compete agreements with our employees. Competition for people with the specific skills that we require is significant.
Our officers and other key personnel are “at will” employees and we generally do not have employment or non-compete agreements with our employees. Competition is significant for people with the specific skills that we require. As a result of the COVID-19 pandemic, we transitioned to a remote working environment for the substantial majority of our employees.
The occurrence of any of these events, as well as a failure to promptly remedy these events should they occur, could compromise our systems, and the information stored in our systems could be accessed, publicly disclosed, lost, stolen, or damaged.
The occurrence of any of these events, as well as a failure to promptly remedy them when they occur, could compromise our systems and the information stored in our systems.
Our revenue and operating results depend significantly on our ability to retain our existing customers, convert existing non-paying customers to paying customers, and add new customers. We generally sell our solutions to our customers on a monthly or annual subscription basis. Customers may choose not to renew their membership with us at any time.
Our revenue and operating results depend significantly on our ability to retain our existing customers and expand sales to them, convert existing non-paying customers to paying customers and add new customers. We generally sell our solutions to our customers on a monthly or annual subscription basis.
Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments and decisions.
Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments and decisions. Our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers.
Our consumer agreements do not require a signature and therefore may be unenforceable under the laws of some jurisdictions. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we may be subject to the unauthorized use of our products in those countries.
Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we may be subject to the unauthorized use of our products in those countries. The unauthorized copying or use of our products or proprietary information could result in reduced sales of our products.
By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner.
By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner. Some open source software may include generative artificial intelligence (AI) software or other software that incorporates or relies on generative AI.
Further consolidation within our industry or other changes in the competitive environment, such as greater vertical integration from key computing and operating system suppliers could result in larger competitors that compete more directly with us. We also face competition from many smaller companies that specialize in particular segments of the market in which we compete.
Further consolidation among our competitors and within our industry or, in addition to other changes in the competitive environment, such as greater vertical integration from key computing and operating system suppliers could result in larger competitors that compete more frequently with us.
We have in the past incurred, and will continue to incur, significant research and development expenses as we focus on organic growth through internal innovation. We believe that we also must continue to dedicate a significant amount of resources to our research and development efforts to decrease our reliance on third parties.
In the past, we have incurred, and will continue to incur, significant research and development expenses as we focus on organic growth through internal innovation. We believe that we must dedicate significant resources to our research and development efforts to deliver innovative market competitive products and avoid being reliant on third party technology and products.
In addition, hiring, training, and successfully integrating replacement personnel can be time consuming and expensive, may cause additional disruptions to our operations, and may be unsuccessful, which could negatively impact future financial results. Our inability to successfully recover from a disaster or other business continuity event could impair our ability to deliver our products and services and harm our business.
In addition, hiring, training, and successfully integrating replacement personnel can be time consuming and expensive, may cause additional disruptions to our operations, and may be unsuccessful, which could negatively impact future financial results.
These third-party software licenses may not continue to be available to us on acceptable terms or at all and may expose us to additional liability. This liability, or our inability to use any of this third-party software, could result in delivery delays or other disruptions in our business that could materially and adversely affect our operating results.
This liability, or our inability to use any of this third-party software, could result in delivery delays or other disruptions in our business that could materially and adversely affect our operating results.
The development and introduction of new solutions involve a significant commitment of time and resources and are subject to a number of risks and challenges including but not limited to: • Lengthy development cycles; • Evolving industry and regulatory standards and technological developments by our competitors and customers; • Rapidly changing customer preferences; • Evolving platforms, operating systems, and hardware products, such as mobile devices; • Product and service interoperability challenges with customer’s technology and third-party vendors; • Entering into new or unproven markets; and • Executing new product and service strategies.
The development and introduction of new solutions involve significant commitments of time and resources and are subject to risks and challenges including but not limited to: • Lengthy development cycles; • Evolving industry and regulatory standards and technological developments by our competitors and customers; • Rapidly changing customer preferences; • Evolving platforms, operating systems, and hardware products, such as mobile devices; • Product and service interoperability challenges with customer’s technology and third-party vendors; • The integration of products and solutions from acquired companies; • Availability of engineering and technical talent; • Entering new or unproven market segments; and • Executing new product and service strategies. 12 Table of Contents In addition, third parties, including operating systems and internet browser companies, may limit the interoperability of our solutions with their own products and services, in some cases to promote their own offerings.
Our competitors include software vendors and operating system providers that offer solutions that directly compete with our offerings. We face growing competition from other technology companies, as well as from companies in the identity threat protection space such as credit bureaus.
Many of these competitors offer solutions or are currently developing solutions that directly compete with some or all of our offerings. We also face growing competition from other technology companies, as well as from companies in the identity threat protection space such as credit bureaus.
If we fail to manage our sales and distribution channels successfully, these channels may conflict with one another or otherwise fail to perform as we anticipate, which could reduce our sales and increase our expenses as well as weaken our competitive position.
If we fail to manage our sales and distribution channels successfully, these channels may conflict with one another or otherwise fail to perform as we anticipate, which could reduce our sales and increase our expenses as well as weaken our competitive position. 15 Table of Contents Changes in industry structure and market conditions could lead to charges related to discontinuance of certain of our products or businesses and asset impairments.
Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites and misappropriate proprietary information or cause interruptions of our products and services.
Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees and third-party service providers, could or have attempted to penetrate, and in some cases have penetrated, our network security or the security of our vendors or suppliers.
Although we did not experience a material increase in cancellations by customers or a material reduction in our retention rate in fiscal 2021, we may experience such an increase or reduction in the future, especially in the event of a prolonged recession or a worsening of current conditions as a result of the COVID-19 pandemic.
We may experience a material increase in cancellations by customers or a material reduction in our retention rate in the future, especially in the event of a prolonged recession or a worsening of current conditions as a result of inflation, changes in interest rates, or other macroeconomic events.
In addition, many of the risks associated with usage of open source may not or cannot be eliminated and could, if not properly addressed, negatively affect our business. RISKS RELATED TO OUR LIQUIDITY AND INDEBTEDNESS There are risks associated with our outstanding and future indebtedness that could adversely affect our financial condition.
In addition, many of the risks associated with usage of open source, including open source that incorporates or relies on generative AI, may not or cannot be eliminated and could, if not properly addressed, negatively affect our business.
Although we endeavor to ensure there is redundancy in these systems and that they are regularly backed-up, there are no assurances that data recovery in the event of a disaster would be effective or occur in an efficient manner.
There are no assurances that data recovery in the event of a disaster would be effective or occur in an efficient manner.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings Information with respect to this Item may be found under the heading “Litigation contingencies” in Note 18 to the Consolidated Financial Statements in this Annual Report on Form 10-K which information is incorporated into this Item 3 by reference. Item 4. Mine Safety Disclosures Not applicable. 20 Table of Contents PART II
Item 3. Legal Proceedings Information with respect to this Item may be found under the heading “Litigation contingencies” in Note 18 of the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K which information is incorporated into this Item 3 by reference. Item 4. Mine Safety Disclosures Not applicable. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN Among NortonLifeLock Inc., the S&P 500 Index and the S&P Information Technology Index This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of NortonLifeLock under the Securities Act or the Exchange Act.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN Among Gen Digital Inc., the S&P 500 Index and the S&P Information Technology Index This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Gen Digital under the Securities Act or the Exchange Act.
Stock performance graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Composite Index and the S&P Information Technology Index for the five fiscal years ended April 2, 2021 (assuming the initial investment of $100 in our common stock and in each of the other indices on the last day of trading for fiscal 2016 and the reinvestment of all dividends).
Stock performance graph The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Composite Index and the S&P Information Technology Index for the five fiscal years ended March 31, 2023 (assuming the initial investment of $100 in our common stock and in each of the other indices on the last day of trading for fiscal 2018 and the reinvestment of all dividends).
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock symbol and stockholders of record Our common stock is traded on the Nasdaq Global Select Market under the symbol “NLOK”. As of April 2, 2021, there were 1,538 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock symbol and stockholders of record Our common stock is traded on the Nasdaq Global Select Market under the symbol “GEN”. As of March 31, 2023, there were 3,694 stockholders of record.
Repurchases of our equity securities Under our stock repurchase programs, shares may be repurchased on the open market and through accelerated stock repurchase transactions. As of April 2, 2021, we had $274 million remaining authorized to be completed in future periods.
Repurchases of our equity securities Under our stock repurchase programs, shares may be repurchased on the open market and through accelerated stock repurchase transactions. As of March 31, 2023, we had $870 million remaining authorized to be completed in future periods with no expiration date. No shares were repurchased during the three months ended March 31, 2023.
Removed
On May 4, 2021, our Board of Directors approved an incremental share repurchase authorization of $1,500 million bringing the total authorized under the stock repurchase program to $1,774 million. The authorization does not have an expiration date.
Removed
Stock repurchases during the three months ended April 2, 2021, were as follows: (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 January 2, 2021 to January 29, 2021 5 $ 20.80 5 $ 323 January 30, 2021 to February 26, 2021 2 $ 20.28 2 $ 284 February 27, 2021 to April 2, 2021 (2) — $ 20.01 — $ 274 Total number of shares repurchased 7 7 (1) The number of shares purchased is reported on trade date.
Removed
Repurchases of 1 million shares, which were executed prior to January 2, 2021, settled during the period of January 2, 2021 to January 29, 2021 . (2) The number of shares is less than 1 million. 21 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Our capital allocation strategy is to balance driving stockholder returns, managing financial risk, and preserving our flexibility to pursue strategic options, including acquisitions. Historically, this has included a quarterly cash dividend, the repayment of debt, and the repurchase of our common stock.
Our capital allocation strategy is to balance driving stockholder returns, managing financial risk and preserving our flexibility to pursue strategic options, including acquisitions and mergers. Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of shares of our common stock.
The amounts under such contracts are included in the table above because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.
The amounts under such contracts are included because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.
Stock repurchases - Under our stock repurchase program, we may purchase shares of our outstanding common stock through accelerated stock repurchase transactions, open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act,) and privately-negotiated transactions.
Share repurchase program Under our share repurchase program, we may purchase shares of our outstanding common stock through accelerated stock repurchase transactions and open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act).
Our principal cash requirements are primarily to meet our working capital needs and support on-going business activities, including payment of taxes and cash dividends, funding capital expenditures, servicing existing debt, repurchasing our common stock, and investing in business acquisitions.
Material Cash Requirements Our principal cash requirements are primarily to meet our working capital needs and support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers.
Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of April 2, 2021, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.
Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of March 31, 2023, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.
(3) These amounts represent the transition tax on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act which may be paid through July 2025. (4) We have entered into various non-cancelable operating lease agreements that expire on various dates through fiscal 2028. The amounts in the table above exclude expected sublease income.
(4) Transition tax payments on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act, which may be paid through July 2025. (5) Payments for various non-cancelable operating lease agreements that expire on various dates through fiscal 2028. The amounts in the table above exclude expected sublease income.
We use a two-step process to recognize liabilities for uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.
Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions.
Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Our results can also be impacted by the costs incurred and the potential deductibility of the expenses.
(2) These amounts are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.
(3) Agreements for purchases of goods or services, with terms that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These amounts include agreements to purchase goods or services that have cancellation provisions requiring little or no payment.
In connection with the sale of Veritas and the sale of our Enterprise Security business to Broadcom, we assigned several leases to Veritas Technologies LLC or Broadcom and/or their related subsidiaries.
In connection with the sale of our Enterprise Security business to Broadcom, we assigned several leases to Broadcom or certain of its subsidiaries.
The expected timing of payments of the obligations in the following table is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations.
Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for certain obligations.
We are required to estimate the current tax exposure as well as assess the temporary differences between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax purposes. We apply judgment in the recognition and measurement of current and deferred income taxes which includes the following critical accounting estimates.
Income taxes We are subject to tax in multiple U.S. and foreign tax jurisdictions. We are required to estimate the current tax exposure as well as assess the temporary differences between the accounting and tax treatment of assets and liabilities, including items such as accruals and allowances not currently deductible for tax purposes.
Interest on variable rate debt was calculated using the interest rate in effect as of April 2, 2021. See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on the Senior Notes, Convertible Senior Notes, and Term loans.
Interest on variable rate debt may vary based on the performance of our interest rate swaps. See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on the term loans and senior notes.
(In millions) April 2, 2021 Term Loans $ 1,235 Senior Notes 1,500 Convertible Senior Notes 875 Mortgage Loans 10 Total debt $ 3,620 Debt covenant compliance - The credit agreement we entered into in November 2019, which was amended and extended through May 2026 on May 7, 2021, contains customary representations and warranties, non-financial covenants for financial reporting, affirmative and negative covenants, including a covenant that we maintain a consolidated leverage ratio of not more than 5.25 to 1.0, or 5.75 to 1.0 if we acquire assets or business in an aggregate amount greater than $250 million, and restrictions on indebtedness, liens, investments, stock repurchases, and dividends (with exceptions permitting our regular quarterly dividend and other specific capital returns).
The Credit Agreement contains customary representations and warranties and affirmative and negative covenants that we maintain a consolidated leverage ratio of not more than 5.25 to 1.0, or 5.75 to 1.0 if we acquire assets or business in an aggregate amount greater than $250 million, and restrictions on indebtedness, liens, investments, stock repurchases, and dividends (with exceptions permitting our regular quarterly dividend and other specific capital returns).
The authorization does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities.
As of March 31, 2023, the remaining balance of our stock repurchase authorization is $870 million and does not have an expiration date. We currently expect to repurchase shares in the future, but the timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and other investment opportunities.
Net revenues Fiscal Year Variance in % (In millions, except for percentages) 2021 2020 2019 2021 vs. 2020 2020 vs. 2019 Net revenues $ 2,551 $ 2,490 $ 2,456 2 % 1 % Fiscal 2021 compared to fiscal 2020 Net revenues increased $61 million primarily due to a $91 million increase in sales of our consumer security products and a $60 million increase in sales of our identity and protection products.
Net revenues Fiscal Year % Change (In millions, except for percentages) 2023 2022 2023 vs. 2022 Net revenues $ 3,338 $ 2,796 19 % Fiscal 2023 compared to fiscal 2022 Net revenues increased $542 million, primarily due to a $406 million increase in sales of our consumer security products and a $117 million increase in sales of our identity and protection products.
Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us.
See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information. 35 Table of Contents Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries, and other parties with respect to certain matters, including, but not limited to, product warranties and losses arising out of our breach of agreements or representations and warranties made by us, including claims alleging that our software infringes on the intellectual property rights of a third party.
Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position, and cash flows. A summary of our significant accounting policies is included in Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material impact on our Consolidated Financial Statements for that reporting period. 29 Table of Contents RESULTS OF OPERATIONS We have elected to omit discussion on the earliest of the three years presented in the Consolidated Financial Statements of this Annual Report on Form 10-K.
Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity, and generate investment returns.
Cash and cash equivalents As of March 31, 2023, we had cash, cash equivalents and short-term investments of approximately $750 million, of which $572 million was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity and generate investment returns.
We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed, and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control.
We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may differ from these estimates.
Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our Consolidated Financial Statements. Business combinations We allocate the purchase price of acquired businesses to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date.
Business combinations We allocate the purchase price of acquired businesses to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Any residual purchase price is recorded as goodwill.
See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further cash flow information associated with our restructuring activities. Contractual obligations The following is a schedule of our significant contractual obligations as of April 2, 2021, including those associated with our discontinued operations.
During fiscal 2023, we made $43 million in cash payments related to the September 2022 Plan. See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further cash flow information associated with our restructuring activities.
Fiscal Year 2021 2020 2019 Americas 72 % 74 % 73 % EMEA 16 % 15 % 16 % APJ 12 % 11 % 11 % Percentages may not add to 100% due to rounding. The Americas include U.S., Canada, and Latin America; EMEA includes Europe, Middle East, and Africa; APJ includes Asia Pacific and Japan.
Fiscal Year 2023 2022 Americas 68 % 70 % EMEA 21 % 18 % APJ 11 % 12 % The Americas include U.S., Canada, and Latin America; EMEA includes Europe, Middle East, and Africa; APJ includes Asia Pacific and Japan.
Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material impact on our Consolidated Financial Statements for that reporting period. 25 Table of Contents RESULTS OF OPERATIONS The following table sets forth our Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Fiscal Year 2021 2020 2019 Net revenues 100 % 100 % 100 % Cost of revenues 14 16 19 Gross profit 86 84 81 Operating expenses: Sales and marketing 23 28 29 Research and development 10 13 17 General and administrative 8 15 17 Amortization of intangible assets 3 3 3 Restructuring, transition and other costs 6 11 9 Total operating expenses 51 70 75 Operating income 35 14 6 Interest expense (6) (8) (8) Other income (expense), net 5 27 (2) Income (loss) from continuing operations before income taxes 34 33 (4) Income tax expense 7 10 — Income (loss) from continuing operations 27 23 (4) Income (loss) from discontinued operations (6) 133 6 Net income 22 % 156 % 1 % Note: The percentages may not add due to rounding.
The following table sets forth our Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Fiscal Year 2023 2022 Net revenues 100 % 100 % Cost of revenues 18 15 Gross profit 82 85 Operating expenses: Sales and marketing 20 22 Research and development 9 9 General and administrative 9 14 Amortization of intangible assets 5 3 Restructuring and other costs 2 1 Total operating expenses 46 49 Operating income (loss) 37 36 Interest expense (12) (5) Other income (expense), net (1) 6 Income (loss) before income taxes 24 37 Income tax expense (benefit) (16) 7 Net income (loss) 40 % 30 % Note: The percentages may not add due to rounding.
Any residual purchase price is recorded as goodwill. The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed especially with respect to intangible assets.
The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, future expected cash flows from customer relationships, developed technology, trade names, and discount rates.
As of April 2, 2021 , we were in compliance with all debt covenants. Dividends - On May 10, 2021, we announced a cash dividend of $0.125 per share of common stock to be paid in June 2021. Any future dividends will be subject to the approval of our Board of Directors.
Dividends On May 11, 2023, we announced a cash dividend of $0.125 per share of common stock to be paid in June 2023.
(GAAP) requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances.
CRITICAL ACCOUNTING ESTIMATES The preparation of our Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. (GAAP) requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
The following table summarizes supplemental key performance metrics for our solutions: 26 Table of Contents Fiscal Year (In millions, except for per user amounts and percentages) 2021 2020 2019 Direct customer revenue (1) $ 2,286 $ 2,204 $ 2,168 Partner revenues $ 270 $ 240 $ 240 Average direct customer count (2) 21.2 20.2 20.7 Direct customer count (at quarter-end) 23.0 20.2 20.3 Direct average revenue per user (ARPU) (3) $ 9.01 $ 8.90 $ 8.74 Annual retention rate 85 % 85 % 85 % (1) Direct customer revenues in fiscal 2021 excludes a $5 million reduction of revenue from a contract liability purchase accounting adjustment recognized during the last quarter due to the acquisition of Avira.
The following table summarizes supplemental key performance metrics for our solutions: Fiscal Year (2) (In millions, except for per user amounts and percentages) 2023 (3) 2022 Direct customer revenue (1) $ 2,933 $ 2,488 Partner revenues $ 341 $ 269 Total Cyber Safety revenues $ 3,274 $ 2,757 Legacy revenues $ 66 $ 50 Direct customer count (at quarter-end) 38.2 24.4 Direct average revenue per user (ARPU) $ 7.10 $ 8.63 Annual retention rate (4) 76 % 84 % (1) Non-GAAP Direct customer revenue differs from GAAP direct customer revenue in fiscal 2023 and 2022 because it excludes a $2 million and $11 million, respectively, reduction of revenue from contract liability purchase accounting adjustments.
Cash requirements Debt - As of April 2, 2021, our total outstanding principal amount of indebtedness is summarized as follows. See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about our debt.
See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about our debt and debt covenants. (2) Interest payments calculated based on the contractual terms of the related debt instruments. Interest on variable rate debt was calculated using the interest rate in effect as of March 31, 2023.
Fiscal calendar and basis of presentation We have a 52/53-week fiscal year ending on the Friday closest to March 31. Fiscal 2021, 2020, and 2019 in this report refers to fiscal year ended April 2, 2021, April 3, 2020, and March 29, 2019, respectively.
Refer to Note 4 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about this business combination. Fiscal calendar and basis of presentation We have a 52/53-week fiscal year ending on the Friday closest to March 31.
Users with multiple products or entitlements are counted for based on which solutions they are subscribed. We exclude users on free trials and promotions and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscriptions directly with us.
Users who have indirectly purchased and/or registered for our products or solutions through partners are excluded unless such users convert or renew their subscription directly with us or sign up for a paid membership through our web stores or third-party app stores.
Therefore, $525 million in long-term income taxes payable has been excluded from the contractual obligations table. See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.
Therefore, $509 million in long-term income taxes payable has been excluded from the contractual obligations table.
Excluding this adjustment, ARPU would have been $9.07 in fiscal 2020. We define direct customer revenues as revenues from sales of our consumer solutions to direct customers, which we define as active paid users who have a direct billing relationship with us at the end of the reported period.
(4) The annual retention rate for fiscal 2023 includes the customer portfolio acquired through our Merger with Avast. We define direct customer count as active paid users of our products and solutions who have a direct billing and/or registration relationship with us at the end of the reported period.
Critical estimates in valuing intangible assets include, but are not limited to, future expected cash flows from customer relationships, developed technology, trade names, and acquired patents, and discount rates. Management estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. Third-party valuation specialists are also utilized for certain estimates.
Management estimates of fair value are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Third-party valuation specialists are utilized for certain estimates. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.
LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS Liquidity We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt, and proceeds from divestitures for our liquidity needs. As of April 2, 2021, we had cash, cash equivalents and short-term investments of approximately $1.0 billion, of which $0.4 billion was held by our foreign subsidiaries.
See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information about the tax capital loss. LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS Liquidity and Capital Resources We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt and proceeds from divestitures for our liquidity needs.
General and administrative expense decreased $153 million primarily due to a $70 million decrease in compensation expense, a $55 million decrease in shared facility and IT costs, and a $43 million decrease in outside services expense, partially offset by an additional legal accrual of $25 million in fiscal 2021 relating to an ongoing civil lawsuit involving a government contract with the GSA.
General and administrative expense decreased $106 million, primarily due to the absence of a $185 million legal accrual in fiscal 2022 relating to an ongoing patent infringement lawsuit and the corresponding legal fees.
Fiscal Year (In millions, except for percentages) 2021 2020 2019 Income (loss) from continuing operations before income taxes $ 872 $ 819 $ (107) Provision for income taxes $ 176 $ 241 $ 3 Effective tax rate on income (loss) from continuing operations 20 % 29 % (3) % Fiscal 2021 compared to fiscal 2020 Our effective tax rate decreased primarily due to releases in uncertain tax positions and favorable withholding tax rulings.
Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict. 32 Table of Contents Fiscal Year (In millions, except for percentages) 2023 2022 Income (loss) from continuing operations before income taxes $ 804 $ 1,042 Provision for income taxes $ (545) $ 206 Effective tax rate on income (loss) from continuing operations (68) % 20 % Fiscal 2023 compared to fiscal 2022 Our effective tax rate decreased primarily due to a decrease in income taxes as a result of a tax capital loss, and releases in uncertain tax positions related to the closure of federal and state income tax audits.
This change in methodology had an immaterial impact to historical amounts presented. ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. We monitor ARPU because it helps us understand the rate at which we are monetizing our consumer customer base.
We monitor ARPU because it helps us understand the rate at which we are monetizing our consumer customer base.
Under the terms of the Agreement, we paid an aggregate of $365 million on May 20, 2021, representing $24.40 per underlying share into which the notes are convertible, accrued and unpaid interest through the date of settlement, and a portion of the cash dividend that we declared on May 10, 2021 .
In addition, we paid $7 million of accrued and unpaid interest through the redemption date. • In August 2022, we settled the $525 million principal and conversion rights of our New 2.0% Convertible Notes in cash. The aggregate settlement amount of $630 million was based on $20.41 per underlying share into which the New 2.0% Convertible Notes were convertible.
Our metrics may be calculated in a manner different than similar metrics used by other companies.
This was inclusive of $113 million of foreign exchange headwinds, primarily in our consumer security products. Performance Metrics We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies.
Research and development expense decreased $61 million due to a $44 million decrease in shared facility and IT costs and a $17 million decrease in compensation, driven by lower headcount.
Research and development expense increased $60 million, primarily due to a $39 million increase of headcount and IT costs, a $12 million increase of stock-based compensation expense and a $10 million increase in outside services and software expense.
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OVERVIEW NortonLifeLock Inc. has the largest Consumer Cyber Safety platform in the world, empowering nearly 80 million users in more than 150 countries. We are the trusted and number one top of mind brand in consumer Cyber Safety, according to the 2020 NortonLifelock brand tracking study. We help prevent, detect, and restore potential damages caused by many cyber criminals.
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OVERVIEW Gen Digital Inc. is a global company powering Digital Freedom with a family of trusted consumer brands including Norton, Avast, LifeLock, Avira, AVG, ReputationDefender and CCleaner. Our core Cyber Safety portfolio provides protection across three key categories in multiple channels and geographies, including security and performance, identity protection, and online privacy.
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We have utilized and expect to continue to utilize acquisitions to contribute to our long-term growth objectives. During fiscal year 2021, we completed the acquisition of Avira, which provides a consumer-focused portfolio of cybersecurity and privacy solutions primarily in Europe and key emerging markets. We believe this acquisition will help accelerate our international growth.
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We have built a technology platform that brings together software and service capabilities within these three categories into a comprehensive and easy-to-use integrated platform across our brands.
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Fiscal Year Highlights • In May 2020, we settled the $625 million principal and conversion rights of our 2.0% Convertible Notes for $1,176 million in cash.
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We bring award-winning products and services in cybersecurity, privacy and identity protection to approximately 500 million users in more than 150 countries so they can live their digital lives safely, privately, and confidently today and for generations to come.
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The repayments resulted in an adjustment to stockholders’ equity of $578 million and a gain on extinguishment of $20 million. • In July 2020, we completed the sale of our Culver City property for cash consideration of $118 million, net of selling costs, and recognized a gain on sale of $35 million. • In September 2020, we borrowed $750 million under the Delayed Draw Term Loan, maturing in 2024, and used the entire amount of the proceeds to repay in full the principal and accrued interest under our 4.2% Senior Notes due September 2020.
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Fiscal Year Highlights • In June 2022, we fully repaid the principal and accrued interest under the 3.95% Senior Notes due June 2022, which had an aggregate principal amount outstanding of $400 million.
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The first amendment to our credit agreement, executed in May 2021, extends the maturity date from November 2024 to May 2026 for this tranche.
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In addition, we paid $5 million of accrued and unpaid interest through the date of settlement.
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See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. • In October 2020, we entered into multiple agreements with Broadcom for an aggregate amount of $200 million to license Broadcom’s enterprise software and security engines and to resolve all outstanding payments and claims related to the asset purchase and transition services agreement. • In December 2020, we substantially completed our restructuring plan (the November 2019 Plan) in connection with the strategic decision to divest our Enterprise Security business.
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The repayments resulted in an adjustment to stockholders’ equity of $100 million. • In September 2022, we issued two series of senior notes, consisting of 6.75% Senior Notes due 2027 and 7.125% Senior Notes due 2030, for an aggregate principal of $1,500 million. • In January 2023, we made a voluntary prepayment of $250 million for our senior credit facilities, which was applied exclusively to the Term B Facility. • During fiscal 2023, we repurchased 40 million shares of our common stock for an aggregate amount of $904 million and paid a total of $314 million in quarterly dividends to shareholders.
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We incurred total costs of $509 million since the inception of the November 2019 Plan, excluding stock-compensation expense, primarily related to workforce reduction, contract termination, and asset write-offs and impairment charges. • In January 2021, we completed the acquisition of Avira for total aggregate consideration of $344 million, net of $32 million cash acquired. • On April 1, 2021, we completed the sale of certain land and buildings in Mountain View for cash consideration of $100 million, net of selling costs, and recognized a gain on sale of $63 million.
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Merger with Avast On September 12, 2022, we completed the Merger with Avast with the issuance of 94,201,223 shares of our common stock to Avast shareholders and cash consideration of $6,910 million, which includes repayment of Avast’s outstanding debt.
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Fiscal 2020 was a 53-week year, whereas fiscal 2021 and 2019 each consisted of 52 weeks. 23 Table of Contents Key financial metrics The following table provides our key financial metrics for fiscal 2021 compared with fiscal 2020: Fiscal Year (In millions, except for per share amounts) 2021 2020 Net revenues $ 2,551 $ 2,490 Operating income $ 896 $ 355 Income from continuing operations $ 696 $ 578 Income (loss) from discontinued operations $ (142) $ 3,309 Net income $ 554 $ 3,887 Net income per share from continuing operations - diluted $ 1.16 $ 0.90 Net income per share from discontinued operations - diluted $ (0.24) $ 5.15 Net income per share - diluted $ 0.92 $ 6.05 Net cash provided by (used in) operating activities $ 706 $ (861) As of (in millions) April 2, 2021 April 3, 2020 Cash, cash equivalents and short-term investments $ 951 $ 2,263 Contract liabilities $ 1,265 $ 1,076 • Net revenues increased $61 million, primarily due to increased sales of our consumer security products and our identity and protection products, partially offset by the divestiture of our ID Analytics solutions and the additional week of revenue recognized during fiscal 2020. • Operating income increased $541 million, primarily due to lower compensation expense, outside services expense, and facility and IT costs that were driven by our cost reduction programs, partially offset by a legal accrual relating to an ongoing civil lawsuit involving a government contract with the U.S.
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In connection with the Merger, we changed our corporate name to Gen Digital Inc. and became dual headquartered in Tempe, Arizona and Prague, Czech Republic, although our principal executive offices remain in Tempe, Arizona.
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General Services Administration (GSA). • Income from continuing operations increased $118 million, primarily due to higher operating income, gain on sale of our Culver City and certain Mountain View properties, gain on extinguishment of debt, and lower income tax expense, partially offset by the absence of the $379 million gain on sale of our equity method investment in DigiCert and the $250 million gain on the sale of our ID Analytics solutions, which were divested in fiscal 2020. • We incurred a loss from discontinued operations, net of tax, compared to a gain during the corresponding period in fiscal 2020, primarily due to the absence of gain on the sale of certain of our Enterprise Security assets and certain liabilities to Broadcom Inc.
Added
Prior to the Merger, Avast was a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protected and enhanced users’ online experiences.
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(the “Broadcom sale”), the absence of operating income as a result of the Broadcom sale, and a settlement with Broadcom in the second quarter of fiscal 2021 of all outstanding payments and certain claims related to the Broadcom sale. • Net income and net income per share decreased, primarily due to the loss from discontinued operations for the reasons discussed above, partially offset by higher income from continuing operations. • Cash, cash equivalents and short-term investments decreased by $1,312 million compared to April 3, 2020, primarily due to repayment of debt, net of borrowings, and to a lesser extent, payments for dividends and dividend equivalents, and payment for acquisitions.
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The Merger enables us to create a broad and complementary consumer product portfolio beyond core security and towards adjacent trust-based solutions and achieve greater geographic diversification and access to a larger user base. We believe this combination will accelerate the transformation of global consumer Cyber Safety.
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The payments were partially offset by net cash provided by operating activities and proceeds from the sale of our Culver City and certain Mountain View properties.
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All financial information related to Avast that is discussed below in key financial metrics, results of operations and liquidity and capital resources is inclusive as of the Closing Date.
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In May 2020, we settled the principal and conversion rights of $625 million of our 2.0% Convertible Notes for $1,176 million in cash. • Contract liabilities increased $189 million compared to April 3, 2020, primarily due to higher billings than recognized revenue and the acquisition of Avira.
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Upon close of the Merger with Avast, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $1,500 million revolving credit facility (Revolving Facility), (ii) a $3,910 million term loan A facility (Term A Facility), (iii) a $3,690 million term loan B facility (Term B Facility) and (iv) a $750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities).
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COVID-19 UPDATE The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.
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The Bridge Loan was undrawn and immediately terminated at the closing of the Merger.
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To protect the health and well-being of our employees, partners and third-party service providers, we implemented a near company-wide work-from-home requirement for most employees, made substantial modifications to employee travel policies, and cancelled or shifted our conferences and other marketing events to virtual-only.
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We drew down the aggregate principal amounts of the Term A Facility and Term B Facility to finance the cash consideration payable for the transaction and to fully repay the outstanding principal of $1,703 million and aggregate accrued and unpaid interest of $3 million under the Initial Term Loan and Delay Draw Term Loan from the existing credit facilities.
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We continue to monitor the situation and plan to adjust our current policies as recommendations and public health guidance is changing. To date, we have not seen any meaningful negative impact on our customer success efforts, sales and marketing efforts, or employee productivity.
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The Credit Agreement replaced our then existing credit facilities upon the close of the Merger. The Merger has altered the size and scope of our operations, impacting our assets, liabilities, obligations, capital requirements and performance measures.
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Nevertheless, as employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation. The U.S. and global economies have experienced a recession due to the economic impacts of the COVID-19 pandemic.
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We expect the key financial metrics and results of operations of the combined company to be materially different than the trends experienced during the year ended March 31, 2023. As a combined company, we expect to achieve synergies, rapidly launch a broad and innovative product portfolio, expand into new and diversified sales channels and enhance customer experience and retention.
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Although we did not experience a material increase in cancellations by customers or a material reduction in our retention rate in 24 Table of Contents 2021, we may experience such an increase or reduction in the future, especially in the event of a prolonged recession as a result of the COVID-19 pandemic.
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Fiscal 2023, 2022 and 2021 in this report refers to fiscal years ended March 31, 2023, April 1, 2022 and April 2, 2021, respectively, each of which was a 52-week year. 27 Table of Contents Key financial metrics The following table provides our key financial metrics for fiscal 2023 compared with fiscal 2022: Fiscal Year (In millions, except for per share amounts) 2023 2022 Net revenues $ 3,338 $ 2,796 Operating income (loss) $ 1,227 $ 1,005 Net income (loss) $ 1,349 $ 836 Net income (loss) per share - diluted $ 2.16 $ 1.41 Net cash provided by (used in) operating activities $ 757 $ 974 As of (In millions) March 31, 2023 April 1, 2022 Cash, cash equivalents and short-term investments $ 750 $ 1,891 Contract liabilities $ 1,788 $ 1,306 • Net revenues increased $542 million, primarily due to revenue attributable to the contribution from Avast, which was acquired during the second quarter of fiscal 2023, and higher sales in both our consumer security and identity and information protection products, partially offset by unfavorable foreign currency fluctuations. • Operating income (loss) increased $222 million, primarily due to operating income attributable to Avast, which was acquired during the second quarter of fiscal 2023, and cost synergies post-acquisition, partially offset by unfavorable foreign currency fluctuations. • Net income (loss) increased $513 million and net income per share increased $0.75, primarily due to an income tax benefit in fiscal 2023, and increased operating income, partially offset by an increase in interest expense associated with our new senior credit facilities and two senior notes. • Cash, cash equivalents and short-term investments decreased by $1,141 million compared to April 1, 2022, primarily due to the completion of the Merger, repurchases of our common stock, income taxes paid, dividends paid to shareholders, and voluntary prepayment of our Term B facility, offset by proceeds from the issuance of the senior credit facilities and the two senior notes.
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A prolonged recession could adversely affect demand for our offerings, retention rates and harm our business and results of operations, particularly in light of the fact that our solutions are discretionary purchases and thus may be more susceptible to macroeconomic pressures, as well impact the value of our common stock, ability to refinance our debt, and our access to capital.
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Additionally, subsequent to March 31, 2023, we made another voluntary prepayment of $150 million for our senior credit facilities, which was applied exclusively to Term B Facility. • Contract liabilities increased $482 million, primarily due to contract liabilities assumed from Avast, which was acquired during the second quarter of fiscal 2023.
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The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of new variants of the disease, the extent, effectiveness and acceptance of containment actions, such as vaccination programs, and the impact of these and other factors on our employees, customers, partners and third-party service providers.
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GLOBAL MACROECONOMIC CONDITIONS Our results of operations and cash flows are subject to fluctuations due to inflation, changes in foreign currency exchange rates relative to U.S. dollars, our reporting currency, changes in interest rates, as well as recession risks, which may persist for an extended period.
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For more information on the risks associated with the COVID-19 pandemic, please see “Risk Factors” in Item 1A. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services we provide.
In addition, we charge our international subsidiaries for their use of intellectual property and technology and for certain corporate services provided.
In addition, we have a $1 billion revolving credit facility that if drawn bears interest at a variable rate based on LIBOR and would be subject to the same risks associated with adverse changes in LIBOR.
In addition, we have a $1,500 million revolving credit facility that if drawn bears interest at a variable rate based on SOFR and would be subject to the same risks associated with adverse changes in SOFR.
Additional information with respect to our derivative instruments is included in Note 11 of the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. 34 Table of Contents
Additional information with respect to our debt and derivative instruments is included in Note 10 and Note 11, respectively, of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K. 36 Table of Contents
Foreign currency exchange rate risk We conduct business in numerous currencies through our worldwide operations, and our entities hold monetary assets or liabilities, earn revenues, or incur costs in currencies other than the entity’s functional currency, primarily in Euro, Japanese Yen, British Pound, Israeli New Shekel, Swiss Franc, Singapore Dollar and Indian Rupee.
Foreign currency exchange rate risk We conduct business in numerous currencies through our worldwide operations, and our entities hold monetary assets or liabilities, earn revenues or incur costs in currencies other than the entity’s functional currency, primarily in Euro, Japanese Yen, British Pound, Australian Dollar, Czech Koruna and Canadian Dollar.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. The gains and losses on these foreign exchange contracts are recorded in Other income (expense), net in the Consolidated Statements of Operations.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. As our international operations grow, we will continue to reassess our approach to managing risks related to fluctuations in foreign currency.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to various market risks related to fluctuations in interest rates and foreign currency exchange rates. We may use derivative financial instruments to mitigate certain risks in accordance with our investment and foreign exchange policies. We do not use derivatives or other financial instruments for trading or speculative purposes.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to various market risks related to fluctuations in interest rates and foreign currency exchange rates.
As of April 2, 2021, we also had $1.2 billion outstanding debt with variable interest rates based on the London InterBank Offered Rate (LIBOR). A reasonably possible hypothetical adverse change of 100 basis points in LIBOR would not result in a significant increase in interest expense on an annualized basis.
As of March 31, 2023, we also had $7,292 million outstanding debt with variable interest rates based on the Secured Overnight Financing Rate (SOFR). A hypothetical 100 basis point change in SOFR would have resulted in a $73 million increase in interest expense on an annualized basis.
A hypothetical change in the yield curve of 100 basis points would not result in a significant reduction in fair value. As of April 2, 2021, we had $2.4 billion in aggregate principal amount of fixed-rate Senior Notes and convertible debt outstanding, with a carrying amount and a fair value of $2.4 billion, based on Level 2 inputs.
Interest rate risk As of March 31, 2023, we had $2,607 million in aggregate principal amount of fixed-rate Senior Notes, with a carrying amount and a fair value of $2,593 million, based on Level 2 inputs. The fair value of these notes fluctuates when interest rates change.
Since these notes bear interest at 33 Table of Contents fixed rates, they do not result in any financial statement risk associated with changes in interest rates. However, the fair value of these notes fluctuates when interest rates change.
Since these notes bear interest at fixed rates, financial statement risk associated with changes in interest rates is limited to future refinancing of current debt obligations.
Removed
Interest rate risk Our short-term investments and cash equivalents primarily consist of corporate bonds and certificate of deposits, respectively. A change in interest could have an adverse impact on their market value. As of April 2, 2021, the carrying value and fair value of our short-term investments and cash equivalents was $18 million.
Added
We may use derivative and non-derivative financial instruments to reduce the volatility of earnings and cash flow that may result from adverse economic conditions and events or changes in foreign currency and interest rates.
Removed
We have a foreign exchange exposure management program designed to identify material foreign currency exposures, manage these exposures, and reduce the potential effects of currency fluctuations on our results of operations through which we enter into foreign exchange forward contracts on our assets and liabilities denominated in currencies other than the functional currency of our subsidiaries with up to twelve months in duration.
Added
If these notes were refinanced at higher interest rates prior to maturity, our total interest payments could increase by a material amount; however, this risk is mitigated by our strong cash position and expected future cash generated from operations, which will be sufficient to satisfy this increase in obligation.
Removed
As of April 2, 2021 and April 3, 2020, we had open foreign currency forward contracts with notional amounts of $338 million and $419 million, respectively, to hedge foreign currency balance sheet exposure, with an insignificant fair value.
Added
In March 2023, we entered into interest rate swap agreements to mitigate risks associated with the variable interest rate of our Term A Facility. These pay-fixed, receive-floating rate interest rate swaps have the economic effect of hedging the variability of forecasted interest payments until their maturity on March 31, 2026.
Removed
A hypothetical ten percent depreciation of foreign currency would result in a reduction in fair value of our forward contracts of $20 million and $30 million for fiscal 2021 and fiscal 2020, respectively.
Added
Pursuant to the agreements, we will effectively convert $1 billion of our variable rate borrowings under Term A Facility to fixed rates, with $500 million at a fixed rate of 3.762% and $500 million at a fixed rate of 3.55%.
Removed
This analysis disregards the possibilities that the rates can move in opposite directions and that losses from one geographic area may be offset by gains from another geographic area.
Added
A hypothetical 100 basis point increase or decrease in interest rates would have resulted in a $26 million increase or $28 million decrease in the fair values of our floating to fixed rate interest swaps at March 31, 2023.
Added
The objective of our interest rate swaps, all of which are designated as cash flow hedges, is to manage the variability of future interest expense.
Added
Growth in our international operations will incrementally increase our exposure to foreign currency fluctuations as well as volatile market conditions, including the weakening of foreign currencies relative to USD, which has and may in the future negatively affect our revenue expressed in USD.
Added
We manage these exposures and reduce the potential effects of currency fluctuations by executing monthly foreign exchange forward contracts to hedge foreign currency balance sheet exposures. The gains and losses on these foreign exchange contracts are recorded in Other income (expense), net in the Consolidated Statements of Operations.

Other GEN 10-K year-over-year comparisons