Gen Digital Inc. (GEN Quick QuoteGEN - Free Report) reported better-than-expected third-quarter fiscal 2023 results. The consumer cyber safety provider’s revenues and non-GAAP earnings for the third quarter marked a year-over-year improvement.

Gen Digital was formerly known as NortonLifeLock Inc. and was trading under the NLOK ticker symbol. NortonLifeLock changed its name and ticker symbol, effective from Nov 8, 2022, following the completed merger of NortonLifeLock and Avast Plc. The newly named company unites trusted consumer safety brands, including Norton, Avast, LifeLock, AVG, Avira, CCleaner and ReputationDefender.

Coming to the third-quarter performance, Gen Digital reported non-GAAP earnings of 45 cents per share, which surpassed the Zacks Consensus Estimate of 42 cents. The bottom line improved by a penny from the year-ago quarter’s earnings of 44 cents per share.

The company’s quarterly non-GAAP revenues increased 33% year over year to $936 million, which surpassed the Zacks Consensus Estimate of $929.2 million. On a constant-currency basis, revenues increased 38% year over year.

The robust top line was mainly driven by the inclusion of the Avast business, improved customer experiences and international business expansion. However, the negative impact of unfavorable foreign currency exchange rates hurt revenues by approximately $34 million.

Direct customer revenues increased to $818 million from the $624 million reported in the year-ago quarter. Partner revenues improved by 39.7% to $95 million from the $68 million reported a year ago.

Quarterly Details

The monthly direct average revenue per user decreased to $7.09 from $8.62 in the year-ago quarter. The quarterly bookings increased 29% on a year-over-year basis to $966 million.

Gen Digital’s average direct customer count increased to 38.4 million from 24.2 million in the year-ago quarter. Before the Avast acquisition, NortonLifeLock’s customer retention rate was slightly more than 85%. However, including Avast’s customer base and online customers, the aggregate retention rate for Gen Digital fell to 75% at the third-quarter end.

The non-GAAP gross profit grew 34% year over year to $816 million from $610 million. Moreover, the gross margin expanded by 60 basis points (bps) to 87.2%.

The non-GAAP operating income for the third quarter of fiscal 2023 totaled $526 million, up 41% year over year. The non-GAAP operating margin expanded by 340 bps to 56.2%, mainly due to an increased gross margin, cost synergies resulting from the NortonLifeLock and Avast merger and disciplined spending.

Non-GAAP operating expenses increased 22% year over year to $290 million. However, as a percentage of revenues, non-GAAP operating expenses reduced by 280 bps to 31% from 33.8% in the year-ago quarter.

Non-GAAP EBITDA plunged 48.5% year over year to $490 million. Meanwhile, the non-GAAP reported EBITDA increased 41.8% to $533 million.

Balance Sheet & Other Details

Gen Digital exited the third quarter with cash and cash equivalents of $812 million compared with the previous quarter’s $1.1 billion. The long-term debt was $9.83 billion, down from $9.88 billion in the previous quarter.

The company generated operating and free cash flows of $306 million and $305 million, respectively, in the third quarter of fiscal 2023. In the first nine months of fiscal 2023, it generated operating and free cash flows of $433 million and $428 million, respectively.

In the third quarter, Gen Digital repurchased stocks worth $500 million and paid out $81 million in dividends. In the first nine months of fiscal 2023, it bought back common stocks worth $904 million and paid out $234 million in dividends. GEN authorized a quarterly cash dividend of $0.125 per share, payable on Mar 15 to shareholders of record as of Feb 20.

Fourth-Quarter Fiscal 2023 Guidance

For the fourth quarter of fiscal 2023, Gen Digital anticipates revenues in the band of $935-$945 million. The company projects non-GAAP earnings between 44 cents and 46 cents in the fourth quarter.

Zacks Rank & Stocks to Consider

Currently, Gen Digital carries a Zacks Rank #3 (Hold). Shares of GEN have declined 14.6% over the past year.

Some better-ranked stocks from the broader technology sector are Clarivate Plc (CLVT Quick QuoteCLVT - Free Report) , CDW Corporation (CDW Quick QuoteCDW - Free Report) and ServiceNow (NOW Quick QuoteNOW - Free Report) . Clarivate sports a Zacks Rank #1 (Strong Buy) at present, while CDW and ServiceNow each carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Clarivate’s first-quarter 2023 earnings has remained unchanged at 17 cents per share over the past 60 days. For 2023, earnings estimates have been revised a penny northward to 80 cents per share in the past 30 days.

Clarivate's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 9.4%. Shares of CLVT have fallen 21.1% in the trailing 12 months.

The Zacks Consensus Estimate for CDW's fourth-quarter 2022 earnings has remained unchanged at $2.45 per share over the past 60 days. For 2022, earnings estimates have remained unchanged at $9.75 per share in the past 60 days.

CDW’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 6.6%. Shares of the company have increased 5.1% over the past year.

The Zacks Consensus Estimate for ServiceNow's first-quarter 2023 earnings has been revised southward by 4 cents to $2.01 per share over the past 30 days. For 2023, earnings estimates have moved upward by 10 cents to $9.17 per share in the past seven days.

ServiceNow's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6.9%. Shares of NOW have plunged 14.9% in the trailing 12 months.