Gen Digital Inc. (GEN Quick QuoteGEN - Free Report) reported mixed first-quarter fiscal 2024 results, wherein its earnings beat the Zacks Consensus Estimate, but revenues missed the same. However, the top and bottom lines both 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 first-quarter performance, Gen Digital reported non-GAAP earnings of 47 cents per share, which surpassed the Zacks Consensus Estimate by a penny. The bottom line increased 5% year over year on a reported basis and 9% on constant currency.

The company’s quarterly non-GAAP revenues increased 34% year over year to $946 million but marginally fell short of the Zacks Consensus Estimate of $947.2 million. On a constant-currency basis, revenues increased 35% 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 revenue growth in the reported quarter.

Key Metrics

Gen Digitals’ Direct Customer revenues increased 33.3% year over year to $832 million. Partner revenues improved by 34.7% to $97 million. Our revenue estimates for Direct Customer and Partner were pegged at $833 million and $96.8 million.

The direct monthly average revenue per user increased to $7.26 from $7.24 in the previous quarter. Our estimates for the direct monthly average revenue per user stood at $7.31. The quarterly bookings advanced 34% on a year-over-year basis to $887 million.

Gen Digital’s average direct customer count increased to 38.2 million from 24.1 million in the year-ago quarter but remained flat compared with the previous quarter. Our estimate for the average direct customer count was pegged at 38 million.

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 76% at the first-quarter end.

Operating Details

The non-GAAP gross profit grew 35% year over year to $825 million. Moreover, the gross margin expanded by 80 basis points (bps) to 87.2%.

Non-GAAP operating expenses increased 21% year over year to $280 million. However, as a percentage of revenues, non-GAAP operating expenses reduced by 320 bps to 29.6%.

The non-GAAP operating income in the first quarter of fiscal 2024 totaled $545 million, up 43% year over year. The non-GAAP operating margin expanded by 390 bps to 57.6%, mainly due to cost synergies resulting from the NortonLifeLock and Avast merger, an improved gross margin and disciplined spending.

Non-GAAP EBITDA soared 71.8% year over year to $493 million. Meanwhile, the non-GAAP reported EBITDA increased 44.1% to $552 million.

Balance Sheet & Other Details

Gen Digital exited the first quarter with cash and cash equivalents of $623 million compared with the previous quarter’s $750 million. The long-term debt was $9.7 billion, down from $9.9 billion in the previous quarter.

The company generated operating and free cash flows of $226 million and $222 million, respectively, in the first quarter of fiscal 2023.

In the first quarter, Gen Digital repurchased stocks worth $41 million and paid out $83 million in dividends. The company also paid debt worth $208 million. GEN authorized a quarterly cash dividend of $0.125 per share, payable on Sep 13 to shareholders of record as of Aug 21.

Second-Quarter and Fiscal 2024 Guidance

For the second quarter of fiscal 2024, Gen Digital anticipates revenues in the band of $940-$950 million. The company projects non-GAAP earnings between 46 cents and 48 cents in the second quarter.

For fiscal 2024, Gen Digital anticipates revenues in the band of $3.8-$3.85 billion. The company projects non-GAAP earnings between $1.95 and $2.02 in the fiscal.

Zacks Rank & Stocks to Consider

Currently, Gen Digital carries a Zacks Rank #3 (Hold). Shares of GEN have declined 13.2% year to date (YTD).

Some better-ranked stocks from the broader technology sector are NVIDIA (NVDA Quick QuoteNVDA - Free Report) , Fortinet (FTNT Quick QuoteFTNT - Free Report) and Salesforce (CRM Quick QuoteCRM - Free Report) . NVIDIA sports a Zacks Rank #1 (Strong Buy), while Fortinet and Salesforce each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

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Salesforce's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 15.5%. Shares of CRM have surged 63.2% YTD.