Back to top

Image: Bigstock

Gen Digital (GEN) Q3 Earnings & Revenues Miss, Stock Falls 15%

Read MoreHide Full Article

Gen Digital’s (GEN - Free Report) shares declined 15% after it reported third-quarter fiscal 2024 results, wherein earnings and revenues missed the Zacks Consensus Estimate. However, the bottom and top lines marked year-over-year improvements.

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 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 49 cents per share, which missed the consensus estimate of 50 cents. The bottom line increased 10% year over year on a reported basis and 11% on constant currency.

The company’s third-quarter non-GAAP revenues increased 2% year over year to $951 million, mainly driven by better sales executions. The top line also increased 2% on a constant-currency basis. However, revenues missed the Zacks Consensus Estimate of $955.8 million.

Gen Digital Inc. Price, Consensus and EPS Surprise

 

Gen Digital Inc. Price, Consensus and EPS Surprise

Gen Digital Inc. price-consensus-eps-surprise-chart | Gen Digital Inc. Quote

Key Metrics

Gen Digitals’ Direct Customer revenues increased 2.3% year over year to $837 million. Partner revenues improved 4.2% to $99 million. Our revenue estimates for Direct Customer and Partner were pegged at $843.4 million and $98.4 million, respectively.

The direct monthly average revenue per user increased to $7.21 from $7.09 in the year-ago quarter. Our estimates for the direct monthly average revenue per user were pegged at $7.32. The quarterly bookings advanced 4% on a year-over-year basis to $1.01 billion.

Gen Digital’s average direct customer count increased to 38.9 million from 38.4 million in the year-ago quarter. Our estimate for the average direct customer count was pegged at 38.4 million.

The company's customer base is experiencing stagnation, as the customer retention rate remains unchanged at 77% compared with the previous quarter. Notably, before the Avast acquisition, NortonLifeLock’s customer retention rate was slightly more than 85%. However, it had fallen to around 75-77% post the merger.

Operating Details

The non-GAAP gross profit grew 1.3% year over year to $827 million. Moreover, the gross margin declined by 20 basis points (bps) to 87%.

Non-GAAP operating expenses decreased 7% year over year to $269 million. Moreover, as a percentage of revenues, non-GAAP operating expenses deteriorated 270 bps to 28.3%.

The non-GAAP operating income in the third quarter of fiscal 2024 totaled $558 million, up 6% year over year. The non-GAAP operating margin expanded by 250 bps to 58.7%, mainly due to cost synergies resulting from the NortonLifeLock and Avast merger and disciplined spending.

Non-GAAP EBITDA declined 5.3% year over year to $464 million. Meanwhile, the non-GAAP reported EBITDA increased 5.6% to $563 million.

Balance Sheet & Other Details

Gen Digital exited the third quarter with cash, cash equivalents and short-term investments of $490 million compared with the previous quarter’s $629 million. The long-term debt was $9.08 billion, down from $9.33 billion in the previous quarter.

The company generated operating and free cash flows of $315 million and $307 million, respectively, in the third quarter of fiscal 2024. In the first three quarters of fiscal 2023, it generated operating cash flow and free cash flow of $666 million and $652 million, respectively.

In the third quarter, Gen Digital paid out $81 million in dividends. The company also paid debt worth $259 million. GEN authorized a quarterly cash dividend of 12.5 cents per share, payable on Mar 13 to shareholders of record as of Feb 19.

Fourth-Quarter and Fiscal 2024 Guidance

For the fourth quarter of fiscal 2024, Gen Digital anticipates revenues of $960-$970 million. The company projects non-GAAP earnings between 52 cents and 54 cents in the third quarter.

For fiscal 2024, Gen Digital has lowered its revenue projection from the previous guidance of $3.81-$3.835 billion to $3.805-$3.815 billion. The company has also lowered its earnings per share projection for 2024 to $1.95-$1.97 from $1.95-$2.02 mentioned earlier.

Zacks Rank and Stocks to Consider

Currently, Gen Digital carries a Zacks Rank #3 (Hold). GEN shares have gained 1.5% in the past year.

Some better-ranked stocks from the broader technology sector are BlackLine (BL - Free Report) , Arista Networks (ANET - Free Report) and Blackbaud (BLKB - Free Report) . BL and ANET sport a Zacks Rank #1 (Strong Buy) each, and BLKB carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BlackLine’s fourth-quarter 2023 earnings has been revised by a penny northward to 55 cents per share in the past 30 days. Shares of BL have lost 22% in the past year.

The Zacks Consensus Estimate for Arista’s fourth-quarter 2023 earnings has been revised by a penny northward to $1.70 per share in the past 90 days. Shares of ANET have rallied 97.1% in the past year.

The Zacks Consensus Estimate for Blackbaud's fourth-quarter 2023 earnings per share has been revised by a penny northward to $1.04 in the past 90 days. Shares of BLKB have returned 29.9% in the past year.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Gen Digital Inc. (GEN) - free report >>

Blackbaud, Inc. (BLKB) - free report >>

Arista Networks, Inc. (ANET) - free report >>

BlackLine (BL) - free report >>

Published in