Gen Digital Inc. GEN shares rose 4.1% during Thursday’s extended trading session after the company reported better-than-expected results for the fourth quarter of fiscal 2024. Moreover, the top and bottom 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 fourth-quarter performance, Gen Digital reported non-GAAP earnings of 53 cents per share, which surpassed the consensus estimate of 52 cents. The bottom line increased 15% year over year on a reported basis and 16% on constant currency. Increased revenues, disciplined spending and cost synergies attained from the NortonLifeLock and Avast merger mainly drove the bottom-line growth.
The company’s fourth-quarter non-GAAP revenues increased 2% year over year to $967 million and beat the Zacks Consensus Estimate of $964.8 million. The top line also increased 3% on a constant-currency basis.
The top-line growth was primarily driven by the U.S. market, which was up 3% as the company scaled the adoption of its privacy and performance offerings through cross-selling. Increased membership revenues, particularly in the higher-tier Norton 360 with LifeLock memberships, also drove revenues in the U.S. market.
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 1.9% year over year to $847 million. Partner revenues improved 5% to $105 million. Our revenue estimates for Direct Customer and Partner were pegged at $848.7 million and $99.4 million, respectively.
The direct monthly average revenue per user remained flat at $7.24 when compared with the year-ago quarter but improved 3 cents from the third quarter’s $7.21. Our estimates for the direct monthly average revenue per user were pegged at $7.32. The quarterly bookings advanced 2% on a year-over-year basis to $1.04 billion.
Gen Digital’s average direct customer count increased to 39.1 million from 38.2 million in the year-ago quarter. Our estimate for the average direct customer count was pegged at 38.7 million.
The company’s customer base is experiencing stagnation as the customer retention rate remains unchanged at 77% compared with the previous quarter. Before the Avast acquisition, NortonLifeLock’s customer retention rate was slightly more than 85%. However, it fell to around 75-77% post the merger.
Operating Details
The non-GAAP gross profit grew 2% year over year to $835 million. Moreover, the gross margin expanded by 20 basis points (bps) to 86.3%.
Non-GAAP operating expenses decreased 3% year over year to $266 million. Moreover, as a percentage of revenues, non-GAAP operating expenses deteriorated 150 bps to 27.5%.
The non-GAAP operating income in the fourth quarter of fiscal 2024 totaled $569 million, up 5% year over year. The non-GAAP operating margin expanded by 170 bps to 58.8%, mainly due to cost synergies resulting from the NortonLifeLock and Avast merger and disciplined spending.
Non-GAAP EBITDA grew 6% year over year to $480 million. Meanwhile, the non-GAAP reported EBITDA increased 4.7% to $574 million.
Balance Sheet & Other Details
Gen Digital exited the fourth quarter with cash, cash equivalents and short-term investments of $846 million compared with the previous quarter’s $490 million. The long-term debt was $8.72 billion, down from $9.08 billion in the previous quarter.
The company generated operating and free cash flows of $1.4 billion and $1.39 billion, respectively, in the fourth quarter of fiscal 2024. In fiscal 2024, it generated operating cash flow and free cash flow of $2.06 billion and $2.05 billion, respectively.
In the fourth quarter, Gen Digital paid out $78 million in dividends and repurchased shares worth $300 million. The company also paid debt worth $658 million. In fiscal 2024, GEN paid $323 in dividends, bought back shares worth $441 million and repaid debt worth $1.18 billion.
GEN authorized a quarterly cash dividend of 12.5 cents per share, payable on Jun 12 to shareholders of record as of May 20. The company also raised its share repurchase authorization to $3 billion, inclusive of the current $429 million authorization remaining.
First-Quarter and Fiscal 2025 Guidance
For the first quarter of fiscal 2025, Gen Digital anticipates revenues in the band of $960-$970 million. The company projects non-GAAP earnings between 52 cents and 54 cents in the first quarter. The Zacks Consensus Estimate for first-quarter revenues and non-GAAP earnings is currently pegged at $975.1 million and 55 cents per share.
For fiscal 2025, Gen Digital projects revenues between $3.89 billion and $3.93 billion. It anticipates earnings per share for 2024 to be in the $2.17-$2.23 range. The consensus mark for 2024 revenues and non-GAAP earnings currently stands at $3.81 billion and $1.95 per share.
Zacks Rank & Stocks to Consider
Currently, Gen Digital carries a Zacks Rank #3 (Hold). Shares of GEN have plunged 10.9% year to date (YTD).
Some better-ranked stocks in the broader technology sector are NVIDIA NVDA, Salesforce CRM and Paycom Software PAYC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 10 cents upward to $23.94 per share in the past 30 days, which suggests year-over-year growth of 84.7%. The long-term estimated earnings growth rate for the stock stands at 30.9%. The NVDA stock has soared 79.2% YTD.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 earnings has been revised upward by 3 cents to $9.71 per share in the past 60 days, which calls for an increase of 18.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 17.4%. CRM shares have risen 4.6% YTD.
The consensus mark for Paycom’s 2024 earnings has been revised upward by 5 cents to $7.68 per share over the past seven days, which indicates a marginal 0.9% decrease from 2023. It has a long-term earnings growth expectation of 10.4%. The PAYC stock has declined 16% in the YTD period.
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