NortonLifeLock Inc. NLOK reported strong second-quarter fiscal 2022 results, wherein both the top and bottom lines not only surpassed the respective Zacks Consensus Estimate but also improved year over year.
The consumer cyber safety provider reported non-GAAP earnings of 43 cents per share, beating the Zacks Consensus Estimate of 42 cents per share. The bottom line improved 19% from the year-ago quarter’s earnings of 36 cents per share.
The company’s quarterly non-GAAP revenues increased 11% year over year to $695 million, which surpassed the Zacks Consensus Estimate of $661 million. Constant currency-adjusted revenues on a non-GAAP basis were $696 million, 11% higher than the year-ago quarter’s reported figure.
This outperformance was primarily driven by improved customer experiences. International business expansion contributed to the quarterly results. It recorded double-digit growth with expanded product offerings globally.
Direct customer revenues climbed 9.4% to $616 million from $563 million reported in the year-ago quarter. The partner revenues improved 25.4% to $79 million from $63 million reported a year ago.
Leveraging Avira's freemium model has helped the company in expanding the customer reach globally, while accelerating their free to paid conversion with the use of marketing capabilities.
NortonLifeLock revealed during its quarterly result announcement that it got an overwhelming response from shareholders regarding its proposed merger with consumer cybersecurity vendor, Avast.
Notably, the two companies entered into a merger agreement in August this year under which NortonLifeLock will acquire UK-based Avast in a cash-and-stock deal. The merger agreement values Avast’s entire ordinary share capital between $8.1 billion and $8.6 billion, subject to its shareholders’ elections.
NortonLifeLock Inc. Price, Consensus and EPS Surprise
NortonLifeLock Inc. price-consensus-eps-surprise-chart | NortonLifeLock Inc. Quote
The monthly direct average revenue per user (ARPU) decreased 2.7% on a year over year basis to $8.85. Continued stabilization of direct customer count was positive. The quarterly bookings increased by 7% on a year-over-year basis to $681 million.
The company’s direct customer count increased 2.6 million year over year to 23.3 million. The customer retention rate remained strong at 85% as new initiatives were launched for the improvement of overall retention and within specific products and customer cohorts.
Gross profit climbed 10.4% year over year to $592 million. Gross margin contracted 40 basis points (bps) to 85.2%.
Non-GAAP operating income for the second quarter of fiscal 2022 totaled $363 million, up 15.6% year over year. Non-GAAP operating margin expanded 200 bps to 52%.
Balance Sheet & Other Details
NortonLifeLock exited the second quarter with cash and cash equivalents of $1.53 billion compared with the previous quarter’s 1.23 billion. Long-term debt was $2.78 billion, down from $3.42 billion in the previous quarter.
The company generated cash worth $60 million from operational activities during this quarter, while it generated $258 million worth cash in the previous quarter, and utilized $113 million of operating cash flow for the year-ago quarter.
It authorized a quarterly cash dividend of $0.125 per share to be payable on Dec 15, 2021 to shareholders of record as of Nov 22. The company has $1.8 billion remaining under its current share repurchase authorization.
For the third quarter of fiscal 2022, NortonLifeLock expects non-GAAP revenues between $695 million and $705 million, indicating an increase of 9% to 11% on a year-over-year basis in constant currency. Non-GAAP earnings are estimated to be 42-44 cents per share.
Additionally, the company raised the lower-end of its fiscal 2022 revenue growth guidance range to 9-10% from 8-10% predicted earlier. Similarly, it now projects non-GAAP earnings per share between $1.70 and $1.75 compared with the prior estimate of $1.65-$1.75.
Zacks Rank & Key Picks
NortonLifeLock currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader computer and technology sector are Salesforce CRM, which sports a Zacks Rank #1 (Strong Buy), while both Advanced Micro Devices AMD and Adobe ADBE carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rates for Salesforce, Advanced Micro Devices and Adobe are currently pegged at 16.8%, 46.2% and 19.1%, respectively.
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