NortonLifeLock (NLOK) Tops Q4 Earnings and Revenue Estimates

NortonLifeLock Inc. NLOK reported strong fourth-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 46 cents per share, beating the Zacks Consensus Estimate by a penny. The bottom line improved by 15% from the year-ago quarter’s earnings of 40 cents per share.

The company’s quarterly non-GAAP revenues increased 6% year over year to $717 million, which surpassed the Zacks Consensus Estimate of $712.7 million. Constant currency-adjusted revenues on a non-GAAP basis were $732 million, 8% higher than the year-ago quarter’s reported figure.

This outperformance was primarily driven by improved customer experiences. The international business expansion contributed to the quarterly results. It recorded double-digit growth with expanded product offerings globally.

Direct customer revenues increased 4.2% to $627 million from the $602 million reported in the year-ago quarter. The partner revenues improved by 20% to $90 million from the $75 million reported a year ago.

Leveraging Avira's freemium model helped the company expand the customer reach globally while accelerating customers’ free-to-paid conversion with the use of marketing capabilities.

In its quarterly result announcement, NortonLifeLock revealed that its pending merger of Avast Plc is under the Phase 2 review with the U.K. Competition and Markets Authority (CMA). NLOK stated that it continues to constructively engage with the CMA for reviewing the merger and hopes to close the transaction in mid-to-late 2022.

The two companies entered into a merger agreement in August 2021 under which NortonLifeLock would acquire U.K.-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 and EPS Surprise

NortonLifeLock Inc. price-consensus-eps-surprise-chart | NortonLifeLock Inc. Quote

Quarterly Details

The monthly direct average revenue per user increased 1.1% on a year-over-year basis to $8.90. The continued stabilization of the direct customer count was an upside. The quarterly bookings increased 4% on a year-over-year basis to $793 million.

NortonLifeLock’s average direct customer count increased to 23.5 million from 22.8 million in the year-ago quarter and 23.4 million in the previous quarter. The customer retention rate was slightly more than 85% as new initiatives were launched for the improvement of overall retention and within specific products and customer cohorts.

Non-GAAP gross profit grew 6.5% year over year to $624 million from $589 million. However, the gross margin contracted by 10 basis points (bps) to 86.9%.

Non-GAAP operating income for the fourth quarter of fiscal 2022 totaled $391 million, up 14.3% year over year. The non-GAAP operating margin expanded by 400 bps to 54.5%.

Non-GAAP EBITDA plunged 55.8% year over year to $159 million, while non-GAAP reported EBITDA jumped 13.5% to $395 million.

Balance Sheet & Other Details

NortonLifeLock exited the fourth quarter with cash and cash equivalents of $1.89 billion compared with the previous quarter’s 1.77 billion. The long-term debt was $2.74 billion, down from $2.76 billion in the previous quarter.

The company generated cash worth $326 million through operating activities in the fourth quarter and $974 million in full fiscal 2022. Free cash flow was $324 million in the fourth quarter and $968 million in full fiscal 2022.

NortonLifeLock authorized a quarterly cash dividend of $0.125 per share payable on Jun 22, 2022 to shareholders of record as of Jun 8.

First-Quarter Fiscal 2023 Guidance

For the first quarter of 2023, NLOK anticipates revenues in the band of $705-$715 million, suggesting year-over growth of 5%-7% on a constant-currency basis, with 3% of forex headwinds.

NortonLifeLock projects non-GAAP earnings between 42 cents and 44 cents in the first quarter, including the assumptions of a negative impact of 3 cents from forex headwinds and 2 cents from the incremental dilution impact of the new accounting guidance on convertible debt.

Zacks Rank & Stocks to Consider

NortonLifeLock currently carries a Zacks Rank #4 (Sell). Shares of NLOK have rallied 14.3% in the past year.

Some better-ranked stocks from the broader technology sector are Semtech SMTC, Gogo GOGO and Analog Devices ADI. Semtech sports a Zacks Rank #1 (Strong Buy), while Gogo and Analog Devices 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 Semtech's first-quarter fiscal 2023 earnings has been revised to 76 cents per share from 70 cents over the past 60 days. For fiscal 2023, earnings estimates have moved north by 8% to $3.38 per share in the past 60 days.

Semtech's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 2.8%. Shares of SMTC have declined 3.7% in the past year.

The Zacks Consensus Estimate for Gogo's second-quarter 2022 earnings has been revised upward by three cents to 15 cents per share over the past 90 days. For 2022, Gogo's earnings estimates have moved south by two cents to 63 cents per share in the past seven days.

Gogo's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 65%. Shares of GOGO have soared 62.2% in the past year.

The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised upward by 4 cents to $2.12 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 11 cents to $8.43 per share in the past 30 days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have decreased 0.6% in the past year.

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