UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                to                

Commission File Number 000-17781

Gen Digital Inc.

(Exact name of the registrant as specified in its charter)

Delaware				77-0181864
(State or other jurisdiction of incorporation or organization)				(I.R.S. employer Identification no.)
60 E. Rio Salado Parkway,	Suite 1000,	Tempe,	Arizona	85281
(Address of principal executive offices)				(Zip code)

Registrant’s telephone number, including area code:

(650) 527-8000

Former name or former address, if changed since last report:

Not applicable

  ________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)	Name of each exchange on which registered
Common Stock,	par value $0.01 per share	GEN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	þ	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
						Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐   No þ

The number of shares of Gen common stock, $0.01 par value per share, outstanding as of January 27, 2023 was 639,129,470 shares.

Table of Contents

GEN DIGITAL INC.

FORM 10-Q

Quarterly Period Ended December 30, 2022

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	51
Signatures		52

“Gen,” “we,” “us,” “our,” and “the Company” refer to Gen Digital Inc. and all of its subsidiaries. Gen, the Gen Logo, the Checkmark Logo, Norton, LifeLock, the LockMan Logo, Avast, Piriform and AVG are trademarks or registered trademarks of Gen Digital Inc. or its affiliates in the United States (U.S.) and other countries. Other names may be trademarks of their respective owners.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

GEN DIGITAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value per share amounts)

	December 30, 2022		April 1, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	812	$	1,887
Short-term investments	—		4
Accounts receivable, net	168		120
Other current assets	366		193
Assets held for sale	30		56
Total current assets	1,376		2,260
Property and equipment, net	104		60
Operating lease assets	49		74
Intangible assets, net	3,212		1,023
Goodwill	10,124		2,873
Other long-term assets	638		653
Total assets	$	15,503	$	6,943
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	75	$	63
Accrued compensation and benefits	106		81
Current portion of long-term debt	233		1,000
Contract liabilities	1,643		1,264
Current operating lease liabilities	26		18
Other current liabilities	795		639
Total current liabilities	2,878		3,065
Long-term debt	9,831		2,736
Long-term contract liabilities	86		42
Deferred income tax liabilities	386		75
Long-term income taxes payable	928		996
Long-term operating lease liabilities	38		75
Other long-term liabilities	46		47
Total liabilities	14,193		7,036
Commitments and contingencies (Note 18)
Stockholders’ equity (deficit):
Common stock and additional paid-in capital, $0.01 par value: 3,000 shares authorized; 639 and 582 shares issued and outstanding as of December 30, 2022 and April 1, 2022, respectively	2,838		1,851
Accumulated other comprehensive income (loss)	(28)		(4)
Retained earnings (accumulated deficit)	(1,500)		(1,940)
Total stockholders’ equity (deficit)	1,310		(93)
Total liabilities and stockholders’ equity (deficit)	$	15,503	$	6,943

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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GEN DIGITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share amounts)

	Three Months Ended				Nine Months Ended
	December 30, 2022		December 31, 2021		December 30, 2022		December 31, 2021
Net revenues	$	936	$	702	$	2,391	$	2,080
Cost of revenues	178		105		399		307
Gross profit	758		597		1,992		1,773
Operating expenses:
Sales and marketing	183		160		506		466
Research and development	91		60		225		194
General and administrative	11		42		225		150
Amortization of intangible assets	61		21		111		63
Restructuring and other costs	44		12		55		24
Total operating expenses	390		295		1,122		897
Operating income (loss)	368		302		870		876
Interest expense	(154)		(32)		(233)		(95)
Other income (expense), net	2		(9)		3		165
Income (loss) before income taxes	216		261		640		946
Income tax expense (benefit)	51		59		206		230
Net income (loss)	$	165	$	202	$	434	$	716
Net income (loss) per share - basic	$	0.26	$	0.35	$	0.72	$	1.23
Net income (loss) per share - diluted	$	0.25	$	0.34	$	0.70	$	1.21
Weighted-average shares outstanding:
Basic	647		582		605		581
Diluted	651		591		617		591

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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GEN DIGITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)

	Three Months Ended				Nine Months Ended
	December 30, 2022		December 31, 2021		December 30, 2022		December 31, 2021
Net income (loss)	$	165	$	202	$	434	$	716
Other comprehensive income (loss), net of taxes:
Foreign currency translation gain (loss)	(13)		(12)		(24)		(25)
Other comprehensive income (loss), net of taxes	(13)		(12)		(24)		(25)
Comprehensive income (loss)	$	152	$	190	$	410	$	691

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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GEN DIGITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in millions, except share amounts)

Three months ended December 30, 2022	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of September 30, 2022	661	$	3,378	$	(15)	$	(1,665)	$	1,698
Net income (loss)	—	—		—		165		165
Other comprehensive income (loss), net of taxes	—	—		(13)		—		(13)
Common stock issued under employee stock incentive plans	1	—		—		—		—
Shares withheld for taxes related to vesting of stock units	—	(1)		—		—		(1)
Repurchases of common stock	(23)	(500)		—		—		(500)
Cash dividends declared ($0.125 per share of common stock) and dividend equivalents accrued	—	(81)		—		—		(81)
Stock-based compensation	—	42		—		—		42
Balance as of December 30, 2022	639	$	2,838	$	(28)	$	(1,500)	$	1,310

Nine months ended December 30, 2022	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of April 1, 2022	582	$	1,851	$	(4)	$	(1,940)	$	(93)
Net income (loss)	—	—		—		434		434
Other comprehensive income (loss), net of taxes	—	—		(24)		—		(24)
Common stock issued under employee stock incentive plans	4	6		—		—		6
Shares withheld for taxes related to vesting of stock units	(1)	(17)		—		—		(17)
Repurchases of common stock	(40)	(904)		—		—		(904)
Cash dividends declared ($0.375 per share of common stock) and dividend equivalents accrued	—	(227)		—		—		(227)
Stock-based compensation	—	95		—		—		95
Extinguishment of convertible debt	—	(100)		—		—		(100)
Cumulative effect adjustment from adoption of ASU 2020-06 (1)	—	(7)		—		6		(1)
Merger consideration	94	2,141		—		—		2,141
Balance as of December 30, 2022	639	$	2,838	$	(28)	$	(1,500)	$	1,310

(1) Effective on April 2, 2022, the Company adopted ASU 2020-06 (Debt with Conversion and Other Options, ASC 470-20) using a modified retrospective method. See Note 2 for further information about this recently adopted guidance.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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GEN DIGITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in millions, except share amounts)

Three months ended December 31, 2021	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of October 1, 2021	582	$	1,996	$	34	$	(2,262)	$	(232)
Net income (loss)	—	—		—		202		202
Other comprehensive income (loss), net of taxes	—	—		(12)		—		(12)
Shares withheld for taxes related to vesting of stock units	—	(1)		—		—		(1)
Cash dividends declared ($0.125 per share of common stock) and dividend equivalents accrued	—	(73)		—		—		(73)
Stock-based compensation	—	18		—		—		18
Balance as of December 31, 2021	582	$	1,940	$	22	$	(2,060)	$	(98)

Nine months ended December 31, 2021	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of April 2, 2021	580	$	2,229	$	47	$	(2,776)	$	(500)
Net income (loss)	—	—		—		716		716
Other comprehensive income (loss), net of taxes	—	—		(25)		—		(25)
Common stock issued under employee stock incentive plans	3	8		—		—		8
Shares withheld for taxes related to vesting of stock units	(1)	(16)		—		—		(16)
Cash dividends declared ($0.375 per share of common stock) and dividend equivalents accrued	—	(220)		—		—		(220)
Stock-based compensation	—	51		—		—		51
Extinguishment of convertible debt	—	(112)		—		—		(112)
Balance as of December 31, 2021	582	$	1,940	$	22	$	(2,060)	$	(98)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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GEN DIGITAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)

	Nine Months Ended
	December 30, 2022		December 31, 2021
OPERATING ACTIVITIES:
Net income	$	434	$	716
Adjustments:
Amortization and depreciation	203		108
Impairments and write-offs of current and long-lived assets	(5)		8
Stock-based compensation expense	95		51
Deferred income taxes	(50)		(16)
Loss (gain) on extinguishment of debt	9		5
Gain on sale of property	—		(175)
Non-cash operating lease expense	17		16
Other	(15)		8
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	8		2
Accounts payable	(10)		29
Accrued compensation and benefits	—		(27)
Contract liabilities	(62)		1
Income taxes payable	(125)		(67)
Other assets	38		29
Other liabilities	(104)		(40)
Net cash provided by (used in) operating activities	433		648
INVESTING ACTIVITIES:
Purchases of property and equipment	(5)		(4)
Payments for acquisitions, net of cash acquired	(6,547)		(39)
Proceeds from the maturities and sales of short-term investments	4		9
Proceeds from the sale of property	—		355
Other	2		(5)
Net cash provided by (used in) investing activities	(6,546)		316
FINANCING ACTIVITIES:
Repayments of debt	(2,738)		(391)
Proceeds from issuance of debt, net of issuance costs	8,954		512
Net proceeds from sales of common stock under employee stock incentive plans	6		8
Tax payments related to vesting of stock units	(20)		(15)
Dividends and dividend equivalents paid	(234)		(230)
Repurchases of common stock	(904)		—
Net cash provided by (used in) financing activities	5,064		(116)
Effect of exchange rate fluctuations on cash and cash equivalents	(26)		(10)
Change in cash and cash equivalents	(1,075)		838
Beginning cash and cash equivalents	1,887		933
Ending cash and cash equivalents	$	812	$	1,771

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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GEN DIGITAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business and Significant Accounting Policies

Business

On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued ordinary share capital of Avast plc, a public company incorporated in England and Wales and a global leader of digital security and privacy headquartered in Prague, Czech Republic (Avast and such transaction, the Merger). On September 12, 2022, we completed the Merger with Avast, and its results of operations have been included in our Condensed Consolidated Statements of Operations beginning September 12, 2022. See Note 4 for further information about this business combination.

In connection with the Merger, effective November 7, 2022, we changed our corporate name from NortonLifeLock Inc. to Gen Digital Inc. (Gen).

Gen is a global, leading provider of consumer Cyber Safety solutions. Our portfolio provides protection across three Cyber Security categories: security, identity protection and online privacy. We help customers protect their computer and mobile devices from online threats, safeguard their identity and personal information and strengthen online privacy capabilities and functionalities.

Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America for interim financial information. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022. The results of operations for the three and nine months ended December 30, 2022 are not necessarily indicative of the results expected for the entire fiscal year.

Fiscal calendar

We have a 52/53-week fiscal year ending on the Friday closest to March 31. Unless otherwise stated, references to three and nine month periods in this report relate to fiscal periods ended December 30, 2022 and December 31, 2021. The three and nine months ended December 30, 2022 and December 31, 2021 each consisted of 13 and 39 weeks, respectively. Our 2023 fiscal year consists of 52 weeks and ends on March 31, 2023.

Use of estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying Notes. Such estimates include, but are not limited to, valuation of business combinations including acquired intangible assets and goodwill, loss contingencies, the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions, and valuation of assets and liabilities. On an ongoing basis, management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Third-party valuation specialists are also utilized for certain estimates. Actual results could differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment as a result of macroeconomic factors such as inflation, fluctuations in foreign currency exchange rates relative to the U.S. dollars, our reporting currency, changes in interest rates, the COVID-19 pandemic and Russia’s invasion of Ukraine, and such differences may be material to the Condensed Consolidated Financial Statements.

Significant accounting policies

With the exception of those discussed in Note 2, there have been no material changes to our significant accounting policies as of and for the three and nine months ended December 30, 2022, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022.

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Note 2. Recent Accounting Standards

Recently adopted authoritative guidance

Debt with Conversion and Other Options. In August 2020, the FASB issued Accounting Standards Update 2020-06 (ASU 2020-06) which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The new guidance removes from GAAP the separation models for convertible debt with embedded conversion features. As a result, entities will no longer separately present embedded conversion features in equity. A convertible debt instrument will be accounted for wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. In addition, the debt discount, which is equal to the carry value of the embedded conversion feature upon issuance, will no longer be amortized as interest expense over the life of the instrument. The new guidance also requires the use of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share and include the effect of share settlement for instruments that may be settled in cash or shares. See Note 16 for further information related to the diluted earnings per share calculation.

We adopted this standard as of April 2, 2022, the first day of fiscal 2023, using a modified retrospective method of transition, under which, financial results and earnings per share amounts reported in prior periods were not adjusted or restated in the Condensed Consolidated Financial Statements. As such, the new guidance was applied to the convertible debt instruments outstanding as of the beginning of this fiscal year, with the cumulative effect of adoption recognized through an adjustment to the opening balance of retained earnings. We increased the carrying amount of the New 2.0% Convertible Notes (as defined in Note 10) by approximately $1 million and reduced additional paid-in capital by approximately $7 million, net of tax. The net effect of these adjustments was recorded as an increase to retained earnings as of April 2, 2022.

Reference Rate Reform. In March 2020, the FASB issued new guidance providing temporary optional expedients and exceptions to ease the financial reporting burden of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR). The standard was effective upon issuance and may generally be applied through December 31, 2024, to any new or amended contracts, hedging relationships and other transactions that reference LIBOR. As of December 30, 2022, we have fully transitioned to SOFR and no longer use LIBOR on any debt or material contractual arrangements that are outstanding. Any future contracts, hedging relationships and other transactions will be SOFR denominated.

Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had, or will have, a material impact on our Condensed Consolidated Financial Statements and disclosures.

Note 3. Assets Held for Sale

Assets held for sale

During fiscal 2020, we reclassified certain land and buildings previously reported as property and equipment to assets held for sale when the properties were approved for immediate sale in their present condition and the sale was expected to be completed within one year. However, the commercial real estate market was adversely affected by the COVID-19 pandemic, which delayed the expected timing of such sales.

During the second quarter of fiscal 2023, we determined certain land and buildings in Mountain View, California, which were previously reported as assets held for sale as of April 1, 2022, no longer qualify as held for sale classification. As a result, we reclassified the aggregate $26 million carrying value from assets held for sale to property and equipment, net, in our Condensed Consolidated Balance Sheets and recorded an immaterial catch-up depreciation adjustment, which is included in our Condensed Consolidated Statements of Operations.

We continue to actively market the remaining property for sale. We have taken into consideration the current real estate values and demand and continue to execute plans to sell this property. As of December 30, 2022, this property remains classified as assets held for sale. During the three and nine months ended December 30, 2022, there were no impairments because the fair value of the properties less costs to sell either equals or exceeds their carrying value.

Note 4. Business Combinations

Merger with Avast

On August 10, 2021, we announced a transaction under which we intended to acquire the entire issued and to be issued share capital of Avast plc, a public company incorporated in England and Wales (Avast and such transaction, the Merger). The Merger was implemented by means of a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006 (the Scheme). Under the terms of the Merger, Avast shareholders were entitled to elect to receive, for each ordinary share of Avast held, in respect of their entire holding of Avast shares, either: (i) $7.61 in cash and 0.0302 of a new share of our common stock (such option, the Majority Cash Option); or (ii) $2.37 in cash and 0.1937 of a new share of our common stock (such option, the Majority Stock Option). Each Avast Director who held Avast shares elected for the Majority Stock Option in respect to their entire beneficial holdings of Avast shares.

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The Merger was approved by our Board of Directors and by our shareholders, the Board of Directors and shareholders of Avast, and regulators including the Federal Trade Commission under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) and in Europe, the German Federal Cartel Office, the Spanish National Markets and Competition Commission and the U.K. Competition and Markets Authority.

Closing of Merger with Avast

On September 12, 2022 (the Closing Date), we completed the Merger with Avast, and as a result, we have changed our corporate name to Gen Digital Inc. and have become dual headquartered in Tempe, Arizona and Prague, Czech Republic. Prior to the Merger, Avast was a global leader in consumer cybersecurity, offering a comprehensive range of digital security and privacy products and services that protected and enhanced users’ online experiences. With this Merger, we are positioned to provide a broad and complementary consumer product portfolio with greater geographic diversification and access to a larger user base.

Upon completion of the Merger, we acquired all of the outstanding common stock of Avast. Based on the election of the Avast shareholders, we paid cash consideration of approximately $6,910 million and issued 94,201,223 shares of our common stock to Avast shareholders. As a result, immediately following the closing of the Merger, Avast shareholders owned approximately 14% of our outstanding common stock. The fair value of our common stock provided on September 12, 2022 in exchange for all outstanding ordinary shares of Avast was approximately $2,141 million.

Consideration transferred

The total consideration for the Merger with Avast was approximately $8,688 million, net of cash acquired, and consisted of the following:

(In millions)	September 12, 2022
Cash and equity consideration for outstanding Avast common shares (1)	$	8,109
Repayment of outstanding Avast debt (2)	942
Total consideration	9,051
Cash acquired	363
Net consideration transferred	$	8,688

(1)     Represents the total value of cash paid and our common stock issued to Avast shareholders pursuant to the Majority Cash/Stock Option in the Scheme.

(2)     Represents the cash consideration paid concurrent with the close of the Merger to retire certain Avast debt, including repayment of the associated principal, accrued interest, premiums and other costs.

Fair value of assets acquired and liabilities assumed

We accounted for the Merger as a business combination. The identifiable assets acquired and liabilities assumed of Avast were recorded at their estimated fair values as of the acquisition date and consolidated with those of our company. The allocation of purchase price requires management to make significant estimates and assumptions in determining the fair values of the assets acquired and liabilities assumed, especially with respect to intangible assets. Third-party valuation specialists were also utilized for certain estimates.

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Our preliminary allocation of the aggregate purchase price, based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date, is as follows:

(In millions)	September 12, 2022
Assets:
Accounts receivable	$	63
Other current assets	18
Property and equipment	29
Operating lease assets	18
Intangible assets	2,383
Goodwill	7,265
Other long-term assets	10
Total assets acquired	9,786
Liabilities:
Current liabilities	181
Contract liabilities	508
Operating lease liabilities	18
Long-term deferred tax liabilities	345
Other long-term obligations	46
Total liabilities assumed	1,098
Total purchase price	$	8,688

The allocation of the purchase price is based upon a preliminary valuation, and as additional information becomes available, our estimates and assumptions may be subject to refinement within the measurement period, which may be up to one year from the acquisition date. Adjustments to the purchase price may require adjustments to goodwill prospectively. The primary areas of preliminary purchase price allocation that are not yet finalized include intangible assets and certain tax and litigation matters.

The preliminary goodwill of $7,265 million represents the excess of the consideration transferred over the fair values of the assets acquired and liabilities assumed. It is attributable to the expected synergies of the Merger, including future cost savings from planned integration of infrastructure, facilities, personnel and systems, and other benefits that are anticipated to be generated by combining both companies. Goodwill is allocated to our single reportable segment. Substantially all of the goodwill recognized is expected to be deductible for U.S. tax purposes. See Note 6 for further information on goodwill.

Preliminary identified intangible assets and their respective useful lives, as of September 12, 2022, are as follows:

(In millions, except for useful lives)	Fair Value		Weighted-Average Estimated Useful Life (Years)
Customer relationships (1)	$	1,055	7 years
Developed technology (2)	1,244		6 years
Finite-lived trade names (2)	84		10 years
Total identified intangible assets	$	2,383

(1)     Customer relationships were valued using the multi-period excess earnings method, which is a form of the income approach that primarily considers customer retention rate.

(2)     Developed technology and finite-lived trade names were valued using the relief-from-royalty method, which is a form of the income approach that primarily considers technology migration and probability of use, respectively.

Financing

In connection with the Merger, on September 12, 2022, we entered into the Amended and Restated Credit Agreement (Credit Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $1,500 million revolving credit facility (Revolving Facility), a $3,910 million term loan A facility (Term A Facility), (iii) a $3,690 million term loan B facility (Term B Facility) and (iv) a $750 million tranche A bridge loan (Bridge Loan) (collectively, the senior credit facilities). The Bridge Loan was undrawn and immediately terminated upon the Merger’s close. The proceeds were or will be used (i) to finance the cash consideration payable for the Merger, (ii) to repay in full and terminate all commitments under Avast’s credit facility, (iii) to pay expenses relating to the Merger, (iv) to add cash to the balance sheet and (v) for general corporate purposes and on-going business activities. See Note 10 for further information about these debt instruments and the related debt covenants.

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In connection with the financing provided by the Term B Facility, we incurred customary ticking fees with respect to the undrawn commitments that began accruing on the 61st day post-syndication. The ticking fees were payable at the per annum rate of (i) 50% of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans for 61-90 days from January 28, 2022, the syndication date, and (ii) 100% of the interest rate margin for adjusted SOFR (or applicable replacement rate) loans on and after 91 days from the syndication date. Ticking fees were payable on the Closing Date of the Merger. During the nine months ended December 30, 2022, we paid $31 million in ticking fees.

Impact on operating results

The operating results of Avast have been included in our Condensed Consolidated Statements of Operations beginning September 12, 2022. Our results of operations for the three and nine months ended December 30, 2022 include $234 million and $282 million, respectively, of net revenues booked through the Avast enterprise resource planning system. This total post-acquisition revenue extracted from the legacy Avast system is not comparable to pre-acquisition results due to our product integration strategy, cross-selling activities and the reallocation of performance marketing spend deployed to maximize total GEN revenue and not revenue by brand. It is also impracticable to provide income before income taxes attributable to Avast subsequent to the Merger due to the integration of our operations. The Company does not consider it to be a separate operating unit or a separate reporting segment, pursuing an integrated brand, selling and marketing strategy, and is in the advanced stages of completing the full integration of Avast with our ongoing operations.

We recognized transaction and integration costs of $5 million and $7 million for the three months ended December 30, 2022 and December 31, 2021, respectively, and $71 million and $28 million for the nine months ended December 30, 2022 and December 31, 2021, respectively. These costs were primarily associated with legal and professional services and other regulatory closing fees, which were expensed as incurred and included in general and administrative expenses in our Condensed Consolidated Statements of Operations.

On the Closing Date of the Merger, we incurred $145 million of debt issuance costs associated with the senior credit facilities, of which $132 million was capitalized and recorded as a reduction of outstanding debt balances and $10 million was capitalized and included in Other long-term assets in our Condensed Consolidated Balance Sheets. The remaining $3 million was capitalized but immediately extinguished in conjunction with the termination of the Bridge Loan.

Unaudited pro forma information

The following unaudited pro forma financial information represents the combined historical results for the three and nine months ended December 30, 2022 and December 31, 2021, as if the Merger had been completed on April 3, 2021, the first day of fiscal 2022. The results presented below include adjustments to conform Avast financial information, prepared in accordance with International Financial Reporting Standards (IFRS), to U.S. GAAP as well as the impacts of material, nonrecurring pro forma adjustments, including amortization of acquired intangible assets, interest on debt issued to finance the Merger, and acquisition-related transaction costs, and the income tax effect of the other pro forma adjustments. The unaudited pro forma results do not include any anticipated synergies or other expected benefits of the Merger. The following table summarizes the unaudited pro forma financial information:

	Three Months Ended				Nine Months Ended
(In millions)	December 30, 2022		December 31, 2021		December 30, 2022		December 31, 2021
Net revenues	$	936	$	939	$	2,857	$	2,784
Net income (loss)	$	204	$	113	$	323	$	341

The unaudited pro forma financial information is provided for informational purposes only and are not indicative of future operations or results that would have been achieved had the Merger been completed as of the beginning of fiscal 2022.

Fiscal 2022 acquisition

On September 15, 2021, we completed an acquisition of an online reputation management and digital privacy solutions company for total aggregate consideration of $39 million, net of $1 million cash acquired. The purchase price was primarily allocated to intangible assets and goodwill. Our estimates and assumptions were subject to refinement within the measurement period, which is up to one year from the acquisition date. Adjustments to the purchase price during the measurement period required adjustments to be made to goodwill. The measurement period ended on September 14, 2022.

Note 5. Revenues

Contract liabilities

During the three and nine months ended December 30, 2022, we recognized $686 million and $1,116 million from the contract liabilities balances as of September 30, 2022 and April 1, 2022, respectively. During the three and nine months ended December 31, 2021, we recognized $505 million and $1,093 million from the contract liabilities balances as of October 1, 2021 and April 2, 2021, respectively.

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Remaining performance obligations

Remaining performance obligations represent contract revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods. As of December 30, 2022, we had $1,179 million of remaining performance obligations, excluding customer deposit liabilities of $550 million, of which we expect to recognize approximately 93% as revenue over the next 12 months.

See Note 17 for tabular disclosures of disaggregated revenue by solution and geographic region.

Note 6. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill were as follows:

(In millions)
Balance as of April 1, 2022	$	2,873
Merger with Avast	7,265
Translation adjustments	(14)
Balance as of December 30, 2022	$	10,124

Intangible assets, net

	December 30, 2022						April 1, 2022
(In millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	1,639	$	(490)	$	1,149	$	583	$	(382)	$	201
Developed technology	1,460		(222)		1,238		217		(143)		74
Other	91		(5)		86		8		(3)		5
Total finite-lived intangible assets	3,190		(717)		2,473		808		(528)		280
Indefinite-lived trade names	739		—		739		743		—		743
Total intangible assets	$	3,929	$	(717)	$	3,212	$	1,551	$	(528)	$	1,023

As a result of the Merger with Avast, we recorded $2,383 million of acquired intangible assets during the second quarter of fiscal 2023. See Note 4 for further information about this business combination.

Amortization expense for purchased intangible assets is summarized below:

	Three Months Ended				Nine Months Ended				Condensed Consolidated Statements of Operations Classification
(In millions)	December 30, 2022		December 31, 2021		December 30, 2022		December 31, 2021
Customer relationships and other	$	61	$	21	$	111	$	63	Operating expenses
Developed technology	57		11		78		32		Cost of revenues
Total	$	118	$	32	$	189	$	95

As of December 30, 2022, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

(In millions)
Remainder of 2023	$	118
2024	461
2025	400
2026	394
2027	381
Thereafter	719
Total	$	2,473

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Note 7. Supplementary Information

Cash and cash equivalents:

(In millions)	December 30, 2022		April 1, 2022
Cash	$	468	$	609
Cash equivalents	344		1,278
Total cash and cash equivalents	$	812	$	1,887

Accounts receivable, net:

(In millions)	December 30, 2022		April 1, 2022
Accounts receivable	$	169	$	121
Allowance for doubtful accounts	(1)		(1)
Total accounts receivable, net	$	168	$	120

Other current assets:

(In millions)	December 30, 2022		April 1, 2022
Prepaid expenses	$	118	$	107
Income tax receivable and prepaid income taxes	206		35
Other tax receivable	24		27
Other	18		24
Total other current assets	$	366	$	193

Property and equipment, net:

(In millions)	December 30, 2022		April 1, 2022
Land	$	14	$	2
Computer hardware and software	496		462
Office furniture and equipment	27		27
Buildings	41		27
Leasehold improvements	63		56
Construction in progress	1		1
Total property and equipment, gross	642		575
Accumulated depreciation and amortization	(538)		(515)
Total property and equipment, net	$	104	$	60

During the second quarter of fiscal 2023, we reclassified $26 million of buildings and leasehold improvements, which were previously reported as held for sale as of April 1, 2022, to property and equipment, net. Adjustments associated with catch-up depreciation were immaterial. Refer to Note 3 for further information about our assets held for sale.

Other long-term assets:

(In millions)	December 30, 2022		April 1, 2022
Non-marketable equity investments	$	182	$	178
Long-term income tax receivable and prepaid income taxes	21		25
Deferred income tax assets	348		351
Long-term prepaid royalty	41		53
Other	46		46
Total other long-term assets	$	638	$	653

Short-term contract liabilities:

(In millions)	December 30, 2022		April 1, 2022
Deferred revenue	$	1,093	$	743
Customer deposit liabilities	550		521
Total short-term contract liabilities	$	1,643	$	1,264

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Other current liabilities:

(In millions)	December 30, 2022		April 1, 2022
Income taxes payable	$	243	$	109
Other taxes payable	88		87
Accrued legal fees	273		273
Accrued royalties	43		49
Accrued interest	42		32
Other	106		89
Total other current liabilities	$	795	$	639

Long-term income taxes payable:

(In millions)	December 30, 2022		April 1, 2022
Deemed repatriation tax payable	$	310	$	437
Other long-term income taxes	4		3
Uncertain tax positions (including interest and penalties)	614		556
Total long-term income taxes payable	$	928	$	996

Other income (expense), net:

	Three Months Ended				Nine Months Ended
(In millions)	December 30, 2022		December 31, 2021		December 30, 2022		December 31, 2021
Interest income	$	5	$	—	$	10	$	—
Foreign exchange gain (loss)	(7)		1		(8)		3
Gain (loss) on early extinguishment of debt	—		—		(9)		(5)
Gain on sale of properties	—		—		—		175
Other	4		(10)		10		(8)
Other income (expense), net	$	2	$	(9)	$	3	$	165

Supplemental cash flow information:

	Nine Months Ended
(In millions)	December 30, 2022		December 31, 2021
Income taxes paid, net of refunds	$	378	$	297
Interest expense paid	$	212	$	105
Cash paid for amounts included in the measurement of operating lease liabilities	$	18	$	19
Non-cash operating activities:
Operating lease assets obtained in exchange for operating lease liabilities	$	23