Gen Digital Inc (GEN) — Q4 2023 Earnings Call Transcript

Thank you, Lauren, and good afternoon everyone. Welcome to Gen's fourth quarter fiscal 2023 earnings call. Joining me today to review our Q4 and full year results are Vincent Pilette, CEO; and Natalie Derse, CFO. As a reminder, there will be a replay of this call posted on the IR website along with our slides and press release. I'd like to remind everyone that during this call, all references to the financial metrics are non-GAAP and all growth rates are year-over-year unless otherwise stated. A reconciliation of non-GAAP to GAAP measures is included in our press release which is available on the IR website. Today's call contains statements regarding our business, financial performance, and operations including the impact of our business industry that may be considered forward-looking statements and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those statements are based on current beliefs, assumptions, and expectations and speak only as of the current date. For more information, please refer to the cautionary statement in our press release and the risk factors in our filings with the SEC and in particular, our most recent reports on Form 10-K and 10-Q. And now, I will turn the call over to our CEO. Vincent?

Thank you, Mary. Good afternoon everyone and welcome to our earnings call. As I reflect on the year, I'm proud of all that we have accomplished and I'm excited about the tremendous long-term opportunity in front of us. Three years ago we strategically set out to be singularly focused on redefining cyber safety for the billions of individuals connected to the digital world. We believe then as we do now that the complexity of our digital lives calls out for someone to help protect people from the myriads of threats with innovative and easy-to-use technology that could seamlessly stitch together solutions across security, identity, and privacy before reaching into adjacent trust-based solutions. Well, that someone is us, Gen. We are confident that our reach, innovation capability, and disciplined execution can deliver on that strategy, and will sustainably deliver long-term profitable growth and increasing shareholder value. Let me quickly recap our year. For fiscal year 2023, we delivered another year of organic growth, our fourth consecutive year of growth in consumer cyber safety. We delivered mid-single-digit growth in cyber safety bookings and revenue, and exited the year on a $3.7 billion revenue run rate, up from $2.4 billion three years ago. During that period, we considerably expanded our scope across our cyber safety pillars of security, identity, and privacy, and became truly global with 60% of our customers now from outside the US. We also expanded our reach with our vast capabilities in our freemium and free user base in the hundreds of millions. Gen, with its trusted brands, omnichannel expertise, and rigorous execution, is well-positioned to expand the adoption of cyber safety across the globe. We have over 38 million direct paid customers as we exit fiscal year 2023, up from 20 million three years ago. Despite the pressure on our direct customer count in a post-COVID environment, which saw a sequential decline of 180,000 in Q4, our direct business actually grew low single-digits in Q4 and fiscal year 2023. Our direct customer retention rate ended the year at 76% and our annual ARPU was nearly $87 as we exited fiscal year 2023. In two quarters since the close of the Avast acquisition, we have increased our overall annual ARPU by $3 and our overall retention rate by one point, a testament to the increased value we are providing our customers with our expanded product portfolio offerings, the membership adoption, and the increased loyalty. Both metrics, ARPU and retention rates, improved sequentially in this last quarter and confirm the value creation thesis at the core of our merger with Avast. In addition to our 38 million direct paid customers, we also protect over 26 million indirect customers with solutions sold through partners. In fiscal year 2023, indirect customers grew over 1.5 million with about 400,000 sequentially added in Q4. Our partner revenue delivered its third consecutive year of double-digit growth for fiscal year 2023 and we continue to see tremendous opportunities to reach more consumers via diversified channels in our partner business. Our employee benefits channel again grew double digits, accelerating in growth as employers recognize the growing demand from employees. Identity protection is becoming a stable offering in benefits packages just like health care and life insurance. We also continue to scale our telco relationships in key international markets, working closely with our partners to expand their offerings and provide comprehensive cyber safety protection to millions of customers. Our strategy to diversify the distribution channels and grow the value of the offering with these partners is actually working. On the innovation front, we maintained a strong pace throughout fiscal year 2023. We introduced more than 10 new products and features including international privacy monitoring assistance, Norton AntiTrack, Norton Identity Advisor, Avast Email Advisor, Avast Identity Solution with Avast Secure Identity, and Avast One Platinum, Norton Executive Benefit Program for the C-suite with reputation management features, utility account alerts for US LifeLock, and Norton 360 numbers. Each of these is a step forward in our strategic efforts to rapidly expand capabilities, protection, and geographic reach in privacy and identity. We have accomplished a lot in the business this year, but I would be remiss to not mention the tremendous job the team has done in bringing together Avast and NortonLifeLock. Within six months of growth, our sales, G&A, and overall infrastructure processes have been fully integrated. Our single ERP, integrated code cash processes, unified go-to-market structure, and functional organizational structures are all in place. We've already realized two-thirds of the cost synergies as we exited fiscal year 2023. This was no small feat given the size, scale, and complexity of the two businesses. Overall, we have accelerated the integration process and we are on track to achieve the $300 million-plus annual cost savings exiting fiscal year 2024. Our integration efforts helped us deliver another point of sequential operating margin improvement in Q4, reaching 57%. In fiscal year 2023, we scaled operating profit to $1.8 billion, up 24% year-over-year and more than doubled compared to three years ago. This profit margin and the resulting unlevered free cash flow gives us great confidence that we can navigate the short-term volatility and uncertainties of the global economy. Product integration, broadly defined, is what remains in front of us and is well underway. We see it as an opportunity to accelerate our march towards our vision of cyber safety that is digital life-centered, tailored to your needs, and easy to use. This requires a unified and simplified product architecture. Progress on this front will allow us to extend our reach to more people, giving them exactly what they need while better enabling us to educate them on additional protection and value that we can offer. This is a key enabler of our revenue synergies in fiscal year 2024 and 2025. We still have work to do here, but with our comprehensive set of products, we believe these changes unlock not only those mid-term opportunities but also position us perfectly for the long-term in cyber safety and in trust-based adjacencies. You've heard me talk time and time again about all of our opportunities but let me sum it up briefly. We aim to make cyber safety much more accessible, engaging, and easy to use for everyone. That will undoubtedly continue to grow our customer appeal and loyalty. To start, in particular within the Avast business, we can improve the customer experience and fully integrate our customer journey. Avast retention improved two points in the last six months, and we believe the potential is at least a 10-point improvement as we incorporate user-focused changes. Secondly, customers always focus on value and we have a tremendous opportunity to show them the value of our cyber safety offering, and to continually add to it as the needs evolve and the threats increase. The move towards protection of identity and privacy, and the protection of your full digital footprint will continue. We have increased monthly ARPU by $0.26, or 4% in the last six months, and our long-term objective is to move above $8, adjusted for a new geographical mix. Finally, we know that customer count is a critical metric for our long-term success. In addition to continued growth in indirect customers, where a portion of the market is moving to, we know that in the long-term we will grow our customer base materially. We believe that our initiatives in mobile, emerging markets, and optimizing our marketing spend among a few will help us stabilize the trend in direct customer count and ultimately return it to growth. And with that, let me pass the floor to Natalie, who will talk about our detailed performance.

Thank you, Vincent, and hello, everyone. For today's call, I will walk through our full year fiscal 2023 performance followed by our Q4 results and wrap up with our outlook for Q1 fiscal year 2024. I will focus on non-GAAP financials and year-over-year growth rates unless otherwise stated. Fiscal year 2023 was another year of progress towards achieving our long-term $3 EPS target and was our fourth straight year of organic growth as a pure-play consumer cyber safety company. As we successfully closed our merger with Avast and integrated as one Gen company, we finished fiscal year 2023 with over $3.3 billion in total revenue, growth of 19% in USD and 23% growth in constant currency. When including Avast's historical financials, cyber safety revenue grew 4% year-over-year in constant currency amidst the dynamic macro environment. We challenged ourselves to accelerate the execution of our committed cost synergies and remain disciplined in our investments, which enabled us to expand full year operating margin to 55%, up 220 basis points year-over-year. This growth and discipline led us to deliver $1.81 in EPS, up 4% from the prior year and up 10% in constant currency after incurring a significantly higher amount of debt costs than anticipated at the time of the deal announcement. Our customer base is resilient with over 38 million direct cyber safety customers. Across our Gen business, we have a strong and increasing customer retention rate of 76% and a growing direct monthly average revenue per user, or ARPU, of $7.24, as we scale our cross-selling and upselling efforts, providing increased value to our direct customer base with new security, identity, and privacy offerings. Our business with partners continues to grow, and we've expanded to a total paid customer base of approximately 65 million. We are enabling growth with the continued evolution of our product portfolio, and introduced over 10 new products and features this year to provide best-in-class protection and unlock new capabilities for our customers. Turning to Q4 performance. Q4 was our 15th consecutive quarter of growth, and our results reflect another quarter of consistent execution. We exceeded our revenue guidance and came in at the high end of our EPS guidance. We also crossed $1 billion in bookings for the first time, with Q4 bookings up 29% in USD, and up 32% in constant currency. When including Avast's historical financials, cyber safety bookings grew 2% year-over-year in constant currency. Q4 non-GAAP revenue was $948 million, up 32% in USD, and up 35% in constant currency. This also includes an unfavorable FX headwind of $21 million year-over-year, or three points of growth. When including Avast's historical results, cyber safety revenue grew 3% year-over-year in constant currency. Direct revenue was $831 million, up 32% in USD, and up 3% when including Avast historicals. We continue to drive higher value and loyalty with our existing customers, as both ARPU and retention improve. As I referenced above, monthly direct ARPU is $7.24, an expansion of $0.15 quarter-over-quarter driven by our cross-sell and upsell efforts and as our identity and privacy offerings grew double digits in the quarter. Ending direct customer count was 38.2 million, a decline of 183,000 customers quarter-over-quarter, a trend we are working hard to reverse. Lower web traffic demand continues to impact the customer acquisition funnel, despite improvements in conversion. We continue to invest in a diverse mix of marketing spend to reach new audiences and drive more traffic to our sites, while dynamically optimizing the channel and geographic mix to drive the highest returns. It is imperative that we continue to focus on improving retention in our existing customer base. Our aggregate direct retention rate improved one point quarter-over-quarter to 76%, which is a strong indication that our efforts to increase customer engagement are working. Offering the best customer experience remains at the core of our values, and we are pleased with the progress made this quarter. Before I move off the direct business, I want to give a quick update on revenue synergies. As I shared six months ago, we expect traction with revenue synergies to be measured directly through ARPU and retention improvements over the coming quarters to support our bookings and top line growth expectations. Two quarters later, we have expanded monthly ARPU by over $0.25, translating to $3 of increased annual ARPU. We have improved Avast retention, making progress to narrow the prior 20-point retention differential between NortonLifeLock and Avast observed at the time of close. You will continue to see us expand our ARPU and retention rates over the coming quarters. Moving on to partners. Partner revenue was $100 million in Q4, delivering 35% growth year-over-year as reported in USD and 9% growth when including Avast historical results. This was our third consecutive year of double-digit revenue growth in our partner business, as we continue to scale our identity offerings through key channels like employee benefits, telcos, and breach protection. With our broad reach and omni-channel strategy, we will continue growing our pipeline, scale and nurture existing partnerships, and build further growth momentum. Rounding out our revenue, our legacy business lines contributed $17 million this quarter, and now make up less than 2% of our revenue. We expect legacy to continue its decline at a similar pace as Q4. Turning to profitability. Q4 operating income was $541 million, up 38% year-over-year. We expanded operating margin to 57% as we continue to make strong inroads to the 60-plus margin framework we've outlined in our long-term model. In Q4, we reduced our overall operating expense profile from 31% to 29% of revenue sequentially, while maintaining gross margins above 86%. Since the close of the merger, we've rightsized our organization structure to under 3,700 from approximately 4,500. Our hybrid workforce strategy has also enabled us to further rationalize our real estate and data center footprint, driving structural reductions in our operating model. Exiting Q4, we achieved approximately two-thirds of the annual cost synergy target from a run rate perspective with the remaining integration efforts focused on product and engineering. We remain well on track to achieve cost synergies of over $300 million as we exit fiscal year 2024. Ultimately, our accelerated pace and track record of strong execution will unlock more operating leverage, enabling us to selectively reinvest back into growth and innovation in fiscal year 2024 and beyond. Q4 net income was $296 million, up 9% year-over-year. Diluted EPS was $0.46 for the quarter, stable year-over-year and up 4% in constant currency, including $0.02 of currency headwind. Interest expense related to our debt was approximately $160 million in Q4, with an EPS impact of $0.19, and a $0.16 headwind compared to last year. Our non-GAAP tax rate remains at 23%. And our ending share count was 644 million, down 7 million quarter-over-quarter, reflecting the weighted impact of last quarter's share repurchases. Turning to our cash flow and balance sheet. Q4 operating cash flow was $324 million, and free cash flow was $323 million, which includes approximately $177 million of cash interest payment this quarter. This brings our total fiscal year 2023 free cash flow to over $750 million, which includes $381 million of interest expense paid, approximately $120 million of costs related to the Avast merger, and $43 million of cash restructuring expenses. Our ending cash balance is $750 million. Turning to capital allocation. We remain intentional and balanced with our capital deployment. In fiscal year 2023, we returned over $1.2 billion of capital to shareholders with approximately $900 million in share buybacks and the rest in the form of our regular quarterly dividends. In Q4, we paid $80 million to shareholders in the form of our regular quarterly dividend of $0.125 per common share. For the next quarter, Q1 fiscal 2024, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on June 14, 2023, for all shareholders of record as of the close of business on May 22, 2023. In addition, since we closed the Avast merger, we have deployed approximately $460 million towards debt paydown when you include the April voluntary payment. We continue to be supported by strong total liquidity of over $2.2 billion, and we have no near-term maturities due in the next two years. With our strong cash flow generation and disciplined capital deployment, we will continue to utilize our capital to deliver EPS expansion with expected net leverage of approximately 3.9x within 12 months post-Avast deal close and remain committed to the target of approximately 3x over the long-term. We will maintain a balanced approach, commit to our regular dividends, pay down debt, and deploy opportunistic share buybacks. Now turning to our fiscal Q1 2024 outlook. For Q1, we expect non-GAAP revenue in the range of $940 million to $950 million, translating to low single-digit growth in cyber safety expressed in constant currency. We expect Q1 non-GAAP EPS to be in the range of $0.45 to $0.47 per share, as cost synergies are partially offset by near-term increased interest expense based on current SOFR forward curves. For the full fiscal year 2024, we expect bookings growth in low to mid-single digits, scaling through the year as we make progress on our key metrics. We remain focused on driving our long-term objectives and are still targeting to exit fiscal year 2025 on a $3 annualized EPS with the following underlying key assumptions: cyber safety business to grow mid-single digits, post-synergy structure of 60-plus percent operating margin, and free cash flow deployed towards debt paydown and share buyback, with SOFR curve trends indicating rates below 3% exiting fiscal year 2025. Diluted share count is expected to be around pre-Avast merger levels. In summary, we are closing out this fiscal year with a strong sense of accomplishment. We have successfully introduced Gen to the world and are excited to scale as the leader in global cyber safety protection. Our financial model remains resilient, powered by our best-in-class products and technologies and a loyal customer base. As we look forward to fiscal year 2024 and an evolving macroeconomic environment, we will remain very disciplined in how we operate, focusing on executing our plan and will be strategic and intentional in where we invest to maximize long-term shareholder value. As always, thank you for your time today. And I will now turn the call back to the operator to take your questions.

Okay. Great. Hey, good afternoon, guys. Thanks for taking my questions here.

Hey, Saket.

Vincent maybe first for you. Great to see the improvement in retention, I think you said it was one point for the company overall quarter-over-quarter. Great to see that. Can you just maybe talk us through what's driving that in your view? And maybe as part of that just touch on what's happening within the Avast base from a retention perspective?

Sure. We prefer not to disclose our operational strategies widely and instead focus on developing our unique process. However, I can share some examples of our efforts. Overall, our company retention improved to over 76%, with a one-point increase. This improvement is attributed to two factors: stable retention rates in our Norton and LifeLock brands and a two-point enhancement in Avast's retention. It's important to note the stabilization in the NortonLifeLock brands, which boast industry-leading retention rates, a significant achievement that requires ongoing effort to enhance customer value. On the Avast front, its retention rate was about 20 points lower than Norton and LifeLock, sitting at around 65%, compared to 85% for NortonLifeLock. Before acquiring Avast, we had similar experiences with retention in a freemium business model like Avira, which also showed slightly above 80%. Our strategy involved identifying operational opportunities, with approximately half of the gap being operationally driven, around 10 points, while the rest stemmed from structural factors like geographical mix, business models, and product value. We focused on addressing the operational aspects first. Some actions we took included merging our renewal teams across all brands into one, separating renewal activities from customer journey activities to enhance education and communication that benefits customers, and centralizing marketing operations for renewals across all brands while collaborating with our e-commerce partner to improve our online sales experience. As you might know, NortonLifeLock has its own system, while Avast relied on outsourcing. We are now sharing best practices and implementing quick wins. These operational improvements are ongoing and will take a few quarters to fully realize. Overall, we remain cautiously optimistic that this positive trend will continue in the upcoming quarters.

Got it. Got it. That's super helpful. Natalie, maybe for my follow-up for you. I thought it was great to see the deleveraging in the quarter. I think it was about $300 million. You correct me there if I'm wrong. But can you just maybe talk through how you're thinking about debt paydown this year? And maybe related to that, how you're thinking about interest expense even just broad brush?

Yeah sure. Hi, Saket. Just for a reminder for everybody else on the phone, so we did—since the funding of the deal—we did $460 million of debt repayment-$400 million of that, including the April voluntary payment, was voluntary. Yes, with $7 billion of debt in an increasing, volatile SOFR, with Q4 SOFR up to 5%, it's a meaningful challenge for us to overcome. If you just extrapolate the Q4 interest expense, that's $600 million to $700 million on an annualized basis. That's $0.75 to $0.80 of EPS. So yes, it's a huge headwind/challenge to overcome. If you looked at that in isolation combined with our stated targets on leverage over the long term, the cost, the expense, and the level of debt that we've got would point you to deploy as much capital as you can to get that paid down. But we know we have multiple levers in our business. We know that we have expressed a balanced capital allocation. And if you look at the $17 stock price that we've got and you look at our strategy and vision on where we're going over the long term, I personally believe that we're massively undervalued. And so that makes the share buyback capital deployment very, very important. And so when we talk to you guys about a balanced approach to our capital allocation, it's exactly that. Both of them are challengers of each other, but both of them are incredibly viable and critical to drive our business and to achieve our long-term objectives. So what you'll see us do on a go-forward basis, whether you specifically call it Q1 2024 or over the long-term, is strike that right balance looking at all of the dynamics that we've got in our business.

Got it. Super helpful. I’ll get back in queue. That was very helpful. Thanks guys.

Thank you.

Hi. Thank you guys so much for taking my question today. I'm speaking on behalf of Hamza Fodderwala from Morgan Stanley. So just had a quick question on net adds. The last quarter you mentioned that net adds for NortonLifeLock were a little bit more under pressure compared to Avast's net adds. So could you just talk a little bit more about the dynamic of net adds for NortonLifeLock versus Avast for this quarter? And how should we think about this dynamic as we model out fiscal year 2024? Thank you.

Yeah. Hey, Angie, thanks for your question. So as you mentioned, Q4 sequential decline in the direct customers is about 180,000, the lowest of the year. So we see the trend stabilizing. We're working very actively, our plan to first stabilize and then return direct customer counts to growth. We continue to grow our indirect customer counts. On the direct side, last quarter it was a little more pressure on the NortonLifeLock side on a ratio basis than Avast. It was two-thirds, one-third of the decline. The quarter before it was the reverse. So we also said, just be careful not to drive trends within the brands. We see the overall tensions to be about the same across the globe, focusing more on the security side versus the identity side, slightly more focused on security. I would say Avast, because we improved retention by two points, of course, continue to reduce the gap. We're very confident that we'll return them to growth once we fully bridge the 10-point retention gap between Avast and Norton. So that should give you some color on the dynamic.

Great. Thank you. And just one more if I may. So on the long-term target, I know that the Avast acquisition definitely brought some complexity into the equation. And given the recent macro backdrop that caused even more uncertainty, could you just remind us what your confidence level is now as we have a little bit more visibility into fiscal year 2024 in achieving your $3 EPS target exiting fiscal year 2025? Thank you so much.

Yeah, absolutely Angie. And I'll pass it to Natalie on the confidence, so you'll hear directly from the CFO. But what I can tell you is that when you talk about Avast bringing complexity, in one sense, you're right. It's merging multibillion-dollar companies together. But it's a similar business model with very complementary strengths, so we're very focused every day on the opportunities that Avast is bringing. We talked about the complementary product portfolio. They are bringing more strength on the privacy side, combined with our identity, that now allows us to offer across 65 million paid customers and hundreds of millions of free users, full cyber safety. We gave you some proof points of us being on track for that. We said that we can bolster our technology with Avast, and you'll hear more about our pace of innovation now for the combined R&D. We also said that we have some revenue synergies, and the Avast retention rate is the beginning of that. You'll see more of that in 2024 and 2025 as we return to growth using those revenue synergies. And then the cost synergies, where we delivered only two-thirds of the $300 million-plus promises. Now where is the complexity coming from that you may have mentioned? Yes, we did not anticipate the cost of the debt. Frankly, by the time we signed the deal, SOFR was 0%, and today it is 5%. Natalie mentioned that, but we will deliver quickly with our cash flow. Following you guys in the investor community predicting SOFR at 3% by the end of fiscal year 2025, you'll see the full realization of those synergies. Our focus is really on the opportunities that this acquisition is bringing to us. I'll pass it to Natalie for the confidence in the bridge and the different levers.

Yeah. I think you heard the majority. I would just summarize it as follows: from a growth perspective, we really look at it from a value, reach, and loyalty perspective. Value is where the innovation is coming in, and we will constantly innovate, bringing great products and services to market in a competitive way. Reach is our intent and priority to expand globally, focusing on international markets, and bringing different products and services to those markets. Loyalty is about how we can best service our customers, focusing on NPS, but also increasing engagement with our existing user base through cross-sell/upsell and focusing on our retention metrics. Combine that with the expressed discipline we've got in our cost structure, driving the company to a 60%-plus margin structure, which will be incredibly supportive of the $3 EPS target. We also said not to forget, back when we had our Analyst Day, we indicated M&A could be considered as an accelerator as we continue to generate very strong cash flow and look at other products and services as cyber safety protection continues to expand and evolve. All of that leads to how you see the $3 EPS target over the period we've outlined.

Thank you so much.

Okay. Great. Hey, guys. Me again. Sorry, I just had a couple more follow-ups. Natalie, maybe for you. I know it was great to see the ARPU expansion quarter-over-quarter. Maybe a question for you. Where do you think that can go over time? And sort of how do you think about that?

Yes, I think we're just getting started honestly. I think with the expanded portfolio that we now have as Gen and with the expressed desire and strategy to invest in more and more innovation, I'm confident that we're going to continue to bring great products and services to market that will be easy sell to our customer base. Where specifically ARPU will go, I'm not sure. It will be a balanced approach depending on markets, customer cohorts, the source of those customers, etc. But if you even look at the progress we’ve made with a $3 ARPU expansion, just start applying that to more and more of our customer base. In my opinion, we're just getting started. We have a ton of space to increase our ARPU as we expand and bring our innovation to market but also as we expand our reach across our existing 38 million and bring in new customers.

Got it. Got it. Maybe for my follow-up for you, Vincent. Listen, I mean, we're clearly trying to control what we can with margins and operational improvements in retention. Of course, the other part of the net add equation is new customer acquisition. So maybe the question is for you, Vincent. What can you do on the new customer side to sort of continue the stabilization of net adds that we've seen, but then maybe turn that corner and reverse the trend?

Yes. If you allow me to think slightly differently, where you compare margin and what we control versus customer acquisition, I would say, you can take a stable stance that our operational commitment to running lean and directing every dollar toward either innovation or sales is what we do. This is embedded in our DNA and culture, and we'll continue to do that very well. The value we drive and the price we're able to charge, representing that value, coupled with operational discipline drives the margin. As you know, it's a very high-margin business. Regarding growth, we have three buckets: first, Natalie mentioned ARPU and supported by innovation, how much more we can add to our portfolio's value. Natalie is right that this is not a daily focus. I told you the first proof point we can go to is where we were with NortonLifeLock, which was above $8, adjusted for geography and portfolio mix. And over the next eight quarters, we're confident we'll cross $8 with the same cohort. The second is retention—satisfied customers mean more value driven for the business. You've seen some progress, and we talked about operational perspectives. Our focus is centered around customer journeys, offering peace of mind in a world where hacking continues to evolve and is quite threatening. The third is about bringing new people to cyber safety, focusing on acquisition, and we have a full set of capabilities from freemium to product sales, to membership sales across all countries. We realize we're not perfect in every area and have opportunities to do more, particularly in mobile, which is a critical growth area. We recognize some customers want cyber safety as part of broader solutions like financial products or employee benefits, making partnerships key for customer acquisition. Once acquired, the crossover between indirect and direct customers leads us to more direct engagement. With Avast's strong footprint in emerging markets, we can offer comprehensive cyber safety services there as well, even if it means pressure on ARPU as prices are lower. Ultimately, we are balancing various marketing activities, including accelerating freemium to paid conversions, demonstrating value across all channels. I cannot provide precise quarter-by-quarter customer counts, but I assure you we're confident in returning that metric to growth and improving further in Q1 with similar trends as observed over the past two quarters, with a longer-term view of achieving balanced growth in all three buckets mentioned.

Very helpful, guys. Thank you.

Excellent. Thanks, Lauren. I want to thank each Gen employee for their hard work and for embracing and directly managing through so much change. Our entire team is driven to protect and advocate for our customers, and we do not take for granted the millions of people around the world who trust us to help them safely navigate the complex digital world. We have a strong culture of innovation and execution. We have a winning strategy, and we will continue to execute to drive profitable growth and create long-term value for all our stakeholders. So thank you for joining our call today, and I look forward to talking to you soon.