Gen Digital Inc (GEN) — Q4 2024 Earnings Call Transcript

Thank you, Joel. Good afternoon, everyone. Welcome to Gen's Fourth Quarter and Fiscal Year 2024 Earnings Call. Joining me today are Vincent Pilette, CEO; and Natalie Derse, CFO. As a reminder, there will be a replay of this call posted on the Investor Relations 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 and earnings presentation, both of which are available on our website at investor.gendigital.com. We encourage investors to monitor this website as we routinely post investor-oriented information such as news and events and financial filings. Today's call contains statements regarding our business, financial performance and operations, including the impact of our business and industry that may be considered forward-looking statements and such statements of 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 as of today's date, May 9, 2024. We undertake no obligation to update these statements as a result of new information or future events. 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 Form 10-Q. And now I'll turn the call over to Vincent.

Thanks, Jason. Good afternoon, and thank you all for joining our Q4 and fiscal year 2024 earnings call. Fiscal 2024 was our first full year at Gen, and what a transformational year it was. We finished the year with strong operating results across the board and a deliberative year of organic growth with record revenue, profitability, and cash flow. Our Q4 and full year results reinforce our confidence in the tremendous opportunity in consumer cyber safety and put us right on track to meet our long-term aspirations. Natalie will take you through the details of our quarterly and annual financial performance, but I would like to take a moment to talk more about the opportunity in consumer cyber safety and why we are so well-positioned to win. You have heard me say it many times, Gen Digital is now just live, but the risks it creates are different. They're bigger, they're more pervasive, and are getting more and more sophisticated as quickly as our lives move online; the cyber risk dynamically follows. Everywhere you look nowadays, you hear about data breaches from telecom providers, health care companies, banks, leading automakers and even government organizations. And those are just from these first few months of 2024. Cyber risks are here to stay, but we know that Gen can bring comprehensive cyber safety protection to everyone in a way no one else can. In an always-on world, bad actors have continued to threaten privacy, identity, and financial assets. We have seen a significant increase in scans delivered through malvertising and malicious browser notifications, the majority of which were social-engineered attacks with massive growth in bidding scans, up tenfold year-over-year. The increasing sophistication and intensity of phishing campaigns are up 40% year-over-year; targeted spear-phishing attacks involving personal identifiable information on the dark web and the emerging use of generative AI technologies by threat actors are all accelerating the shift in focus from device to user-centric security. And as this threat landscape continues to rapidly evolve, so do the cyber safety needs of consumers, providing a compelling and dynamic market opportunity. Many others will try to convince consumers that their safety is important to them, but most have other substantial interests in delivering their core services or even monetizing your data. At Gen, Cyber Safety is not something on the side that can be at odds with another business model; it is our mission and the most important thing we do. Unlike many other players, we have teams dedicated to uncovering, researching, and stopping new threats in their tracks. In fiscal year 2024, we blocked over 12 billion attacks using threat telemetry data from those to update our models 500 times a day and train them on data sets that are 6 petabytes large. In our labs, our researchers and AI scientists are identifying anomalies and patterns to deliver insights to consumers and our product teams so we can keep up with dynamic threats. The combination of those people plus our technology results in us having developed and deployed on all major platforms and devices an engine and technology stack that is second to none. And when you add in our AI capabilities in consumer cyber safety, alongside our market-leading visibility across the entire ecosystem, we expect to continue to lead the way with the strongest, most relevant protection that delivers value and peace of mind for millions of loyal customers. Our people and technology are the foundation of the most complete and comprehensive product portfolio in the industry. We have our customers covered on all fronts when they are facing a threat to their online security, privacy, identity, or reputation. And just as important as all those features that we deliver, we also demand that our engineers, product managers, designers, and other specialists find ways to make our offering fit the real-world needs of consumers. We were the first to come up with the all-in-one cyber safety membership because we believed it was what consumers wanted and needed, and we were right. Over 40% of our customers have adopted the cyber safety membership, and we continue to see that grow as we expanded the membership value through offering identity and privacy features internationally and into the Avast offering, along with the launch of Avast Identity and the release of new Avast One membership tiers, enabling customers to tailor their security, privacy, or performance coverage based on their own needs, preferences, or risk profile. While we strongly believe in the need for and the value delivered with our member tiers, we also know that not everyone leads their digital life in the same way or that each person understands all the cyber threats at the same level. Still today, many customers are only looking for specific solutions, and we are hard at work on delivering innovation in our point products to meet the needs of those consumers. In January, we launched our first AI-driven anti-scam app called Norton Genie. With this anti-scam assistant in your pocket, customers can determine if a text or social media post is a scam, featuring conversational UI for additional insights. At the end of April, we crossed one million downloads in just 100 days, and customer satisfaction was high with Norton Genie rated 4.7 stars. It's a good start, if you ask me. And the great thing is that the more it is used, the better it gets. Another innovation that we are proud of is Total Radius, which we fully launched in January 2024. Total Radius is a 360-degree reputation defender tool that fully and automatically analyzes your online information to help you quickly take actions on content to protect your digital reputation. Our consumer-centric approach combines key consumer trends with deep insight about the threat landscape and emerging technologies. We want to simplify your digital life, protect your ever-growing number of online transactions, bring new visibility to the privacy risks, and do it seamlessly and in real time through the deployment of generative AI consumer use cases. No one can bring these things together like Gen. And now with our new Gen Stack, which I will talk more about later, we will be able to adapt more quickly to the needs of our customers. It’s truly been a transformational year for Gen, and I can't tell you how proud I am of what this team has accomplished. Some things were out of our control that definitely changed the world in our business. Conflicts in multiple regions, volatile macroeconomic conditions with spiking interest rates, and dramatic currency fluctuations. Despite those very real challenges this team delivered. For the full fiscal year and for the last three consecutive quarters, we are now at over 65 million paid customers, 39 million of which are direct, and hundreds of millions of users. More importantly, our customers are showing greater engagement and satisfaction across all our brands. With respect to the commitments we made when we acquired Avast, we delivered on those as well despite the very material changes to the cost of our debt. In terms of cost synergies, we exceeded our original goals and did it faster than expected. On top of that, we didn't just reduce costs; we worked together to bring the best assets of NortonLifeLock and Avast, laying the foundation to tackle cyber safety by tightly integrating the fabric of two industry leaders to create things like our integrated technology stack, which delivers the full suite of our capabilities to our customers in a more modern and accessible way. We call it the Gen Stack. Over the last 18 months, our engineers, designers, and product managers have tirelessly consolidated our tech portfolio into a single, scalable, and modular platform. This quarter, we released Norton 360 for Windows and Mac on the new stack in selected countries, with the majority of our customers experiencing our new platform in a phased approach as we progress through this new fiscal year. With our new Gen Stack, we are marching towards a vision of increased personalization and empowerment through natural, tailored, contextual communication. This kind of AI enhancements and innovation will lead to a better customer experience, and we believe improve loyalty, value-add, cross-sell, and upsell. AI has been and will only become more pivotal for us. We will continue to enhance our portfolio to address new threats. We'll also keep investing in AI to expand the types of new solutions and the way we bring them to our customers. We know that as we keep addressing this growing set of needs, our growth will accelerate over time. Our AI-infused roadmap, which addresses security, financial safety, personal data control and verification, combined with insights into the threat landscape and AI technology, enables us to deliver on a mission of protecting and empowering people's digital lives. And we're just getting started. Before I pass it to Natalie, I do want to thank the team and our loyal customers for another strong year. We delivered fifth organic growth in the adoption of our offerings with almost one million net direct customer adds and established the identity and mission-driven culture of Gen in our first full year together. We are confident that our reach, customer centricity, innovation, and disciplined execution will enable us to deliver on our strategy to accelerate long-term profitable revenue growth and increase shareholder value. I could not be prouder of what we have accomplished together and more excited about our prospects. Finally, I would be remiss if I didn't thank Andre Walcheck for his contributions in putting Gen on this track. Three years ago, Andre and I dreamt about bringing two industry leaders together to transform consumer cyber safety. Three years have now passed along with the successful integration, and Andre has decided to step down as President. Andre will still be a big part of Gen's future, as I know he will remain a trusted sounding board and supporter of our leadership team. And of course, he will continue to help shape the strategy from his seat on our Board of Directors. And with that, let me pass it to Natalie to review our performance in greater detail and our guidance for the next fiscal year and quarter.

Thank you, Vincent, and hello, everyone. For today's call, I will walk through our full year fiscal 2024, followed by our Q4 results and wrap up with our outlook for Q1 and full year fiscal 2025. I will focus on non-GAAP financials and year-over-year growth rates unless otherwise stated. Please recall that our acquisition of Avast closed in September fiscal 2023 near the end of our second quarter, and therefore, I will break out select financial metrics for relevant annual comparisons throughout today's call. Fiscal year 2024 was a pivotal year for Gen as we integrated Avast, returned our direct customer base to growth, and delivered our fifth straight year of organic growth. We finished the year with over $3.8 billion in total revenue, growing 14% in USD and 15% in constant currency. When including Avast's historical results, cyber safety revenue and bookings increased 3% year-over-year in constant currency, with broad-based growth across our geographic regions. We delivered nearly $300 million of annual cost synergies within 18 months of the Avast acquisition, $20 million more than our original plan, and we used less cash than previously planned to achieve this. As a result, fiscal 2024 operating income was over $2.2 billion, with a full-year operating margin of 58% and exiting the year at 59%. This represents seven full points of margin expansion since the close of the transaction, net of partial reinvestment. Driving continued top line growth, our operating discipline and our strong capital allocation strategy enabled us to deliver $1.96 in full-year EPS, in line with our guidance, and up 8% from the prior year and up 11% in constant currency. We've also made significant progress reducing our net leverage to 3.4 times, down from 3.9 times at the time of the merger. Now with the integration largely behind us, we look forward to the next chapter, driving our strategic priorities into fiscal 2025. Turning to Q4 performance. Q4 reflects our 19th consecutive quarter of growth, with financial results in line with our guidance. Q4 bookings were a record $1.044 billion, exceeding $1 billion for the second consecutive quarter, growing 2% in USD and 3% in constant currency. Cyber safety bookings also grew 3% year-over-year in constant currency. Total Q4 revenue was $967 million, up 2% in USD and up 3% in constant currency. Cyber safety revenue also increased 3% year-over-year in constant currency. Our revenue growth is driven primarily by the US market, up 3% as we scale the adoption of our privacy and performance offerings through cross-sell and increased our membership revenue, particularly in our higher-tier Norton 360 with LifeLock memberships. In our more developed international markets, growth was mid- to high-single digits in constant currency as we expanded our identity partnerships. And we continue to drive double-digit growth in our emerging markets as we capitalize on the growing safety awareness for a mobile-first population. With varying degrees of market maturity, the growth levers will be different, and we will continue to execute on all levers at our disposal to drive broad-based growth in a profitable manner. Direct revenue was $847 million, up 3% in constant currency. We are making progress across our key performance metrics. Our installed base is healthier compared to the prior year, growing in both scale and in value as we execute all components of our growth strategy. Let me share some specifics. A key ingredient to our growth strategy is driving new customer acquisition. In Q4, we have expanded our customer base for the third consecutive quarter, increasing to 39.1 million, up over 230,000 customers sequentially and over 900,000 year-over-year. To help drive this growth, we continue to invest in a diverse mix of marketing to reach new audiences and generate more traffic to our sites while dynamically optimizing the channel performance. We are acquiring positive new additions at healthy ROIs across all brands, fueling our renewable base. Our growth is coming through our diverse set of acquisition channels, particularly international growth markets and mobile devices. On monetization, our monthly direct ARPU was $7.24, up $0.03 versus last quarter and in line with last year's results. However, note that as reported, this result absorbed $0.06 of negative FX headwinds given the dollar's rise over the year, particularly against the Japanese yen, and we expect these headwinds to continue impacting reported ARPU comparisons through the next fiscal year. With that said, let me provide additional commentary on the operational drivers of our expanding ARPU. In Q4, the ARPU of our online customers, which is the vast majority of our customer base, is up on a year-over-year and a quarter-over-quarter basis across Norton, LifeLock, and Avast brands. This growth reflects the synergistic efforts and learnings from the Avast cross-sell model brought into the Norton and LifeLock go-to-market efforts, with cross-sell penetration nearing 20%, up approximately 5 points over the past two quarters. In addition, the ARPU on mobile customers was stable on both a year-over-year and a quarter-over-quarter basis with measured healthy ROI, another proof point of our ability to balance customer acquisition costs, ARPU, and retention rate across the channels. Demand for our increased cyber safety is growing as threats evolve, and we are well-positioned with a broad portfolio of cross-sell products. Across our customer cohorts, we will continue to drive expansion through their journey, increasing value through additional product offerings suited for their cyber safety needs or upselling to a higher-tier membership, offering more comprehensive protection for their growing digital footprint. This increase in engagement drives retention. In Q4, our overall customer retention rate increased to over 77%, improving by over 1 point year-over-year and improving by 2.5 points since the merger. A key component of our 5 for 5 growth strategy is driving retention rates to 80% over the next few years, and we have made progress towards that target in our first year operating as Gen with every brand in our portfolio increasing retention rates year-over-year and quarter-over-quarter. As we look forward, we expect to drive additional uplift leveraging our strong trusted brands while creating more personalized customer experiences through their journey. And although we already have industry-leading retention rates today, we have many opportunities to drive higher customer loyalty and increase lifetime value through simplification, optimization, and personalization. We have the expertise across our team and the technology to provide the experience our customers want. Turning to our partner business, partner revenue was $105 million in Q4, up 5% year-over-year. We have a record pipeline and employee benefits. We continue to build strategic partnerships with financial services and insurance providers, and we have seen strong traction already in our newly launched Norton Private Browser. Scaling our partner business to $0.5 billion in annual revenue is a key component of achieving our overall growth plan. We are proud of the traction we're making across multiple partner channels, and we look forward to sharing more progress in the coming quarters. Rounding out our revenue, our legacy business lines contributed $15 million in the quarter, down from $17 million in the prior year. As a reminder, we expect our legacy revenue to continue to decline double digits year-over-year, representing less than 2% of our total revenue. Turning to profitability, Q4 operating income was $569 million, up 5% year-over-year, translating to an operating margin of 59%. Since the close of the merger, we have reduced our overall operating expense profile from 30% to 27.5% of revenue while maintaining gross margins above 86%. We've right-sized our organization to under 3,400 full-time employees, down from approximately 4,500 at the time of the merger, representing productivity of over $1 million of revenue per employee. You will see us continue to invest in marketing as well as product and technology to reach new and existing customers, to bolster our product portfolio with differentiated solutions, to amplify our international presence, especially in identity and privacy, and expand into trust-based adjacencies that will touch more parts of the consumers' digital life. These investments fuel progress in each of our growth levers and strengthen our position to accelerate revenue growth to mid-single digits over the next three years. We will continue to operate our G&A functions at approximately 3% of revenue, reinvesting any further productivity into levers for growth. Q4 net income was $336 million, up 14% year-over-year. Diluted EPS was $0.53 for the quarter, up 15% year-over-year and up 16% in constant currency. Interest expense related to our debt was approximately $154 million in Q4. Our non-GAAP tax rate remained steady at 22%, and our ending share count was 637 million, down 7 million year-over-year, reflecting the impact of share repurchases. Turning to our balance sheet and cash flow. Q4 ending cash balance was $846 million. We are supported by over $2.3 billion of total liquidity, consisting of our ending Q4 cash balance and $1.5 billion revolver. Q4 operating cash flow was $1.398 billion, and free cash flow was $1.395 billion, which included a $900 million tax refund received in January and approximately $114 million of cash interest payments this quarter. Turning to capital allocation. We remain intentional and balanced with our capital deployment and are committed to returning 100% of excess free cash flow to shareholders. We voluntarily paid down $600 million of our TLB during the fourth quarter, with an additional $58 million repaid per our maturity schedule. We are now at 3.4 times net leverage, down from 3.9 times at the time of the merger with $1.2 billion in repayments in fiscal year 2024. We also deployed $300 million for share repurchases this quarter, the equivalent to 14 million shares. Since the start of fiscal year 2023, we have deployed a total of $1.3 billion in share repurchases, and we're pleased to announce the Board has recently expanded our current buyback program to $3 billion with no expiration date to support our future capital allocation strategy. We paid $78 million to shareholders in the form of a regular quarterly dividend of $0.125 per common share. For Q1 fiscal 2025, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on June 12, 2024, for all shareholders of record as of the close of business on May 20, 2024. With our strong cash flow generation nearing $2 billion unlevered excluding one-time items and our disciplined capital deployment, we will continue to pay down debt and deploy opportunistic share buybacks to help achieve our goals of delivering EPS growth of 12% to 15% and driving net leverage below three times EBITDA by fiscal year 2025. In summary, fiscal year 2024 was about bringing two large companies together as one operating business, starting to tailor our revenue synergies by returning our customer base to growth and increasing our retention rate while driving improvements in our cost structure and executing our integration commitments. We have accomplished a lot since the merger. Now looking forward, our margins are world-class with room to make disciplined investments into our organic growth initiatives outlined in the 5 for 5 structure we shared at our Analyst Day in order to accelerate growth to mid-single digits. Turning to our Q1 and fiscal year outlook. For fiscal year 2025, we expect full-year revenue in the range of $3.89 billion to $3.93 billion, translating to 3% to 4% growth in Cyber Safety expressed in constant currency and supported by expected Cyber Safety bookings growth of 3% to 5%. We expect non-GAAP EPS to be in the range of $2.17 to $2.23 per share, representing an annual increase of 12% to 15% in constant currency. Please note that we expect continued FX headwinds impacting our reported revenue primarily from the Japanese yen, which has depreciated over the past year and is now at multi-decade lows. For Q1, we expect non-GAAP revenue in the range of $960 million to $970 million, translating to approximately 3% growth in Cyber Safety. And Q1 non-GAAP EPS to be in the range of $0.52 to $0.54, up 12% to 16% in constant currency. As we kick off our new fiscal year, we are in line with the expectations we set out at Analyst Day back in November 2023. We remain steadfast in driving our long-term growth plan. We are focused on delivering our commitments always in a disciplined and balanced manner. Our key performance indicators are trending in the right direction. Our strategy is working. Our financial model is resilient. We're committed to investing in our business to drive sustainable and profitable mid-single-digit growth and create shareholder value over the long term. We look forward to reporting on our progress in the quarters ahead. As always, thank you for your time today, and I will now turn the call back to the operator to take your questions.

Great. Thank you for taking my question. Natalie, I think one comment that actually stuck out to me was moving into kind of new trust-based adjacencies. Can you maybe just provide a little color there outside of what you already provide?

Hey Peter, I'll take that one. So, I would refer to the AI-infused roadmap that we shared that at AIB, right? We've started with a very strong membership structure, which we upgraded on the Avast side and now deploying Norton 360 on the New Gen stack. And so we're rolling that out to enable a very strong modularity, scalability, and a much more flexible usage from a customer perspective, allowing us to add a lot of different value. Over the last two years, we have added features like reputation management and other services; we will move Norton Genie into the membership and again be growing into discovering deep fakes, protecting your financial transactions, and making progress. So, over the next few years, you'll see us launch more features in these areas.

If I consider Norton Genie, which has reached 1 million downloads so far, what is the monetization potential for that product? What do you believe customers are willing to pay? How do you think this will integrate into your long-term model?

Yes. Today, we don't have anything in our model. That's not how we see it. We first wanted to develop our air models using the vast data that we have building this new generative AI interface for people to interact with their security officer in their pocket, if you want, and we continue to develop the model. The goal is to really grow the adoption first and foremost, and that's our strategy. The second aspect is to add new features. So moving from text, emails, and scans to voice and others while progressing towards the value add. The third item is to move that feature as part of the membership. Remember, 545 from Natalie is, of course, to acquire new customers, retain them with great features, cross-sell where you can, but mainly move up into the membership for full protection. So at some level of our membership level, it will be integrated into the price. And as you know, we price for value. And then only will we come up with the Gene Pro, which is our project name, which would be a monetized version. But it's down the line and not in our model today.

Natalie, I wanted to ask about the current rate environment, which seems unpredictable. Considering the macro developments we've observed recently, does this influence your approach to capital allocation, particularly regarding debt repayment compared to share buybacks? I'm interested in whether the current conditions, along with potential rate cuts over the next 12 to 24 months, affect your short-term strategy.

I don't think we've seen significant change in how the external community rates things. We've discussed the number of cuts and while I can't predict the future, we are keeping up with the latest news. Our business model allows us to generate a lot of cash flow, which provides us with many opportunities for deployment. Every time we allocate our capital, we focus on the most competitive and profitable options that maximize shareholder value. You will continue to see us maintain a good balance between share buybacks, repurchases, and accelerated debt paydown. We've made significant progress in fiscal year 2024 on both sides of this equation. I encourage you to expect the same disciplined strategy towards cash flow generation and leveraging that for the best capital deployment for our business.

Thank you for taking my questions.

Hey, It's Dan Bergstrom on for Matt Hedberg. Thanks for taking our questions. Say the launch of Gen Stack, obviously, exciting congratulations on that. Vincent, you talked to a phased approach there, maybe more thoughts around how you plan to go about the rollout?

We won't disclose the entire roadmap, but we're really excited about it. The merger presents a great opportunity to create a client and a full stack that leverages AI for increased personalization, enhancing the user experience. The security product was developed a couple of decades ago with the intention of functioning in the background, but it has since evolved to play a more active role in new security measures and is now more front-end oriented. The user experience has significantly improved, especially in our contextual and personalized communication, which presents various opportunities. It's fully scalable, meaning we won't need to create a new app. We can introduce new features based on membership pricing, enabling you to activate different features according to your purchases. We plan to spend the entire fiscal year 2025 on its deployment. We'll proceed cautiously, but if everything goes smoothly, we may speed up the process. Currently, we have three countries testing it, and the early results from April are very encouraging. We'll continue to expand into more global markets as they become available at the end of the quarter, and our pace will depend on what we observe.

Thanks. And then you mentioned consumers kind of choosing their own features. You also had some comments in the prepared remarks around making offerings fit real-world needs of consumers. I noticed a slide about Avast One in the deck concerning its early reception. What's been the reception around that modular approach, letting users tailor their coverage to their needs and upgrade what they want where they want it?

Yes, absolutely. With the new tax structure and deployment associated with the Avast One concept, we will also transition our clients. The vast majority are already under contract, and as we move to the new system, we will have chances to upgrade. We transitioned Norton 360 to reach 60% of the Norton installed base. We need to make further progress in that area, but we are confident about the direction it’s heading, particularly with an agile system that can effectively function as a single product. If you pay for just one feature, you can still gain value from the full system. It's this flexibility and scalability that we are very excited about.

Thank you.

Thank you, Dan.

Hey, great. Hey, Vincent and Natalie. Thanks for taking my questions. You have nice progress of the year.

Yes. Thanks, Saket.

Hey, Natalie. Maybe just to start with you, I think the guide for fiscal 2025, we said 3% to 5% bookings growth, great to see. I think that implies a little bit of a pickup in bookings growth compared to fiscal 2024. So do you just maybe have a general rule of thumb on how much of that can be driven by subscribers or ARPUs? Is it a mix of growth? How do you sort of think about that growth formula for next year?

Hi, Saket, good to hear from you. Yes, the bookings of 3% to 5% as we look into 2025, we're super excited about. But nothing's really changed from what we talked to you guys about back in November at AID. It's going to be a mix of our 5 for 5 growth strategy. All those levers will be equally important but will scale to a different magnitude as we kick off 2025 and continue this three-year journey. I'll give you a bit of color. We are committed to driving the acquisition of new customers in a healthy ROI way. We'll continue to stay committed to that. Of course, our aspiration is to drive new customer acquisition growth. Quarter in, quarter out, the absolute number of customer acquisition will vary, but we definitely stay steadfast and committed to investing our marketing dollars doing that in a healthy way geographically and across brands. The other levers that will drive installed base in both scale and value, as well as growth, are cross-sell and upsell. With cross-sell penetration nearing 20%, up approximately 5 points over the past two quarters, we are very proud of it. You should look at those as real proof points, and we will continue to drive cross-sell to increase engagement with our existing customers. Upsell means getting more of our new and existing customers into higher-tiered, higher-value Norton 360 membership offerings. This combination of all those things will drive bookings, and therefore, will drive revenue growth. A higher engaged customer tends to have notable higher retention rates. So, at the end of the day, bundle that in with our partner business. The partner business drives broader awareness, and it's our competitive differentiator. It's a diversification of our acquisition that will drive scaling revenue contribution. We will continue investing behind the diversification of our partner channels with our world-class sales teams. You will see the five levers implemented, and they will all scale throughout the year. This will be evident in the growth we see from boards to revenue to lifetime value as we increase our offerings suited for consumer safety needs and see engagement growth as well.

Got it, got it. That's super helpful. And maybe that's a good segue into the follow-up for you, Vincent. I think you said we expanded retention rates on the Avast customer base by more than two points since the deal. That's great to see. How are you maybe thinking about that retention rate for next year? And maybe relatedly, is it the same blocking and tackling that's going to just continue to lift that retention rate higher as the years go on? Or are there other parts to the playbook around improving that retention rate for Avast?

Let me take that one. So just to highlight a few numbers to put everybody on the same page: when we closed the merger 18 months ago, our aggregated retention rates for the full portfolio was around 75%. As we discussed, the NortonLifeLock combined business was around 84%, and Avast was around 65%, 66%. First, as we centralized our operations around the center of expertise for process management, the same techniques and the same operations drive these retention activities that really start on day one when the customer onboard for the first time all the way to day 365 when they renew. We closed Q4 at an aggregated retention of 77.5%, a 2.5 points improvement post-merger. But Avast itself closed at a record retention rate of over 70%, with nearly 5 points improvement in 18 months, while Norton and LifeLock combined stayed somewhat flat. I call it flat. We still have a good retention rate. It's important to remember that we had a 20-point delta for Avast, meaning we could improve half of it operationally. We have done half in 18 months, and now over the next 18 months, we aim to drive another half, that's our linear projection. The approach isn't different. We're shifting from having centralized operations, standardizing operations, and focusing on defining customer journeys within the customer lifecycle. We think about the life cycle from onboarding for the first time all the way to when they try to leave; that could take years, with many different steps throughout their journey. We have done a lot to beef up our team to make that integrated part of the journey into our product. The second focus area is using our new Gen stack effectively. It will enable us to use vast amounts of data, and our data scientists and AI modeling will improve contextual communication. The last focus area multiplies efforts for cross-sell, upsell, and membership, all of which leads to better retention on those three axes. The whole company will capitalize on mobilizing around this plan moving forward.

Thanks, guys. Appreciate the time.

Absolutely, Saket.

Thank you, operator, and of course, thank you all for joining our call. I started this call by saying that fiscal year 2024 was a transformational and pivotal year for Gen. In fiscal year 2025, we're putting the company in a position to reap the benefits of the hard work we put in. As the leader in consumer cyber safety market, we are well positioned to succeed in transforming the industry. We have a strategy to accelerate growth. While it is not always a smooth journey, it is working. We have a long and proven track record of investing in technology and innovation to best serve our customers, and we will continue to do so. Thank you.