Gen Digital Q3 2022 Earnings Call Transcript

Quartr
Provided by Quartr
February 2, 2022

Key Takeaways

  • Q3 revenue was $704 M, up 10% YoY with bookings +11% and EPS +16%, and full-year 2022 non-GAAP revenue is guided to $2.795–2.805 B (+10% in constant currency) with EPS $1.73–1.75.
  • The company added 2.4 M net direct customers YoY to 23.4 M in Q3 (9th straight quarter of net adds), kept unit retention above 85% (87% ex-first-year cohorts) and delivered a record organic ARPU of $8.87.
  • Innovation remains a priority with new product launches like Avira Breach Monitor, machine-learning alerts for unusual transactions and social media monitoring, all integrated into the Norton 360 platform in 20+ countries.
  • The merger with Avast is now expected to close on February 24, 2022, pending final regulatory approvals in the UK, Germany and Spain, moving ahead of the originally planned mid-2022 timeframe.
  • Profitability and cash flow are strong, with Q3 operating margin at 52.8%, gross margin at 87%, free cash flow of $328 M, and net leverage around 1×, supporting ongoing investments and shareholder returns.
AI Generated. May Contain Errors.
Earnings Conference Call
Gen Digital Q3 2022
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good afternoon, everyone. Thank you for standing by. My name is Paul, and I will be your conference operator today. I would like to welcome everyone to the Norton LifeLock Fiscal 2022 Third Quarter Earnings Call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. At this time, for opening remarks, I would like to pass the call over to Ms. Mary Lai, Head of Investor Relations. Ms, you may begin.

Speaker 1

To turn the call over to the Northern LifeLock's fiscal 2022 Q3 earnings call. To Joining me today to review our Q3 results are Vincent Pilette, CEO and Natalie Dursi, CFO. As a reminder, there will be a replay of this call posted on the Investor Relations website, along with our earnings slides, press release to remind everyone that during this call, all references to the final metrics are non GAAP and all growth rates are year over year to turn the call over to Mr. President, a reconciliation of non GAAP to GAAP measures is included in our press release, which is available on our IR Web to turn the call over to Steve at investor. Norrenlifelock.com.

Speaker 1

Today's call contains statements regarding our business, financial performance to

Speaker 2

turn the

Speaker 1

call over to our operator for questions. Thank you, and good afternoon everyone. Thank you, and good afternoon everyone. Thank you, and good afternoon everyone. Thank you, and good afternoon everyone.

Speaker 1

Thank you, statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those statements are based on our 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 to thank you for joining us today. I would like to thank you for joining us today.

Speaker 2

I would like to thank you for joining

Speaker 1

us today. I would like to thank you for joining us today. And now, I will turn the call over to our CEO. Vincent?

Speaker 3

Thank you, Mary, and welcome, everyone. This was another strong quarter, double digit growth on both the top and bottom line, and we continue to drive improvements across several key business areas that we believe to conclude our long term success. Q2E revenue and bookings grew 12% 11%, respectively. The growth profile we delivered was broad based, reflective of diversification across our product portfolio, our channels and our geographies. And with 16% growth in EPS, our profitability remains strong and continues to grow faster than revenue.

Speaker 3

Later in this call, Nathalie will provide you with more details on our Q3 results, but let's take a step back for 1 minute. It is clear to all of us that we are living more and more of our daily lives online, shopping, working, learning, creating, sharing, you name it, We are doing it all online. All of it is designed to make our lives easier and better, but it does come with a very real risk to take a moment to introduce our next question. Thank you. Thank you.

Speaker 3

Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 3

Our next question comes from the line of Making the world cyber safe for everyone and ultimately powering their digital freedom. Today, we are protecting and empowering approximately 80,000,000 users in more than 150 countries, but we are just getting started. Our strategy is built around our customers and their digital lives. We're focused on accelerating innovation, expanding access and reach, and to thank our customers' needs. Our innovation engine continues to thrive.

Speaker 3

In Q3, we introduced Avira Breach Monitor, where we actively scan the Internet and alert users if their e mail is a part of a data breach. To take your questions. In identity and in privacy, we continue to expand our reach internationally, combining dark web monitoring, to take a look at the entire NIV Navigator and bring it to over 20 countries. Not only do we bring new products to market, We also improve upon category leading products that we have offered for years. For example, using machine learnings, We rolled out new alerts detecting unusual transactions for our LifeLock subscribers, better protecting people from various frauds or unusual activities.

Speaker 3

Day after day, this team brings energy and new ideas about how we can better build out the Nordland 360 Cyber Safety to introduce our integrated platform. Within various plans of NordLyn 360, our members automatically receive the benefits of our latest innovation, to provide a more detailed summary of our financial results. Our next question comes from the line of David.

Speaker 2

Our next question comes from the line of David. Our next question comes from the line of David. Our first question comes from the line of David. Our first question comes from the line of David. Our first question comes from the line of David.

Speaker 3

Our first question comes from the line of David. Our first question comes from Easy backup activation, software updater, improved integrated VPN, game booster, cryptocurrency mining and wallet options Enhance identity protection features like Identity Lock and Social Media Monitoring. These to Just a few of the new features made available into our NordLyn 360 platform over just the last few months. And it's not just innovation. It is a continued commitment to protecting our users, as highlighted with multiple AV Test Awards to And the most recent, the SCLabs Best Consumer Anti Malware Awards for 2021.

Speaker 3

We know we are on the right track as over 14,000,000 customers are now on Norden 360, with more than 1,000,000 to

Speaker 2

introduce the first ever since our

Speaker 3

Investor Day last May. We are thrilled that over 60% of our direct customers are now protected by the NordLyn 360 platform, And it keeps growing. Whether it's launching entirely new products, bringing these products to more people to By improving our industry leading platform, we know that innovation is a core driver of our success. When customers make the decision to trust us to help protect their digital lives, they stay with us. We have improved our net promoter score by 5 points to High 40s in the last 12 months.

Speaker 3

That strengthening engagement is also reflected in our retention rate, which is something we are particularly proud of. In Q3, it was slightly above 85%. If you exclude the 1st year customers, retention is at 87% in aggregate to take a look at the Q1 of 2019.

Speaker 2

And as high as 90% for some

Speaker 3

cohort of customers with the identity offering. It speaks to the power of our NordLyn 360 platform with identity protection, to take a look at the numbers. As traditionally in this industry, renewal rates for the 1st year customers or security only customers are lower. But even in this category, we believe we have room for improvement. We've already improved Aviora retention to 83%, up 3 points since we acquired them.

Speaker 3

Through our evolving and innovative product portfolio and expanding distribution channels, we have now added customers to the platform consistently over 9 consecutive quarters. Total direct customers are now over 23,400,000, to take a look at

Speaker 2

the numbers of 12% or 2,400,000 customers added

Speaker 3

year over year and 126,000 sequentially. The growth was broad based, to also slightly higher mix in security as expected for a December holiday driven quarter. In our direct to consumer channel, we observed some market to take a look at the pressure on ad prices that slightly pushed up our customer acquisition cost. We partially offset those increases with improvement in shopping cart conversions. One of the key investment areas in our go to market strategy is the expansion in indirect channels.

Speaker 2

To The

Speaker 3

net direct customer count increase that I just shared does not include customers coming through our partner channels, including employee benefits or through the app store, for example. In those two channels alone, we added almost 500,000 customer year over year and over 100,000 customer sequentially. And interestingly, almost twothree now of our new customer from app stores have installed the NordLyn 360 app. You will see us continue to expand and invest in our multichannel approach to reach more customers. While it is great that we've brought innovations to the market, added customers to our platform and retained them, it is also clear that we're delivering value.

Speaker 3

In Q3, our average revenue per user or ARPU was $8.87 But excluding Avira, to achieve a record organic ARPU well above $9 driven by higher NordLyn 360 adoption and successful cross sell and up sell activities. Avira's installed base is more focused on traditional security feature, which drives an ARPU at just below $5 to review this as one of the many opportunities we have to continue to grow and provide more rounded protection to all customers, to take a look at the next question. Nathalie will provide more details on ARPU in her section. To wrap up, I'm also excited to announce that we are driving to an to read the close date for the merger with Avast. As you will recall, we originally expected to close in mid calendar year 2022.

Speaker 3

To However, while there remains some outstanding regulatory conditions that we need to be satisfied or waived before we can close, We currently expect to close on February 24, 2022. We have made great strides towards combining the 2 companies, to conclude the formal and financing commitments. On the remaining regulatory conditions, we have submitted antitrust to take our

Speaker 4

next question from the U.

Speaker 3

K, Germany and Spain and are fully engaged with each of them. We fundamentally believe that this merger to continue to grow our business and better serve consumers around the world. In the meantime, we'll keep driving our business forward. We've made great progress and frankly can't wait to merge with Havas. Together, we will accelerate the transformation of consumer cyber safety to empower digital freedom for everyone.

Speaker 3

And now I will pass the call over to Nathalie to cover details of the financial results to hand the activities supporting our merger with Avast.

Speaker 5

Thank you, Vincent, and hello, everyone. For today's discussion, I will focus on non GAAP financials, to start with our Q3 results and then provide our outlook for fiscal year 2022. We delivered another excellent quarter. To take our Q3 revenue was $704,000,000 and at the high end of our guidance range. Revenue was up 10% in USD to take a look at the numbers for the Q1 of 2019.

Speaker 5

We expect to see an

Speaker 2

uptick in constant currency, including a

Speaker 5

2 point currency headwind as the euro and yen weakened against the U. S. Dollar. Bookings growth accelerated sequentially and year over year, up 10% in USD and 11% in constant currency. To turn the call over to the operator.

Speaker 5

We continue to effectively utilize the levers we have at our disposal to accelerate growth. Our total direct customer count increased to 23,400,000 adding 2,400,000 customers year over year and adding 126 to call the net new customers quarter over quarter. This was our 9th consecutive quarter of sequential net direct customer adds to with close to 500,000 net new customers added already this year. We remain focused to focus on acquiring more customers at the top of the funnel in an increasingly competitive landscape. Q3 growth was broad based.

Speaker 5

To turn the call over to Bob. We saw strength in both the U. S. And international regions. Our new products and services in key international markets to conclude our overall global reach.

Speaker 5

While our customer mix still skews higher in the U. S, we are to turn the call back over to Catherine for more international opportunities as we scale. Looking at our performance in Q3 across key operating metrics, Overall unit retention was slightly above 85% in Q3, and our monthly average revenue per user to or ARPU expanded sequentially to $8.87 Collectively, to turn the call over to the operator for questions. This contributed to 9% revenue growth in our direct business versus 5% growth in Q3 last year and no growth the year before. We believe this consistent growth momentum is built on the foundation of our Norton 360 platform to take your questions as well as our expanding product portfolio and the increasing value we provide to our customers.

Speaker 5

To Retention is a major area of focus for us. Our renewal rates remain strong across Cohort, including our newer customers, to take a moment to reflect the larger mix of our customer base. Our cross sell, up sell efforts are also beginning to bear fruit, to be supported by new product velocity and expanding feature releases in global markets, while driving strong engagement throughout the customer journey And bringing more value to our customers, we in turn continue to increase retention and drive growth in our ARPU over time. Our partner business continued to grow double digits in Q3 with revenue up 17%, scaling in multiple channels, to take your questions. Our employee benefits channel continues to grow double digits as we broaden our identity to introduce more employees in North America.

Speaker 5

Our App Store channel is up double digits for the 5th consecutive quarter, to turn the call over to the operator for questions. Thank you, sir. Thank you, sir.

Speaker 2

Thank you, sir. Our next question comes from the line of

Speaker 5

John Hodges. Hi, good morning, everyone. My name is Paul, and I'll be your conference operator today. I would like to continue to dedicate more resources in this area as we focus on broadening our go to market reach and drive this as a key tenant to take a look at our long term growth strategy. Turning to profitability.

Speaker 5

We continue to deliver high operating leverage. To Q3 gross margin sustained at 87% and operating margin was 52.8%, up 180 basis to

Speaker 2

take your questions.

Speaker 5

We remain diligent in our cost structure to take your questions. In pursuit of efficiency opportunities and to create capacity for reinvestment to drive growth, to We are operating our G and A functions at a cost of approximately 4% of revenue, down from 10% of revenue just 2 years ago. We continue to make investments in sales and marketing, while navigating through the competitive advertising environment and higher ad costs. With R and D, we focus our energy on increasing the pace of new product launches, while also effectively driving efficiencies. To take your questions.

Speaker 5

Looking ahead with Avast, we will continue to operate with a disciplined approach in our cost management in order to drive synergies we committed to And pre integration plans are already underway. Q3 net income was $260,000,000 up 14% year over year. Diluted EPS was $0.44 for the quarter, up 16% year over year and at the high end of our guidance range. We remain committed to driving EPS expansion and achieving our long term EPS objective of $3

Speaker 2

to turn the

Speaker 5

call over to our cash flow and balance sheet. Q3 operating cash flow was $330,000,000 and free cash flow was $328,000,000 Year to date operating cash flow is $648,000,000 growing over 80% year over year. To provide a strong liquidity position and a healthy balance sheet. Our net debt leverage lowered to approximately 1 point times to take a look at the Q1, but please note this does not include any of our expected acquisition financing to take your questions as that does not become funded until the deal close. In Q3, we returned approximately $73,000,000 to shareholders in the to take a look at the form of a regular quarterly dividend of $0.125 per common share.

Speaker 5

For Q4, the Board of Directors has approved a regular quarterly cash to provide a dividend of $0.125 per share to be paid on March 16, 2022, for all shareholders of record as of the close of business to turn the call over to Mr. President. Thank you, Mr. President. Thank you, Mr.

Speaker 5

President. To take the next question from the line of Alex.

Speaker 2

Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex. Thank you, Alex.

Speaker 2

Thank you, Alex. Thank you, Alex.

Speaker 5

Thank you, Alex. Thank you, Alex. Thank you, Alex.

Speaker 2

Thank you, Alex.

Speaker 5

Thank you, Alex. Good morning, everyone. To turn the call over to the operator. As a reminder, depending on the Avast merger shareholder election, an incremental share buyback of up to $3,000,000,000 is possible to take your questions. Before I get into our guidance, let me give you a brief update to turn the call over to

Speaker 2

the operator. Thank you, sir. Thank you, sir. Thank you, sir. Thank you, sir.

Speaker 5

Thank you, sir. Thank you, sir. Our next question comes from the line of John. Thank you, sir. Our first question comes from the line of John.

Speaker 5

Thank you, sir. Our first question comes from the line of John. Your line is now open. Thank you, sir. Our first question comes from the line of John.

Speaker 5

Thank you, sir. Our first question

Speaker 2

comes from the line of At the start

Speaker 5

of this calendar year, we launched the syndication of our Term Loan B commitments to be prepared for the deal close. We received strong interest and great reception in the debt markets. In fact, the demand was notably oversubscribed. We're pleased to report that we have successfully raised all of the required financing we had planned for this merger to turn the call over to our financial results. Thank you, Paul.

Speaker 5

Thank you, Paul. We now expect to achieve fiscal 2022 annual non GAAP to provide revenue in the range of $2,795,000,000 to $2,805,000,000 assuming stable currency rates quarter over quarter, Which translates to approximately 10% growth year over year in constant currency. For fiscal 2022 annual to turn the call over to Mr. President. On GAAP EPS, we expect to be in the range of $1.73 to $1.75 nearing again to the high end.

Speaker 5

To Please note this guidance does not include any impact from the anticipated Avast merger close. We look forward to closing out another successful fiscal year. We remain well positioned as the leader in cyber safety. We have growing momentum, to take a very healthy business model and strong operating capabilities. I want to reiterate what we said last quarter.

Speaker 5

To take your questions. As we navigate forward, we will continue to challenge ourselves to anticipate, prioritize and meet customer needs in a growth focused manner. To thank you for your time today. And I will now turn the call back to the operator to take your questions. Please do keep in mind, to ask questions related to any specific M and A at this time.

Speaker 5

Operator?

Operator

Thank you, ma'am. We will now begin the question and answer session. To stand by and we compile the Q and A roster. Your first question is from the line of Saket Kalia with Barclays. Your line is open.

Speaker 4

Okay, great. Hey, Vincent. Hey, Natalie. How are you guys doing?

Speaker 3

Very good. Thank you for asking.

Speaker 4

Absolutely. Thanks for taking my questions here and great to see the results. Vincent, maybe I'll start with you. To I understand the disclaimer just on talking about specific M and A, but I think the most surprising news with the release here in my view is to The earlier expected close for Avast on February 24. And so maybe

Speaker 2

to the extent you can,

Speaker 4

can you just to share with us just some of the regulatory hurdles left, right, just to understand the timeline from here to 24th.

Speaker 2

And then also to And as much detail

Speaker 4

as I guess you're allowed to, what gives you the confidence in that earlier close date compared to the June timeframe that we earlier thought that we thought about earlier?

Speaker 3

Yes. And to be honest with you, I never believed that I would say what I'm going to say, Which is despite the fact that we posted a double digit quarter on quarter, the most exciting news is for me too that we are now scheduling the close of to take the merger with Avast for February 24. We, as you imagine, are super eager to get started. We've made great to make progress in our planning activities, and we know that this merger will offer an increased capacity for innovation, for global reach to make cyber safety richer for consumers. So we've been patiently working all the processes.

Speaker 3

As I mentioned in my prepared remarks, we to make great progress on many fronts. We still have regulatory conditions to meet in the UK, Germany and Spain. We've done now all of the findings, and we are openly and actively, if you want, collaborating With those stories answering all of the questions they have, based on the progress and I won't go into every detail, we're now confident that we will be in a position to to make sure that we are ready for the future. So that's, as you mentioned, great news.

Speaker 4

Yes, absolutely. And we'll look forward to that. Natalie, maybe for

Speaker 2

you just

Speaker 4

to zero in on the core business. To Vincent's point, I mean, great to see the double digit bookings growth. You talked about a couple of the levers in your prepared remarks, The better retention, the ARPU, I mean continued customer acquisition, can you just go one double deeper into sort of to know how you've been able to accelerate that growth to double digits here?

Speaker 5

Yes. Hi, Saket. Thanks for the question. In our prepared remarks, you heard us right. The growth was pretty broad based, both the U.

Speaker 5

S. And international across security and identity. How we continue to post the double digit growth, I think is exactly what we've said. It's really having our new products come to market faster, to turn, which is allowing us to offer increasing value to our new as well as our existing customers. We continue to to focus our efforts in expanding our customer reach across the globe that's driving both domestic expansion as well as international expansion.

Speaker 5

We've got with Avera, really seeing the premium to paid conversions as well as combine and diversify to through the partner and indirect channels, I think all of that's just really coming together and we're focused on all of those key tenants to drive that double digit growth.

Speaker 4

Got it. Got it. That makes a lot of sense. Vincent, if I could squeeze another one in, it's a product question. I thought the social media monitoring solution that was announced recently was very interesting.

Speaker 2

To I was wondering if you could just talk

Speaker 4

a little bit about the competitive landscape there and the additional value that you can capture with a tool like that because I guess, in the world of, unfortunately, cyberbullying, I imagine that's an interesting product. So can you just dig a little deeper into that?

Speaker 3

Yes. I'm to And to be honest with you, so we have a very broad purpose, right, really protecting and empowering everyone to have that digital lives being to take a look at the numbers and getting the maximum value for it. As we know, as we move more online, we of course expose either the users or our kids or our family 2 more risks coming from that cyber criminality that continues to evolve all the time. I mentioned at our Analyst Day that moving up the stack of value from that core device security to multi device to then, including password manager, VPN, then adding identity features and then moving into privacy features is what Our mission is to build just the best cyber safety platform, full stop. And then on top, offering additional services that would have a lot of value because to part of the cyber safety platform.

Speaker 3

I mentioned the category we really look at very closely within that privacy and protection to take your questions. Your reputation online, reputation privacy, reputation management, and then protecting against all sort of activities that would expose you, cyberbullying being one of them. And so social monitoring is just another features, if you want, in a long road map that we keep developing to protect our children against to have different words, different exposure that you would not want to have in creating an alert system and a blocking system that helps spotting that. You should see as part of kind of a seed development as we continue to build up the different categories. When it comes to competition, I have to tell you, we see a lot of innovation, startups, either geographically located or product category focused to That will bring interesting new ideas, and this is why we like the position we have, and we will even reinforce with Avast.

Speaker 3

To We're going to free up capacity for innovation and continue to accelerate the rate of value we bring into the overall portfolio. So You should see there's a long term development and understanding that we continue to move the value and build up that full definition of what to take a look

Speaker 2

at what cyber safety means

Speaker 3

for an Internet user.

Speaker 2

Makes a

Speaker 4

lot of sense. I'll get back in queue. Thanks, guys.

Speaker 6

Thanks,

Operator

Maggie. Your next question is from the line of Matt Hedberg with RBC. Your line is open.

Speaker 4

I think that guys, thanks for taking my questions and congrats on the double digit growth. Vincent, you talked about to capture more international business and obviously have asked to accelerate that. But wondering if you can provide a bit more detail on what's working internationally and maybe how is Norton 3 Is the rest of the year resonating in international markets?

Speaker 3

Yes. Very good question. So every geography is important. But As you know, Northern came with a more U. S.-centric base, right, 70% of our business coming from there.

Speaker 3

And When we started as a company 2 years ago, Non Laffer, we say, hey, we have a big opportunity internationally. First, with the to take your current product portfolio and we did that. Then we realized that in many local countries, there's many features that are more to add 3 features and introducing in our portfolio the ability to manage a freemium model was important. We acquired Avira, and we

Speaker 4

did a lot of testing

Speaker 3

to and realize that actually combining in one country under the same roof a full lifecycle from premium to premium to full cyber safety platform is actually to And we were able to grow almost all line or all cohorts when we're doing those tests locally. So that has been, of course, a proof point That give us the confidence to say, hey, the combination with Havas would be definitely a fantastic, very powerful move to offer more innovation to these to

Speaker 2

take your questions. Thank you. Thank you. Thank you. Thank you.

Speaker 2

Our next question comes from

Speaker 3

the line of Chris. Your line is open. As we continue to move more value up the, if I can call it, value chain, when you look at the to remind you that the basic security moving into your data being protected and your data inform alive, Protecting your full life and that's an identity or multiple identities and protecting that. We can see both, of course, the value creation of the to going up and then retention actually going up along with the customer satisfaction. We started to launch more to combined product, anti track, starting at the basic with dark web monitoring in many different countries to introduce the notion of that Identity protection, and you will see us more committed and trying to drive that digital identity internationally.

Speaker 3

In Europe, as you know, digital identity has a different meaning than in the U. S. And so having a presence in each region and understanding the Both the local market in the global framework is very important, and we'll be fully committed to that. The third one, I would say, internationally that to We have seen is once a customer gets more of that value that I mentioned under either Norton Identity or different Single product and Tractal Others, we've seen retention improving. Some of the Avera retention improve Internationally, and we can see in the various countries, every country has different renewal rates, So they move up when they move up the value chain and become more a member of the cyber safety platform.

Speaker 3

So that gives you an idea, if you want, of the different levers We will have to continue to accelerate growth as we share best practices with our friend at Havas.

Speaker 4

That's super comprehensive. Thanks, guys. I think we all recognize the international opportunity is significant for you guys. The other thing that really stood out to me, You had a lot of positive things to say about indirect success as well. Now I think you said it's just over 10% of your business.

Speaker 4

You're focused on driving more success there. Maybe tell us what are some things there, obviously, it's been more of a direct growth historically, but it's really, I think, exciting to see a lot of indirect success, it seems like another level of level of growth.

Speaker 3

I totally agree with you. Let's be very clear. We know that to reach out the 5,000,000,000 Internet users, we can't just do it through a DTC business model. We have to continue to partner, whether it's going indirect to a simple channel or combining with other solutions to offer a better mix or to fully integrated value combining, for example, with an insurance provider and a cyber safety offering, etcetera. So expect us to continue to develop our channels that way.

Speaker 3

I think we mentioned publicly that employee benefit was one of them. That's more U. S. Centric. We've increased our investment a year ago in that, and we now to see the fruition to that.

Speaker 3

There too, it's not only a channel because then we get feedback around adjustment to the product portfolio and we can add more Value for the employee benefit of customers, our customers that come through that channel. We want to be of course, we want to move fast, of to to be bigger, but we want to be very thoughtful, making sure that our brand is recognized, that we have engagement with the customers, which is not to make the case with every legacy indirect channels, making sure we have the ability to continue to move up the value chain of customers. Those are some of the criteria as we really consider before really putting the trigger on increasing investment in one area. But there's a lot of opportunities there, want to be thoughtful. We're particularly to come back with all the time with that, but when Havas will come in, they have a VSV so whole channel, so focusing on the gig economy or The home worker person around that cyber safety, we expect to increase that channel as well.

Speaker 3

So and we have none in our Northern LifeLock. So So definitely expecting Direct Chem Du Cognix to be an expanding part of our go to market strategy.

Speaker 4

Super exciting. Thanks, Vincent. Thanks, everybody.

Operator

Your next question is from the line of Fiona Hynes with Morgan Stanley. Your line is open.

Speaker 6

Hi, everyone. Hi, Morgan. Hi, Morgan. On the line from Hamzah. So first question is on the net subscription adds, which is a little bit below typical seasonality.

Speaker 6

We're wondering if you could just please to expand on that a little bit. Has there been any change in renewal rates?

Speaker 5

Yes, thanks for the question. So Look, growing our customer base has consistently been and will continue to be a key ingredient to our strategy. And we've just posted our 9th consecutive quarter of quarter over quarter net adds. But we've chosen to report our customer adds to you defined as direct customers. We'll continue to invest and drive in this area.

Speaker 5

It's very, very fruitful to acquire customers through direct acquisition. But it's not the only Avenue to customer acquisition. I think you've heard us to today a couple of times talk about the indirect channels. These are diverse channels that we can go to market and really expand our reach. And we're putting resources behind that.

Speaker 5

We absolutely want more focus on how we expand our reach globally to take your questions. In all different channels, the direct channel is becoming increasingly more competitive both from a competitive spend perspective, but also just to add costs. And so we're trying to strike the right balance and really leverage all of the diversity of the to acquire users and or indirect customers that will over time feed into our installed base.

Speaker 3

There's one add I want to say, and I know it's doubling down on what I already said, and Anthony mentioned it briefly. But we have a lot of also indirect customers. A year ago, we launched Norden 360 on mobile Android and iOS. In employee benefit to And mobile app, we increased 100,000 net new customers or over 100,000 net new customers to take a look at the numbers. In those 2 channels quarter over quarter, we saw for the first time actually in mobile app 65%, about 2 thirds of the mobile app to purchase this with Norden 360, which is a very big change that is impacting how we report a direct customer count.

Speaker 3

We've made some analysis. AVAS, for example, is including the mobile app into their customers. So as we merge with AVAS, we're going to take a fresh look on how we So this customer council investors can have a full view on how we looked at our business across all dimensions.

Speaker 6

Okay, got it. That's very helpful. One follow-up, if I could. So how should we think about ARPU going forward now that the Avira acquisition has lapsed? Any thoughts on price increases given the current inflation that we're seeing?

Speaker 6

Thank you.

Speaker 5

Yes. So as it pertains to price increases, inflation, etcetera, I know it's being talked about across the globe, very, very top of mind and relevant. For our business though, We're software based, so we really don't have a ton of logistical and raw material inflation in our business. What we focus on when we think about price, when we think about inflation, it's more so how are we driving customer value, How are we bringing innovation faster to market? How are we making sure that we are the number one customer choice in the decision where they to how to protect themselves and their family.

Speaker 5

And that's how we focus and that's how we think about our price. We want to make sure that the price value The equation makes sense, and not necessarily focusing on price increases just because it's top of mind across the world today.

Speaker 3

And when it comes to growth, we balance retention, ARPU, new customer acquisitions. If your question is, can you go higher than the $9 average? The answer is Yes. We still have the majority of our customers that don't have identity protection, but are just on the core to Nobody is anymore just on the AV. They have more than just security like password manager, etcetera.

Speaker 3

But they haven't really made the leap yet on understanding the benefit of having Identity digital identity is being protected, and I think that's really our effort creating the innovative portfolio to really drive that to increase adoption of identity protection.

Speaker 5

Okay. Thank you both very much. Congrats on our outlook. Thank you.

Operator

At this time, there are no more questions. I will turn the call back to Vincent Dillett, CEO for

Speaker 2

closing remarks.

Speaker 3

Yes. Thank you, Paul, and thanks everyone for joining us for this call. We appreciate your continued support, to call and we look forward to connecting you to connecting with you very soon. So stay safe and be well. Thank you.

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