Executive Summary

Non-GAAP revenue rose 13% YoY to $691M and GAAP revenue rose 12% to $686M; Non-GAAP EPS increased 35% to $0.42 and Non-GAAP operating margin expanded 410 bps to 51.2% (GAAP OM 41.8%). Direct customers reached 23.1M (+2.6M YoY) with 150k net adds QoQ; ARPU ticked up sequentially to $8.84 while remaining below prior-year due to Avira mix .
Results were above company guidance: Q1 non-GAAP revenue of $691M exceeded the prior $680–$690M range and EPS landed at the high end ($0.42 vs. $0.40–$0.42). Management reiterated FY22 targets (8–10%+ revenue growth; $1.65–$1.75 EPS) and guided Q2 revenue to $690–$700M and EPS to $0.41–$0.43 .
Partner channel strength continued (up 29% YoY, including Avira), and international outpaced Americas; liquidity remained strong with $1.2B cash and $258M operating cash flow in Q1 .
Stock catalysts: ongoing execution momentum and margin expansion; potential corporate action from advanced discussions with Avast (management not taking Q&A on specifics due to UK rules) .

What Went Well and What Went Wrong

What Went Well

Margin and profit expansion: Non-GAAP OM reached 51.2% (+410 bps YoY), Non-GAAP EPS +35% YoY to $0.42; CEO highlighted “strong execution and accelerating pace of innovation” and CFO noted revenue delivered above the high end of guidance .
Customer and channel momentum: Direct customers grew to 23.1M (+2.6M YoY), 7th straight quarter of sequential adds; partner revenue up 29% YoY. Management emphasized broad-based growth across geos/products and 85% retention .
Product innovation velocity: Launched Game Optimizer (first integrated Avira feature) and Norton Crypto, underscoring a faster innovation cadence to address evolving consumer cyber safety needs .

What Went Wrong

ARPU mix headwind: ARPU of $8.84 was below prior-year $9.03 (though up QoQ), primarily due to Avira’s lower ARPU mix; management reiterated first-year cohorts have lower ARPU/retention than the base .
Sequential EPS optics on GAAP: GAAP diluted EPS from continuing ops declined QoQ ($0.31 vs. $0.35), reflecting tax/other GAAP items despite strong non-GAAP performance .
Q2 outlook implies flattish QoQ revenue ($690–$700M vs. Q1 non-GAAP $691M), suggesting limited near-term acceleration as integration and seasonality play through .

Financial Results

Headline P&L and Cash Flow (GAAP and Non-GAAP)

Metric	Q1 FY2021 (Jul 3, 2020)	Q4 FY2021 (Apr 2, 2021)	Q1 FY2022 (Jul 2, 2021)
Revenue (GAAP, $M)	$614	$672	$686
Revenue (Non-GAAP, $M)	$614	$677	$691
Diluted EPS (GAAP, cont. ops)	$0.24	$0.35	$0.31
Diluted EPS (Non-GAAP)	$0.31	$0.40	$0.42
Operating Margin (GAAP)	19.5%	39.6%	41.8%
Operating Margin (Non-GAAP)	47.1%	50.5%	51.2%
Cash from Operations ($M)	$170	$356	$258

Q1 FY2022 vs. Q1 Guidance (Company)

Metric	Q1 FY2022 Guidance (set May 10, 2021)	Q1 FY2022 Actual	Result
Revenue (Non-GAAP, $M)	$680–$690	$691	Above high end
Diluted EPS (Non-GAAP)	$0.40–$0.42	$0.42	At high end

Channel/“Segment” Breakdown (Non-GAAP operational metrics)

Metric	Q1 FY2021	Q4 FY2021	Q1 FY2022
Direct Customer Revenues ($M)	$552	$602	$611
Partner Revenues ($M)	$62	$75	$80

KPIs

KPI	Q1 FY2021	Q4 FY2021	Q1 FY2022
Direct Customer Count (period-end, M)	20.6	23.0	23.1
Avg. Direct Customer Count (M)	20.4	22.8	23.0
ARPU ($/mo)	$9.03	$8.80	$8.84
Bookings ($M)	—	—	$660
Retention (unit)	—	85%	85%

Non-GAAP adjustments included contract liabilities fair value adjustments (Avira deferred revenue haircut), stock-based comp, amortization of intangibles, restructuring/other, acquisition/integration and other items; reconciliations provided in the 8‑K .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue (Non-GAAP)	Q2 FY2022	—	$690–$700M (10–12% YoY)	New
Diluted EPS (Non-GAAP)	Q2 FY2022	—	$0.41–$0.43	New
Revenue Growth (Non-GAAP)	FY2022	8–10%+ (Investor Day, reiterated on call)	8–10%+ (reiterated)	Maintained
Diluted EPS (Non-GAAP)	FY2022	$1.65–$1.75 (Investor Day, reiterated on call)	$1.65–$1.75 (reiterated)	Maintained
Dividend	Next Pay Date	$0.125/share in prior quarter	$0.125/share payable Sep 15, 2021 (record Aug 23, 2021)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q3 FY2021; Q-1: Q4 FY2021)	Current Period (Q1 FY2022)	Trend
M&A / Avast	Closed Avira; leveraging freemium/EMEA reach; Avira to add ~3 pts to annual revenue growth	“Advanced discussions” with Avast; no specifics due to UK rules	Intensifying strategic focus
Product innovation	Norton 360 momentum; new features; identity expansion in Japan/AU/NZ	Launch of Game Optimizer (Avira tech) and Norton Crypto	Accelerating launches
Go-to-market channels	Partner +15% YoY in Q3; building employee benefits/OEM/B2B2C	Partner +29% YoY incl. Avira; Lenovo OEM pre-installs; international outpaced Americas	Broadening channels
Customer metrics	5th straight quarter of net adds; 85% retention; ARPU ~ $9	7th straight quarter of net adds; 85% retention; ARPU up QoQ to $8.84	Sustained momentum
Capital allocation	>$900M annual FCF; dividend and buybacks; ~2x net leverage	$258M OCF; $1.2B cash; dividend declared; ~2x net debt	Consistent discipline

Management Commentary

Strategy and execution: “This quarter reflects our strong execution and accelerating pace of innovation as we strengthen our foundation for long-term sustainable growth” — CEO Vincent Pilette .
Growth drivers and KPIs: “Our total direct customer count increased to over 23.1 million…monthly ARPU is up on a sequential basis to $8.84…partner business…up 29% YoY” — CFO Natalie Derse .
Innovation highlights: “We launched the very first integrated product with Avira called Game Optimizer…Another new product is Norton Crypto…we accelerated our pace of innovation” — CEO .
International and OEM: “International growth rate once again outpaced the Americas…expanded our partnerships with Lenovo…selected 5G Lenovo laptop PCs will be pre-installed” — CEO .
M&A posture: “We confirm that we are in advance discussion with the Board of Avast…we will not be able to answer any questions related to specific cases” — CEO .

Q&A Highlights

Net adds seasonality and retention: Q1 is seasonally softer sequentially; 150k net adds QoQ; retention stable at 85%; COVID cohort renewals tracking in line with history .
Capital allocation priorities: Balanced between M&A, buybacks, and dividend; long-term view on investment cadence .
OEM channel revisit: Renewed focus on diversified distribution; Lenovo pre-installs illustrate measured return to OEM economics over long-term lifecycle .
ARPU dynamics: Lower aggregate ARPU vs. pre-Avira due to mix (Avira ARPU ~ half of Norton) but sequential improvement with Norton 360 upsell .
Partner channel drivers: Broad-based growth across benefits, retail, service providers; building local, country-by-country strategies .

Estimates Context

We attempted to retrieve S&P Global consensus estimates for Q1 FY2022 revenue and EPS but data was unavailable due to a daily request limit exceeded. As a result, we compare actuals to company guidance rather than Street consensus for this quarter .
Where relevant in future periods, we will benchmark against S&P Global consensus as the default source and flag beats/misses accordingly.

Key Takeaways for Investors

Momentum intact: Non-GAAP revenue +13% YoY to $691M and EPS +35% to $0.42; Non-GAAP OM >51% underscores durable profitability levers .
Above-guide delivery: Q1 printed above the high end on revenue and at the high end on EPS; Q2 guide implies stable sequential revenue with continued EPS discipline; FY22 outlook reiterated, signaling confidence .
Mix headwinds manageable: ARPU remains below prior-year due to Avira mix but improved sequentially; retention steady at 85% suggests healthy cohort behavior .
Channel and geography upside: Partner growth (+29% YoY) and international outperformance broaden demand drivers beyond North America .
Product cadence is a differentiator: Game Optimizer and Norton Crypto expand the platform, supporting cross-sell/upsell and future ARPU lift .
Optionality from corporate actions: The potential Avast combination could expand scale, freemium reach, and EMEA penetration, but timing/terms remain uncertain due to regulatory constraints on disclosure .
Cash return + capacity: $1.2B cash, $258M OCF, regular dividend maintained, and ~2x net leverage provide flexibility for both M&A and shareholder returns .

Additional Notes on Source Review

8-K 2.02 earnings press release (including full financials and reconciliations) for Q1 FY2022 was read in full .
Q1 FY2022 earnings call transcript was read in full –.
Prior two quarters reviewed: Q4 FY2021 8-K press release and full financials –; Q3 FY2021 earnings call transcript –.
No separate “press-release” document beyond the 8‑K exhibit was available in this timeframe; the 8‑K contained the press release in Exhibit 99.01 .

Gen Digital Inc. (GEN)·Q1 2022 Earnings Summary