NortonLifeLock (NLOK) Up 5.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for NortonLifeLock (NLOK). Shares have added about 5.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NortonLifeLock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

NortonLifeLock Q1 Earnings and Revenues Top Estimates

NortonLifeLock reported strong first-quarter fiscal 2022 results, wherein both top and bottom lines not only surpassed the respective Zacks Consensus Estimate but also improved year over year.

The consumer cyber safety provider reported non-GAAP earnings of 42 cents per share beating the Zacks Consensus Estimate of 41 cents per share. The bottom line increased 35% from the year-ago quarter’s earnings of 31 cents per share.

The company’s quarterly non-GAAP revenues increased 13% year over year to $691 million surpassing the Zacks Consensus Estimate of $665 million. Constant currency-adjusted revenues on a non-GAAP basis were $679 million, 11% higher than the year-ago quarter’s reported figure.

This outperformance was mainly driven by impressive customer growth. International business expansion contributed to the quarterly results. The company’s global growth rate has surpassed that of America once again in first-quarter fiscal 2022. It recorded double-digit growth across multiple nations including the U.K., Germany, France, Australia and New Zealand.

Direct customer revenues increased 11% to $611 million from $552 million reported in the year-ago quarter. The partner revenues have improved by 29% from $62 million reported a year ago.

Leveraging Avira's freemium model has helped the company broaden customer reach, while accelerating their free to paid conversion with the use of marketing capabilities. Partner businesses, including Avira, exhibited double-digit revenue growth for the third straight quarter, which in turn accelerated the company’s progress in this quarter.

Quarterly Details

The direct average revenue per user (ARPU) decreased 2% year over year to $8.84 per month. Continued stabilization of direct customer count was positive. The quarterly bookings increased by 12% on a year-over-year basis to $660 million.

The company’s direct customer count increased 2.6 million year over year to 23.1 million, while it remained flat quarter over quarter. The customer retention rate remained strong at 85% as new initiatives were launched for the improvement of overall retention and within specific products and customer cohorts.

First-quarter gross profit climbed 10.6% year over year to $584 million. Gross margin contracted 99 basis points to 85%.

Non-GAAP operating income for the first quarter of fiscal 2022 totaled $354 million, up 22.4% year over year. Non-GAAP operating margin expanded 410 bps to 51.2%.

Balance Sheet & Other Financial Details

NortonLifeLock exited the first quarter with cash and cash equivalents of $1.23 billion compared with the previous quarter’s 933 million. Long-term debt was $3.42 billion, up slightly from the $3.29 billion in the previous quarter.

The company generated cash worth $258 million from operational activities during this quarter, while it generated $170 million of operating cash flow a year ago for the same quarter.

It authorized a quarterly cash dividend of $0.125 per share, payable on Sep 15, 2021, to all shareholders of record as of Aug 23. The company has $1.8 billion remaining under its current share repurchase authorization.

Guidance

For the second quarter of fiscal 2022, NortonLifeLock expects non-GAAP revenues between $690 million and $700 million, indicating an increase of 10% to 12% on a year-over-year basis. Non-GAAP earnings are estimated to be 41-43 cents per share.

Additionally, the company reiterated guidance for fiscal 2022. The company still expects year-over-year revenue growth of 8-10%. It continues to project non-GAAP earnings per share between $1.65 and $1.75.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, NortonLifeLock has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

NortonLifeLock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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