Table of fiscal 2017 to reduce complexity by means of long-term structural improvements (the “Fiscal 2017 Plan”). We have reduced headcount and closed certain facilities in connection with the Fiscal 2017 Plan and expect additional headcount reductions and facilities closures. We expect to incur additional costs of between $70 million and $90 million in connection with the Fiscal 2017 Plan primarily consisting of severance and termination benefits and facilities exit costs. These actions are expected to be completed in the first half of fiscal 2019. As of December 29, 2017, liabilities for excess facility obligations at several locations around the world are expected to be paid throughout the respective lease terms, the longest of which extends through fiscal 2022.Contents

~~Restructuring, transition and other costs summary~~

~~Our restructuring, transition and other costs are presented in the table below:~~

(In millions) Three Months Ended December 29, 2017 Nine Months Ended December 29, 2017
Severance and termination benefit costs $ 11
$ 50
Other exit and disposal costs (benefit) (2 ) 15
Asset write-offs 9
18
Transition costs 75
195
Total $ 93
$ 278

~~Restructuring summary~~

~~Our restructuring activities related to the Fiscal 2017 Plan are presented in the table below:~~

(In millions) Balance as of March 31, 2017 Costs, Net of
Adjustments Cash
Payments Non-Cash Charges Balance as of December 29, 2017 Cumulative Incurred to Date
Severance and termination benefit costs $ 20
$ 50
$ (58 ) $ —
$ 12
$ 126
Other exit and disposal costs 26
15
(22 ) (7 ) 12
94
Total $ 46
$ 65
$ (80 ) $ (7 ) $ 24
$ 220

~~The restructuring liabilities are included in accounts payable, other current liabilities and other long-term obligations in our Condensed Consolidated Balance Sheets.~~

~~Note 5. Income Taxes~~

The following table summarizes net revenues for our ~~effective tax rate for income (loss) from continuing operations~~major solutions:


	Three Months Ended
(In millions)	July 3, 2020		July 5, 2019
Consumer security	$	363	$	381
Identity and information protection	251		255
ID Analytics	—		14
Total net revenues	$	614	$	650

From time to time, changes in our product hierarchy cause changes to the product categories above. When changes occur, we recast historical amounts to match the current product hierarchy. Consumer security products include our Norton 360 Security offerings, Norton Security, Norton Secure VPN, and other consumer security solutions. Identity and information protection products include our Norton 360 with LifeLock offerings, LifeLock identity theft protection and other information protection solutions. Our ID Analytics solutions were divested on January 31, 2020.

Geographic information

Net revenues by geography are based on the billing addresses of our customers. The following table represents net revenues by geographic area for the periods presented:


	Three Months Ended
(In millions)	July 3, 2020		July 5, 2019
Americas	$	448	$	479
EMEA	96		97
APJ	70		74
Total net revenues	$	614	$	650

Three Months Ended Nine Months Ended
(In millions, except percentages) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Income (loss) from continuing operations before income taxes $ 705
$ (61 ) $ 502
$ (14 )
Income tax expense (benefit) $ (606 ) $ (5 ) $ (683 ) $ 45
Effective tax rate (86 )% 8 % (136 )% (321 )%

Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan.

Revenues from customers inside the U.S. were $427 million and $456 million during the three months ended July 3, 2020 and July 5, 2019, respectively. No other individual country accounted for more than 10% of revenues.

The table below represents cash, cash equivalents and short-term investments held in the U.S. and internationally in various foreign subsidiaries.


(In millions)	July 3, 2020		April 3, 2020
U.S.	$	412	$	1,345
International	719		918
Total cash, cash equivalents and short-term investments	$	1,131	$	2,263

The table below represents our property and equipment, net of accumulated depreciation and amortization, by geographic area, based on the physical location of the asset, at the end of each period presented.


(In millions)	July 3, 2020		April 3, 2020
U.S.	$	49	$	174
Ireland	34		34
Other countries ⁽¹⁾	5		30
Total property and equipment, net	$	88	$	238

(1)No individual country represented more than 10% of the respective totals.

Our ~~effective~~operating lease assets by geographic area, based on the physical location of the asset, at the end of each period presented, are as follows:


(In millions)	July 3, 2020		April 3, 2020
U.S.	$	36	$	40
India	11		11
Japan	8		10
Other countries⁽¹⁾	7		27
Total operating lease assets	$	62	$	88

(1)No individual country represented more than 10% of the respective totals.

Table of Contents

Significant customers

Customers that accounted for over 10% of our net accounts receivable were as follows:


	July 3, 2020		April 3, 2020
Customer A	45	%	39	%

Note 17. Commitments and Contingencies

Purchase obligations

As of July 3, 2020, we had purchase obligations of $466 million associated with agreements for purchases of goods or services, including purchase obligations associated with our discontinued operations. The amount of purchase obligations reflects estimated future payments as of July 3, 2020 according to the contract terms.

Deemed repatriation taxes

As of July 3, 2020, we are required to pay a one-time transition tax ~~rate for income from continuing operations for the three and nine months ended December 29, 2017 differs from the federal statutory income tax rate primarily~~of $683 million on untaxed foreign earnings of our foreign subsidiaries due ~~to accounting for the effects of enactment~~in installments through July 2025 as a result of the Tax Cuts and Jobs Act (H.R.1) or the “Act” on December 22, 2017, the benefits of lower-taxed international earnings, the research and development tax credit, and excess tax benefits related to stock-based compensation, partially offset by various permanent differences.

In the third quarter of fiscal 2018, we revised our estimated annual effective rate to reflect a change in the federal statutory rate from 35% to 21%, as a result of the enactment of the Act, which included broad tax reforms that are applicable to us. The rate change is effective January 1, 2018 and therefore will require us to use a blended U.S. statutory rate of 31.58% for our fiscal year 2018. As a result, we recognized a tax benefit in our tax provision for the three and nine months ended December 29, 2017 related to applying the new blended tax rate to our taxable income, as well as adjusting our deferred tax balance to reflect the application of the Act.

Our effective tax rate for loss from continuing operations for the three and nine months ended December 30, 2016 was based on the historic statutory tax rate of 35%. Our effective tax rate for loss from continuing operations for the three months ended December 30, 2016 differs from the federal statutory income tax rate primarily due to the benefits of lower-taxed international earnings and the research and development credit, partially offset by various permanent differences. Our effective tax rate for loss from continuing operations for the nine months ended December 30, 2016 differs from the federal statutory income tax rate primarily due to the benefits of lower-taxed international earnings and the research and development credit, partially offset by various permanent differences and tax expense related to the loss of tax attributes due to restructuring activities. Additionally, as pre-tax income (loss) approaches break even, small changes can produce significant variability in the effective tax rate.Indemnifications

~~we recorded an income tax benefit of $85 million and an income tax expense of $49 million on discontinued operations, respectively. See Note 13 for further details regarding discontinued operations.~~

Income tax expense from continuing operations for the three and nine months ended December 29, 2017 was adjusted to reflect the discrete effects of the Act and resulted in an increase in income tax benefit of $810 million. This includes an income tax benefit of $1.6 billion resulting from the application of the Act to existing deferred tax balances, including a reduction of the previously accrued deferred tax liability for foreign earnings by $1.4 billion. This was partially offset by $821 million of tax expense that was recorded for the one-time transition tax liability under the Act.

As of December 29, 2017, we have not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. These amounts may require further adjustments as a result of additional future guidance from the U.S. Department of the Treasury, changes in our assumptions, and the availability of further information and interpretations. In other cases, we have not been able to make a reasonable estimate and we continue to account for those items based on our existing accounting policies and the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which we were able to determine a reasonable estimate, we recognized a provisional tax benefit of $810 million, which is included as a component of income tax expense from continuing operations.

We remeasured certain deferred tax assets and liabilities based on an estimate of the rates at which they are expected to reverse in the future. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. Additionally, our estimates for when timing differences will reverse could differ from actual results at year end, impacting our provisional tax benefit.

The Act contained a one-time transition tax that is based on our total post-1986 earnings and profits (“E&P”) that we previously deferred from U.S. income taxes. We recorded a provisional amount for our one-time transition tax liability of our foreign subsidiaries. We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries. The liability ultimately determined will be dependent on our final fiscal year results. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. Future accounting guidance may also change our provisional estimates for the transition tax.

We have not completed our analysis of the deferred tax accounting for the new taxes on global intangible low taxed income and, therefore, have not recorded provisional amounts. We have not determined whether our accounting policy will be to record these amounts as deferred taxes or as period costs. We do not have sufficient information to complete the analysis and are awaiting potential further guidance required to evaluate the impact of deferred tax accounting for these provisions. Following the Securities and Exchange Commission guidance on changes in the tax law for which we are unable to make a provisional estimate, we have continued to compute this aspect of the tax provision based on the tax laws that were in effect immediately prior to the Act being enacted.

~~Note 6~~. ~~Acquisitions and Divestiture~~

~~Fiscal 2018 acquisitions~~

~~Fireglass and Skycure acquisitions~~

In July 2017, we completed our acquisitions of Israel-based Fireglass, Ltd. (“Fireglass”) and Skycure, Ltd. (“Skycure”). Fireglass provides agentless isolation solutions that prevent ransomware, malware and phishing threats in real-time from reaching user endpoints or the corporate network. With this acquisition, we further strengthened our enterprise security strategy to deliver an Integrated Cyber Defense Platform and extended our participation in the Secure Web Gateway and Email protection markets delivered both on premises and in the cloud. Skycure provides mobile threat defense for devices running modern operating systems, including iOS and Android. This acquisition extends our endpoint security capabilities. With the addition of Skycure our Integrated Cyber Defense Platform now has visibility into and control over all endpoint devices, including mobile devices, whether corporate owned or bring your own device. The total aggregate consideration for these acquisitions, primarily consisting of cash, was $345 million, net of $15 million cash acquired.

Our preliminary allocation of the aggregate purchase price for these two acquisitions, based on the estimated fair values of the assets acquired and liabilities assumed in July 2017, and the related weighted-average estimated useful lives, is as follows:

(In millions, except useful lives) July 24,
2017 Weighted-Average Estimated Useful Life
Developed technology $ 123

5.5 years
Customer relationships 11

7 years
Goodwill 247

Deferred income tax liabilities (35 )
Other liabilities (1 )
Total purchase price $ 345

The preliminary allocation of the aggregate purchase price for the two acquisitions described above was based upon preliminary valuations, and our estimates and assumptions are subject to refinement within the measurement period (up to one year from the close date). Adjustments to the purchase price allocations may require adjustments to goodwill prospectively. The primary areas of the preliminary purchase price allocations that are not yet finalized are certain tax matters, intangible assets, and identification of contingencies.

The preliminary goodwill arising from the acquisitions is attributed to the expected synergies, including revenue benefits that are expected to be generated by combining Fireglass and Skycure with Symantec. A portion of the goodwill recognized is expected to be deductible for tax purposes. See Note 7 for more information on goodwill.

~~Pro forma results of operations for these acquisitions have not been presented because they were not material to our consolidated results of operations, either individually or in the aggregate.~~

~~Other fiscal 2018 acquisitions~~

During the nine months ended December 29, 2017, in addition to the acquisitions mentioned above, we completed acquisitions of other companies for an aggregate purchase price of $66 million, net of $1 million cash acquired. Of the aggregate purchase price, $48 million was preliminarily recorded to goodwill. The primary areas of the preliminary purchase price allocations that are not yet finalized are certain tax matters, intangible assets, and identification of contingencies. These acquisitions were not material to our consolidated results of operations, either individually or in the aggregate.

~~Fiscal 2017 Blue Coat acquisition~~

During our second quarter of fiscal 2017, we acquired all of the outstanding common stock of Blue Coat, Inc. (“Blue Coat”). The total consideration for the acquisition was approximately $4.67 billion, net of cash acquired. The Blue Coat results are included in our Enterprise Security segment. See Note 2 for more information related to our segments.

~~Unaudited pro forma information~~

The unaudited pro forma financial results combine the historical results of Symantec and Blue Coat for the three and nine months ended December 30, 2016 and include the effects of pro forma adjustments as if Blue Coat were acquired in the beginning of our 2016 fiscal year. The pro forma results for the three and nine months ended December 30, 2016 include nonrecurring adjustments to amortization of acquired intangible assets, stock-based compensation, commissions, interest on debt used to finance the acquisition, and acquisition-related transaction costs, as well as the income tax effect of the pro forma adjustments.

The unaudited pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisition. These pro forma results are presented for informational purposes only and are not indicative of future operations or results that would have been achieved had the acquisition been completed as of the beginning of our 2016 fiscal year. The following table summarizes the pro forma financial information:

December 30, 2016
(In millions) Three Months Ended Nine Months Ended
Net revenues $ 1,041
$ 3,127
Net income (loss) $ 55
$ (64 )

~~LifeLock acquisition-related shareholder settlement~~

On February 9, 2017, we completed the acquisition of LifeLock, Inc. (“LifeLock”). In connection with this acquisition, we recognized a liability of $68 million for a claim related to appraisal rights by a LifeLock stockholder, which we settled in the second quarter of fiscal 2018 for $74 million in cash. The $6 million paid in addition to the recognized liability was recorded to general and administrative expense in our Condensed Consolidated Statements of Operations.

~~Divestiture~~

~~Website Security and Public Key Infrastructure solutions~~

On October 31, 2017, we completed the sale of our WSS and PKI solutions in our Enterprise Security segment to DigiCert. In accordance with the terms of the agreement, we received aggregate consideration of $1.1 billion, consisting of approximately $960 million in cash and shares of common stock representing an approximate 28% interest in the outstanding common stock of DigiCert valued at $160 million as of October 31, 2017. The cash consideration is subject to adjustment for WSS and PKI closing date cash and working capital as specified in the purchase agreement.

We determined the estimated fair value of our equity investment with the assistance of valuations performed by third party specialists and estimates made by management. We utilized a combination of the income approach based on a discounted cash flow method and market approach based on the guideline public company method that focuses on comparing DigiCert to reasonably similar publicly traded companies. The equity interest received is being accounted for under the equity method. We record our interest in the net earnings (loss) of DigiCert based on the most recently available financial statements of DigiCert, which are provided to us on a three month lag, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, in Income (loss) from equity interests in our Condensed Consolidated Statement of Operations. Profits or losses related to intra-entity sales with DigiCert are eliminated until realized by us or DigiCert. Basis differences represent differences between the original fair value of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. The carrying amount of the investment in equity interest will be adjusted to reflect our interest in net earnings, dividends received and other-than-temporary impairments.

~~As of the transaction close date, the carrying amounts of the major classes of assets and liabilities associated with the divestiture of our WSS and PKI solutions were as follows:~~

(In millions) October 31,
2017
Assets:
Cash and cash equivalents $ 2
Accounts receivable, net 34
Goodwill and intangible assets, net 670
Other assets 40
Total assets 746
Liabilities:
Deferred revenue 285
Other liabilities 11
Total liabilities $ 296

~~As of the transaction close date, we also had~~ ~~$8 million~~ ~~in cumulative currency translation losses related to subsidiaries that were sold, which was reclassified from Accumulated other comprehensive income (“AOCI”) to the gain on divestiture~~. ~~In addition, we incurred direct costs of $8 million, which was netted against the gain on divestiture, and tax expense of $137 million.~~

~~The following table presents the gain before income taxes associated with the divestiture:~~

(In millions)
Gain on divestiture:
Gain on sale of short-term investment $ 7
Gain on sale of other assets and liabilities 651
Total gain on divestiture $ 658

The gain on sale of short-term investment represents the gain on the sale of a short-term investment that was included in the transaction and resulted in the reclassification on the transaction close date of $7 million of unrealized gains from AOCI to the gain on divestiture.

~~The following table presents the income before income taxes for our WSS and PKI solutions for the periods indicated:~~

Three Months Ended Nine Months Ended
(In millions) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Income before income taxes $ 8
$ 49
$ 66
$ 157

In connection with the divestiture, we entered into a Transition Services Agreement ("TSA") with DigiCert pursuant to which we provide certain services including human resource services, financial support services and information technology services to

DigiCert. The services under the TSA commenced with the close of the transaction and expire at various dates through fiscal 2019, with extension options. During the three and nine months ended December 29, 2017, we recorded income of $10 million and associated direct costs of $2 million for all services provided to DigiCert in Other income (expense) in our Condensed Consolidated Statement of Operations.

~~Note 7. Goodwill and Intangible Assets~~

~~Goodwill~~

~~The changes in the carrying amount of goodwill by segment are as follows:~~

(In millions) Enterprise Security Consumer Digital Safety Total
Net balance as of March 31, 2017 $ 6,078
$ 2,549
$ 8,627
Acquisitions 256
39
295
Divestiture (606 ) —
(606 )
Translation and other adjustments 5
(3 ) 2
Net balance as of December 29, 2017 $ 5,733
$ 2,585
$ 8,318

~~Intangible assets, net~~

December 29, 2017 March 31, 2017
(In millions) Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Customer relationships $ 1,462
$ (305 ) $ 1,157
$ 1,646
$ (322 ) $ 1,324
Developed technology 1,043
(323 ) 720
1,006
(229 ) 777
Finite-lived trade names and other 13
(7 ) 6
46
(26 ) 20
Total finite-lived intangible assets 2,518
(635 ) 1,883
2,698
(577 ) 2,121
Indefinite-lived trade names 852
—
852
864
—
864
In-process research and development 19
—
19
19
—
19
Total intangible assets $ 3,389
$ (635 ) $ 2,754
$ 3,581
$ (577 ) $ 3,004

~~Amortization expense for purchased intangible assets is summarized below:~~

Three Months Ended Nine Months Ended Statements of Operations Classification
(In millions) December 29, 2017 December 30, 2016 December 29, 2017 December 30, 2016
Customer relationships and other $ 52
$ 43
$ 166
$ 91
Operating expenses
Developed technology 59
51
175
92
Cost of revenues
Total $ 111
$ 94
$ 341
$ 183

~~As of December 29, 2017, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:~~

(In millions) December 29,
2017
Remainder of 2018 $ 110
2019 436
2020 431
2021 321
2022 259
Thereafter 326
Total $ 1,883

~~See Note 6 for more information on our acquisitions and divestiture.~~

~~Note 8. Debt~~

~~The following table summarizes components of our debt:~~

(In millions, except percentages) December 29,
2017 March 31,
2017 Effective
Interest Rate
2.75% Senior Notes due June 15, 2017 $ —
$ 600
2.79 %
Senior Term Loan A-1 due May 10, 2019 300
1,000

LIBOR plus ⁽¹⁾

Senior Term Loan A-2 due August 1, 2019 800
800

LIBOR plus ⁽¹⁾

Senior Term Loan A-3 due August 1, 2019 70
200

LIBOR plus ⁽¹⁾

4.2% Senior Notes due September 15, 2020 750
750
4.25 %
2.5% Convertible Senior Notes due April 1, 2021 500
500
3.76 %
Senior Term Loan A-5 due August 1, 2021 500
1,710

LIBOR plus ⁽¹⁾

2.0% Convertible Senior Notes due August 15, 2021 1,250
1,250
2.66 %
3.95% Senior Notes due June 15, 2022 400
400
4.05 %
5.0% Senior Notes due April 15, 2025 1,100
1,100
5.23 %
Total principal amount 5,670
8,310

Less: Unamortized discount and issuance costs (83 ) (124 )
Total debt 5,587
8,186

Less: Current portion —
(1,310 )
Total long-term portion $ 5,587
$ 6,876


~~(1)~~	The senior term facilities bear interest at a rate equal to the London Interbank Offered Rate (“LIBOR”) plus a margin of 1.50% to 2.00% based on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt and our underlying loan agreements.

Based on the closing price of our common stock of $28.06 on December 29, 2017, the if-converted values of our 2.5% and 2.0% Convertible Senior Notes exceed the principal amount by approximately $337 million and $469 million, respectively.

~~The following table sets forth total interest expense recognized related to our 2.5% and 2.0% Convertible Senior Notes:~~

Three Months Ended Nine Months Ended
(In millions) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Contractual interest expense $ 9
$ 10
$ 28
$ 20
Amortization of debt discount and issuance costs $ 4
$ 3
$ 12
$ 9

~~As of December 29, 2017, the future maturities of debt by fiscal year are as follows:~~

(In millions) December 29,
2017
Remainder of 2018 $ —
2019 —
2020 1,170
2021 1,250
2022 1,750
Thereafter 1,500
Total future maturities of debt $ 5,670

~~Debt repayments~~

~~During the third quarter of fiscal 2018, we prepaid principal amounts of $130 million of our Senior Term Loan A-3 and $500 million of our Senior Term Loan A-1.~~

During the first quarter of fiscal 2018, we prepaid principal amounts of $1.2 billion of our Senior Term Loan A-5 and $200 million of our Senior Term Loan A-1. We also repaid in cash at maturity the $600 million remaining principal balance of our 2.75% Senior Notes due June 15, 2017.

~~Note 9. Fair Value Measurements~~

~~Assets measured and recorded at fair value on a recurring basis~~

Our cash equivalents consist primarily of money market funds whose carrying amount is a reasonable estimate of fair value. Our short-term investments consist of investment securities with original maturities greater than three months whose fair value approximates their amortized cost and marketable equity securities.

~~The following table summarizes our assets measured at fair value on a recurring basis, by level, within the fair value hierarchy:~~

December 29, 2017 March 31, 2017
(In millions) Fair Value Cash and Cash Equivalents Short-Term Investments Fair Value Cash and Cash Equivalents Short-Term Investments
Cash $ 712
$ 712
$ —
$ 1,183
$ 1,183
$ —
Non-negotiable certificates of deposit 381
381
—
15
15
—
Level 1 (Quoted prices in active markets for identical assets):
Money market funds 814
814
—
2,532
2,532
—
U.S. government securities 64
64
—
94
94
—
Marketable equity securities —
—
—
9
—
9
Total level 1 878
878
—
2,635
2,626
9
Level 2 (Significant other observable inputs):
Corporate bonds 367
—
367
—
—
—
U.S. agency securities 63
63
—
75
75
—
Commercial paper 119
108
11
348
348
—
Negotiable certificates of deposit 12
—
12
—
—
—
Total level 2 561
171
390
423
423
—
Total $ 2,532
$ 2,142
$ 390
$ 4,256
$ 4,247
$ 9

~~There were no transfers between fair value measurement levels during the nine months ended December 29, 2017.~~

~~The following table presents the contractual maturities of our debt investments as of December 29, 2017:~~

(In millions) Fair Value
Due in one year or less $ 66
Due after one year through five years 324
Total $ 390

~~Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.~~

~~Fair value of debt~~

~~As of December 29, 2017 and March 31, 2017, the total fair value of our debt was $5.7 billion and $8.3 billion, respectively, based on Level 2 inputs.~~

~~Note 10. Stockholders' Equity~~

~~Dividends~~

~~The following table summarizes dividends declared and paid and dividend equivalents paid for the periods presented:~~

Three Months Ended Nine Months Ended
(In millions, except per share data) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Dividends declared and paid $ 47
$ 46
$ 139
$ 139
Dividend equivalents paid 2
7
24
34
Total dividends and dividend equivalents paid $ 49
$ 53
$ 163
$ 173
Cash dividends declared per common share $ 0.075
$ 0.075
$ 0.225
$ 0.225

~~Our restricted stock units and performance based restricted stock units are entitled to dividend equivalents to be paid in the form of cash upon vesting for each share of the underlying unit.~~

On January 31, 2018, we declared a cash dividend of $0.075 per share of common stock to be paid on March 14, 2018 to all stockholders of record as of the close of business on February 20, 2018. All shares of common stock issued and outstanding and all shares of unvested restricted stock and performance-based stock as of the record date will be entitled to the dividend and dividend equivalents, respectively. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors.

~~Stock repurchase program~~

~~As of December 29, 2017, the remaining balance of our share repurchase authorization is $800 million and does not have an expiration date.~~

~~Accelerated stock repurchase agreement~~

During the fourth quarter of fiscal 2017, we entered into an accelerated stock repurchase (“ASR”) agreement with financial institutions to repurchase an aggregate of $500 million of our common stock. Pursuant to the ASR agreement, we made an upfront payment of $500 million to the financial institutions and received and retired an initial delivery of 14.2 million shares of our common stock. In the first quarter of fiscal 2018, we completed the ASR and received and retired an additional delivery of 2.2 million shares of our common stock. The total shares received and retired under the terms of the ASR agreement were 16.4 million, with an average price paid per share of $30.51.

~~Changes in AOCI by component~~

~~Components of AOCI net of taxes were as follows:~~

(In millions)
Foreign Currency
Translation Adjustments

Unrealized Gain (Loss) on
Available-For-Sale
Securities
Total
Balance as of March 31, 2017 $ 7
$ 5
$ 12
Reclassification to net income 5
(4 ) 1
Other comprehensive income (loss) 4

(2 )
2
Balance as of December 29, 2017 $ 16
$ (1 ) $ 15

~~Net gain (loss) reclassified from AOCI to the Condensed Consolidated Statement of Operations was as follows:~~

Amount Reclassified from AOCI Line Items in Condensed Consolidated Statements of Operations
Three Months Ended Nine Months Ended
(In millions) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
AOCI Components:
Foreign currency translation adjustments:
Gain on liquidations $ —
$ —
$ 3
$ —
Other income (expense), net
Sale of foreign entities (8 ) —
(8 ) —
Gain on divestiture
Total adjustments (8 ) —
(5 ) —
Income (loss) from continuing operations
Available-for-sale securities:
Gain realized 7
—
7
—
Gain on divestiture
Income tax expense 3
—
3
—
Income tax expense (benefit)
Gain, net of tax 4
—
4
—
Income (loss) from continuing operations
Total $ (4 ) $ —
$ (1 ) $ —

~~Note 11. Stock-Based Compensation~~

~~Stock-based compensation expense~~

~~The following table presents the stock-based compensation expense recognized in our Condensed Consolidated Statements of Operations:~~

Three Months Ended Nine Months Ended
(In millions) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Cost of revenues $ 7
$ 6
$ 22
$ 14
Sales and marketing 30
25
123
63
Research and development 49
25
143
64
General and administrative 39
41
160
90
Total stock-based compensation expense 125
97
448
231
Tax expense (benefit) associated with stock-based compensation expense 2
(34 ) (107 ) (74 )
Net stock-based compensation expense $ 127
$ 63
$ 341
$ 157

The tax expense (benefit) associated with stock-based compensation expense for the three and nine months ended December 29, 2017 reflects the impact of the enactment of the Act. The tax benefit associated with stock-based compensation expense for the three and nine months ended December 30, 2016 reflects the historic tax rates.

~~The following table summarizes additional information related to our stock-based compensation:~~

Nine Months Ended
(In millions, except per grant data) December 29,
2017 December 30,
2016
Restricted stock units:
Weighted-average fair value per award granted and assumed $ 30.20
$ 18.80
Awards granted and assumed 11.9
14.2
Total fair value of awards released $ 265
$ 138
Total unrecognized compensation expense, net of estimated forfeitures $ 369
$ 257
Weighted-average remaining recognition period 1.7 years
2.0 years
Performance-based restricted stock units:
Weighted-average fair value per award granted and assumed $ 32.94
$ 19.99
Awards granted and assumed 3.7
5.0
Total fair value of awards released $ 24
$ 13
Total unrecognized compensation expense, net of estimated forfeitures $ 92
$ 63
Weighted-average remaining recognition period 0.9 years
1.2 years
Stock options:
Total intrinsic value of stock options exercised $ 123
$ 57
Total unrecognized compensation expense, net of estimated forfeitures $ 79
$ 116
Weighted-average remaining recognition period 1.0 year
1.6 years

~~Note 12. Contingencies~~

~~Indemnifications~~

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In addition, our bylaws contain indemnification obligations to our directors, officers, employees, and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements, and we have not accrued any material liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.

In connection with the sale of Veritas and the sale of our ~~former information management~~Enterprise Security business ~~(“Veritas”),~~to Broadcom, we assigned several leases to Veritas Technologies LLC or ~~its~~Broadcom and/or their related subsidiaries. As a condition to consenting to the assignments, certain lessors required us to agree to indemnify the lessor under the applicable lease with respect to certain matters, including, but not limited to, losses arising out of Veritas Technologies LLC, Broadcom, or ~~its~~their related subsidiaries’ breach of payment obligations under the terms of the lease. As with our other indemnification obligations discussed above and in general, it is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. As with our other indemnification obligations, such indemnification agreements might not be subject to maximum loss clauses, and to date, generally under our real estate obligations, we have not incurred material costs as a result of such obligations under our leases and have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.

We provide limited product warranties, and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.

Litigation contingencies

SEC Investigation

As previously disclosed in our public filings, the Audit Committee of our Board of Directors (the Audit Committee) completed its internal investigation (the Audit Committee Investigation) in September 2018. In connection with the Audit Committee Investigation, we voluntarily contacted the U.S. Securities and Exchange Commission (SEC) in April 2018. The SEC commenced a formal investigation, and we continue to cooperate with that investigation. The outcome of such an investigation is difficult to predict. We have incurred, and will continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range of any potential loss.

Securities Class Action and Derivative Litigation

Securities class action lawsuits, which have since been consolidated, were filed in May 2018 against us and certain of our former officers, in the U.S. District Court for the Northern District of California. The lead plaintiff’s consolidated amended complaint alleged that, during a purported class period of May 11, 2017 to August 2, 2018, defendants made false and misleading statements in violation of Sections 10(b) and 20(a), and that certain individuals violated Section 20A, of the Securities Exchange Act. Defendants filed motions to dismiss, which the Court granted in an order dated June 14, 2019. Pursuant to that order, plaintiff filed a motion seeking leave to amend and a proposed first amended complaint on July 11, 2019. The Court granted the motion in part on October 2, 2019 and the first amended complaint was filed on October 11, 2019. The Court’s order

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dismissed certain claims against certain of our former officers. Defendants filed answers on November 7, 2019. A trial date has been set for June 14, 2021.

Purported shareholder derivative lawsuits have been filed against us and certain of our former officers and current and former directors in the U.S. District Courts for the District of Delaware and the Northern District of California, Delaware Chancery Court, and Delaware Superior Court, arising generally out of the same facts and circumstances as alleged in the securities class action and alleging claims for breach of fiduciary duty and related claims; these lawsuits include an action brought derivatively on behalf of our 2008 Employee Stock Purchase Plan. The derivative actions are currently voluntarily stayed in light of the securities class action. No specific amount of damages has been alleged in these lawsuits. We have also received demands from purported stockholders to inspect corporate books and records under Delaware law.

We will continue to incur legal fees in connection with these pending cases and demands, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations. The expense of continuing to defend such litigation may be significant. We intend to defend these lawsuits vigorously, but there can be no assurance that we will be successful in any defense. If any of the lawsuits are decided adversely, we may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations, and cash flows.

At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of these lawsuits or estimate the range of any potential loss.

GSA

During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s ~~(“DOJ”)~~(DOJ) Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration ~~(“GSA”)~~(GSA) Multiple Award

Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices.

As reported on the GSA’s publicly-available database, our total sales under the GSA Schedule contract were approximately $222 million from the period beginning January 2007 and ending September 2012. We ~~have~~ fully cooperated with the government throughout its investigation, and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct ~~government~~government sales under the GSA ~~schedule~~Schedule contract was approximately $145 million; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales has increased. The government ~~has~~ also indicated they are going to pursue claims for certain sales to California, Florida, and New York as well as sales to the federal government through reseller GSA Schedule ~~contracts,~~contracts, which could significantly increase our potential damages exposure.

In 2012, a sealed civil lawsuit was filed against ~~Symantec~~us related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the DOJ filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the DOJ and the relator on behalf of New York in an Omnibus Complaint, and a First Amended Omnibus Complaint was filed on October 8, 2015; the state claims also do not state specific damages amounts. On June 6, 2019, we filed a motion seeking summary judgment on all claims asserted by all plaintiffs, and the plaintiffs filed a motion for partial summary judgment on elements of liability on their claims. On October 21, 2019, the DOJ moved for a Prejudgment Writ of Sequestration for the Company to set aside $1,090 million to pay a judgment, should the United States prevail in this litigation, under the Federal Debt Collection Procedures Act. The Writ was sought in response to the Company’s announcement of its plans to distribute the after-tax proceeds of the sale of the Symantec enterprise business to Broadcom to its shareholders via a special dividend. The Court denied the Writ on December 12, 2019, on the basis of the Government’s failure to establish the “probable validity” of the debt, the amount sought to be sequestered, and the Company’s available cash, cash equivalents and short-term investments. The Court permitted the DOJ limited discovery of facts relevant to the Company’s financial state and financial projections and the option to renew its motion if appropriate and supported by the analysis of its own financial expert. That discovery period has now closed. On March 30, 2020, the Court issued an Order granting in part and denying in part our motion for summary judgment and granting in part and denying in part the United States’ motion for partial summary judgment. On May 5, 2020, the Court ordered the parties to mediation with the mediation period to conclude on July 31, 2020, at which time the parties were to provide a status update to the Court. No trial date has been set.

It is possible that the litigation could lead to claims or findings of violations of the False Claims Act and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties in some cases, depending upon a number of factors. Our current estimate of the low end of the range of the probable estimated loss from this matter is $25 million, which we have accrued. This amount contemplates estimated losses from both the investigation of compliance with the terms of the GSA Schedule contract as well as possible violations of the False Claims Act. There is at least a reasonable possibility that a loss may have been incurred in excess of our accrual for this ~~matter, however, we are currently unable to determine the high end of the range of estimated losses resulting from this~~ matter.

~~Finjan~~Avila v. LifeLock et al

On August ~~28, 2013, Finjan, Inc. (“Finjan”~~29, 2019, the Ninth Circuit issued a mandate remanding a securities class action lawsuit, originally filed on July 22, 2015, against our subsidiary, LifeLock, as well as certain of LifeLock’s former officers (the “LifeLock Defendants”) ~~filed a complaint against Blue Coat Systems, Inc.~~for

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further proceedings in the U.S. District Court for the ~~Northern~~ District of ~~California alleging that certain Blue Coat products infringe six of Finjan’s U.S. patents. On~~Arizona. The Ninth Circuit had affirmed in part and reversed in part the August ~~4, 2015, a jury returned a verdict that certain Blue Coat products infringe five~~21, 2017 decision of the ~~Finjan patents-in-suit and awarded Finjan lump-sum damages~~District Court, which had dismissed the case with prejudice. The complaint in the remanded action alleges that, during a purported class period of ~~$40 million. On November 20,~~July 30, 2014 to July 21, 2015, ~~the trial court entered~~ a judgment in favor of Finjan on the jury verdict and certain non-jury legal issues. On July 28, 2016, in its ruling on post-trial motions the trial court denied Blue Coat’s motions seeking a new trial or judgment as a matter of law and denied Finjan’s request for enhanced damages and attorneys’ fees. In August 2016, we completedperiod that predates our acquisition of ~~Blue Coat. We subsequently filed an appeal with~~LifeLock, the ~~Federal Circuit Court~~LifeLock Defendants made false and misleading statements in violation of ~~Appeals. On January 10, 2018, the Federal Circuit Court of Appeals issued an opinion favorable to us. The decision reversed or vacated all but $8 million~~Sections 10(b) and 20(a) of the ~~judgment against Blue Coat~~Securities Exchange Act. In fiscal 2020, we settled this lawsuit and ~~remanded to~~recorded a charge of $20 million in General and administrative expenses. The United States District Court for the District ~~Court to determine whether Finjan is entitled to a new trial~~of Arizona approved the settlement on ~~damages related to one of the patents. Blue Coat previously accrued $40 million in connection with Finjan, which was assumed by us as a part of the acquisition of Blue Coat.~~July 21, 2020.

Other

We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.

~~Note 13. Discontinued Operations~~

On January 29, 2016, we completed the sale of Veritas. The results of Veritas are presented as discontinued operations in our Condensed Consolidated Statements of Operations and have been excluded from continuing operations and segment results for all reported periods.

~~The following table presents information regarding certain components of income from discontinued operations, net of income taxes:~~

Three Months Ended Nine Months Ended
(In millions) December 29,
2017 December 30,
2016 December 29,
2017 December 30,
2016
Net revenues $ 14
$ 22
$ 51
$ 145
Cost of revenues (5 ) (3 ) (21 ) (12 )
Operating expenses (8 ) (2 ) (11 ) (26 )
Gain on sale of Veritas —
—
—
38
Income from discontinued operations before income taxes 1
17
19
145
Income tax expense (benefit) (30 ) (85 ) 7
49
Income from discontinued operations, net of income taxes $ 31
$ 102
$ 12
$ 96

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking statements and factors that may affect future results

The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the ~~“Securities Act”)~~Securities Act) and the Exchange Act of 1934, as amended (the ~~“Exchange Act”)~~Exchange Act). Forward-looking statements include references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” and similar expressions. In addition, projections of our future financial ~~performance,~~performance; anticipated growth and trends in our businesses and in our ~~industries,~~industries; the anticipated impacts of acquisitions, divestitures, restructurings, stock repurchases, and investment activities; the outcome or impact of ~~our restructurings,~~pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the ~~future,~~future; plans for and anticipated benefits of our solutions; matters arising out of the ongoing U.S. Securities and Exchange Commission (the SEC) investigation; anticipated tax rates, benefits and expenses; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including those that we discuss in ~~Risk Factors, set forth in Part I, Item 1A, of our annual report on Form 10-K for the fiscal year ended March 31, 2017 and in~~ Part II Item 1A, of this quarterly report on Form 10-Q. We encourage you to read ~~those sections~~that section carefully.

OVERVIEW

~~Our business~~

~~Symantec Corporation~~NortonLifeLock Inc. is ~~a global leader in cybersecurity. We operate our business on a global civilian cyber intelligence threat network and track a vast number~~leading provider of threats across the Internet from hundreds of millions of mobile devices, endpoints, and servers across the globe. We believe one of our competitive advantages is our database of threat indicators. This database allows us to reduce the number of false positives and provide faster and better protection for customers through our products. We are leveraging our capabilities to deliver integratedCyber Safety solutions for ~~customers. We are also pioneering~~consumers. Our NortonLifeLock branded solutions ~~in markets such as cloud security, digital safety, advanced threat protection,~~help consumers protect their devices, online privacy, identity, ~~protection, information protection~~ and ~~cyber security services.~~home networks.

Fiscal calendar

We have a 52/53-week fiscal year ending on the Friday closest to March 31. The ~~three months ended December 29, 2017 (“Q3 FY18”) and December 30, 2016 (“Q3 FY17”) both~~first quarter of fiscal 2021 consisted of 13 ~~weeks. The nine months ended December 29, 2017 (“YTD FY18”) and December 30, 2016 (“YTD FY17”) both~~weeks, whereas the first quarter of fiscal 2020 consisted of 3914 weeks. Our ~~2018~~2021 fiscal year consists of 52 weeks and ends on ~~March 30, 2018.~~April 2, 2021.

~~Strategy~~Key financial metrics

~~Our strategy~~The following tables provide our key financial metrics for the periods presented:


	Three Months Ended
(In millions, except for per share amounts)	July 3, 2020		July 5, 2019
Net revenues	$	614	$	650
Operating income	$	120	$	140
Income from continuing operations	$	149	$	38
Loss from discontinued operations	$	(31)	$	(12)
Net income	$	118	$	26
Net income per share from continuing operations - diluted	$	0.24	$	0.06
Net loss per share from discontinued operations - diluted	$	(0.05)	$	(0.02)
Net income per share - diluted	$	0.19	$	0.04
Cash provided by operating activities	$	170	$	325


	As Of
(In millions)	July 3, 2020		April 3, 2020
Cash, cash equivalents and short-term investments	$	1,131	$	2,263
Contract liabilities	$	1,058	$	1,076

•Net revenues decreased $36 million, primarily due to the favorable impact of the additional week in the first quarter of fiscal 2020.

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•Operating income decreased $20 million, primarily due to lower revenue and higher costs recognized in connection with our restructuring plans, partially offset by lower compensation expense and outside services expense that we achieved as a result of our cost reduction programs.

•Income from continuing operations increased $111 million, primarily due to higher income tax benefit.

•Loss from discontinued operations, net of tax, increased $19 million, primarily due to higher severance costs as a result of the sale of certain of our Enterprise Security assets and liabilities to Broadcom Inc. (Broadcom sale) in November 2019.

•Net income and net income per share increased, primarily due to higher income from our continuing operations for the reasons discussed above.

•Cash, cash equivalents and short-term investments decreased by $1,132 million compared to April 3, 2020, primarily due to repayment of debt and to a lesser extent, dividend payments and dividend equivalents, partially offset by net cash provided by operating activities. In May 2020, we settled the principal and conversion rights of $625 million of our 2.0% Convertible Notes for $1,179 million in cash.

•Contract liabilities were relatively flat compared to April 3, 2020.

COVID-19 UPDATE

The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal and state governments have implemented measures to ~~deliver comprehensive cyber security solutions~~contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. These events have caused a deterioration of the U.S. and global economies, creating a challenging macroeconomic environment.

To protect the health and well-being of our employees, partners and third-party service providers, we have implemented a near company-wide work-from-home requirement for ~~both enterprises~~most employees until further notice, made substantial modifications to employee travel policies, and ~~consumers.~~

~~Our enterprise security strategy is~~cancelled or shifted our conferences and other marketing events to ~~deliver an Integrated Cyber Defense platform that allows Symantec products~~virtual-only for the foreseeable future. While we continue to ~~share threat intelligence~~monitor the situation and ~~improve security outcomes for customers across all control points. Symantec is~~may adjust our current policies as more information and public health guidance become available, such precautionary measures could negatively affect our customer success efforts, sales and marketing efforts, or create operational or other challenges, such as a reduction in employee productivity because of the ~~leading vendor in protecting users, information, web and messaging across an integrated platform.~~

~~Our consumer digital safety strategy is to deliver the most comprehensive consumer digital safety solutions to help people protect their information, identities, devices and families.~~

~~Our financial highlights~~work from home requirement, any of which could harm our business and results of operations. Further, if the COVID-19 pandemic has a substantial impact on our employees, partners or third-party service providers’ health, attendance or productivity, our results of operations

~~Our~~ and overall financial ~~highlights~~performance may be adversely impacted. Additionally, if employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation. Although we have not yet experienced a material increase in customer cancellations or a material reduction in our retention rate in 2020, a prolonged economic downturn could adversely affect demand for our offerings, retention rates and harm our business and results of operations, ~~discuss~~particularly in light of the fact that our ~~business~~solutions are discretionary purchases and ~~overall analysis~~thus may be more susceptible to macroeconomic pressures, as well impact the value of ~~financial~~our common stock, our ability to refinance our debt, and our access to capital.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of the disease, the extent and effectiveness of containment actions and the impact of these and other ~~highlights affecting~~factors on our employees, customers, partners and third-party service providers. For more information on the ~~company~~risks associated with the COVID-19 pandemic, please see “Risk Factors” in Part II, Item 1A below.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Condensed Consolidated Financial Statements and ~~analyze~~related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial ~~results comparing the three~~position and ~~nine months ended December 29, 2017 to the prior year periods. This interim~~cash flows.

Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~(“MD&A”) should be read in conjunction with the MD&A~~included in our Annual Report on Form 10-K for the fiscal year ended ~~March 31, 2017.~~

On October 31, 2017, we completed the sale of our website security (“WSS”) and public key infrastructure (“PKI”) solutions to DigiCert Parent Inc. (“DigiCert”) for an aggregate consideration of $1.1 billion, consisting of approximately $960 million in cash and shares of common stock representing an approximate 28% interestApril 3, 2020. There have been no material changes in the outstanding common stock of DigiCert valued at $160 million as of the transaction date. The results of operations of our WSS and PKI solutions prior to the divestiture are reported in our consolidated results of operations through October 31, 2017. The cash consideration is subject to adjustmentmatters for ~~WSS and PKI closing date cash and working capital as specified~~which we make critical accounting estimates in the ~~purchase agreement. See Note 6 to the~~preparation of our Condensed Consolidated Financial Statements ~~for more information on our divestiture.~~during the three months ended July 3, 2020.

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RESULTS OF OPERATIONS

The following ~~discussion relates to the results of~~table sets forth our ~~continuing operations and our total Company cash flows unless stated otherwise.~~

~~Our operating segments~~

Our operating segments are significant strategic business units that offer different products and services distinguished by customer needs. Our operating segments are: Enterprise Security and Consumer Digital Safety.

~~Enterprise Security.~~ Our Enterprise Security segment solutions protect organizations so they can securely conduct business while leveraging new platforms and data. Our Enterprise Security segment includes our endpoint protection products, endpoint management products, messaging protection products, information protection products, cyber security services, website security (through ~~October 31, 2017) and advanced web and cloud security offerings. See Note 6 to the~~ Condensed Consolidated ~~Financial~~ Statements ~~for more information on our divestiture~~ of ~~our WSS and PKI solutions on~~ ~~October 31, 2017~~. Our enterprise endpoint, network security and management offerings support evolving endpoints and networks, providing advanced threat protection while helping reduce cost and complexity. These products and solutions are delivered through various methods, such as software, appliance, virtual appliance, Software-as-a-Service (“SaaS”) and managed services.

~~Consumer Digital Safety~~. Our Consumer Digital Safety segment focuses on providing a comprehensive Digital Safety solution to protect information, devices, networks and the identities of consumers. This solution includes our Norton-branded services, which provide multi-layer security across major desktop and mobile operating systems, public Wi-Fi connections, and home networks, to defend against increasingly complex online threats to individuals, families and small businesses, and our LifeLock-branded identity protection services. Our LifeLock-branded identity protection services primarily consist of identifying and notifying users of identity-related and other events and assisting users in remediating their impact. With the addition of LifeLock-branded identity protection services, we are providing a comprehensive digital safety solution designed to protect information across devices, customer identities and the connected home and family and accelerating our leadership in Consumer Digital Safety to protect all aspects of consumers’ digital lives.

~~For more information on our operating segments see Note 2 to the Condensed Consolidated Financial Statements.~~

~~Financial highlights and business trends~~

~~The following is an overview of key financial metrics in millions and the respective metrics~~Operations data as a percentage of ~~revenues.~~

~~Below are our financial highlights~~net revenues for the ~~three months ended December 29, 2017, compared~~periods indicated:


	Three Months Ended
	July 3, 2020		July 5, 2019
Net revenues	100	%	100	%
Cost of revenues	14		15
Gross profit	86		85
Operating expenses:
Sales and marketing	24		28
Research and development	11		16
General and administrative	9		15
Amortization of intangible assets	3		3
Restructuring and other costs	21		2
Total operating expenses	66		64
Operating income	20		22
Interest expense	(7)		(8)
Other income, net	3		—
Income from continuing operations before income taxes	16		14
Income tax expense (benefit)	(8)		8
Income from continuing operations	24		6
Loss from discontinued operations	(5)		(2)
Net income	19	%	4	%

Percentages may not add due to ~~the corresponding period in the prior year:~~rounding.

~~Revenue increased by 16% compared to the corresponding period in the prior year, driven by a 47% increase in our Consumer Digital Safety segment,~~

Net revenues


	Three Months Ended
(In millions, except for percentages)	July 3, 2020		July 5, 2019		Change in %
Net revenues	$	614	$	650	(6)	%

Net revenues decreased $36 million, primarily due to ~~the contribution~~approximately $44 million revenue from the ~~February 2017 acquisition~~additional week in the first quarter of ~~LifeLock, Inc. (“LifeLock”). Revenue~~fiscal 2020.

Performance Metrics

We regularly monitor a number of metrics in order to measure our ~~Enterprise Security segment decreased 3%, primarily due~~current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies.

The following table summarizes non-GAAP supplemental key performance metrics for our consumer solutions:


	Three Months Ended
(In millions, except for per user amounts)	July 3, 2020		July 5, 2019
Direct customer revenues	$	552	$	577	(1)
Average direct customer count	20.4		20.2
Direct customer count (at quarter end)	20.6		20.1
Direct average revenue per user (ARPU)	$	9.03	$	8.83	(2)

(1) Direct customer revenues in the first quarter of fiscal 2020 excludes $14 million of revenue from ID Analytics, which was divested in the fourth quarter of fiscal 2020. This amount includes the impact of the extra week on direct customer revenue, which we estimated to be approximately $41 million.

(2) ARPU in the ~~divestiture~~first quarter of fiscal 2020 was normalized to exclude the impact of the extra week on direct customer revenue, which we estimated to be approximately $41 million. Excluding this adjustment, ARPU would have been $9.51 in the first quarter of fiscal 2020.

We define direct customer revenues as revenues from sales of our ~~WSS~~consumer solutions to direct customers, which we define as active paid users who have a direct billing relationship with the Company at the end of the reported period. Users with multiple products or entitlements are counted for based on which solutions they are subscribed. We exclude users on free trials and ~~PKI solutions, partially offset by increased revenue from Blue Coat products.~~promotions and users who have indirectly purchased our product or services through partners unless such users convert or

~~Gross margin increased 2 percentage points compared to~~

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renew their subscription directly with us. For the ~~corresponding period in~~first quarter of fiscal 2021 and 2020, partner revenues were $62 million and $59 million, respectively.

Average direct customer count presents the ~~prior year due to the mix of customer and products, as our higher margin Consumer Digital Safety segment contributed to a larger proportion~~average of the total ~~gross profit.~~number of direct customers at the beginning and end of the fiscal quarter.

Operating margin increased 10 percentage points compared to the corresponding period in the prior year primarily driven by increased revenue and decreased sales and marketing and general administrative expense relative to our revenue partially due to savings from our ongoing cost reduction initiatives.

~~Income tax expense from continuing operations~~ARPU is calculated as estimated direct customer revenues for the ~~three and nine months ended December 29, 2017 reflects~~period divided by the discrete effects of the Tax Cuts and Jobs Act (H.R.1), or the “Act”, enacted on December 22, 2017, and includes an income tax benefit of $1.6 billion resulting from the application of the Act to existing deferred tax balances, partially offset by $821 million of tax expense that was recordedaverage direct customer count for the one-time transition tax liability under the Act. In addition, we recorded the benefit of a reduction in our estimated annual effective rate to reflect a change in the federal statutory rate from 35% to 21%, effective January 1, 2018,same period, expressed as a ~~result of the enactment of the Act.~~

~~On October 31, 2107, we completed the sale of our WSS~~monthly figure. Non-GAAP estimated direct customer revenues and ~~PKI solutions to DigiCert for an aggregate consideration of $1.1 billion, resulting~~ARPU have limitations as analytical tools and should not be considered in ~~a gain of~~ ~~$658 million~~.

~~Below are our additional financial highlights for the nine months ended December 29, 2017, compared to the corresponding period in the prior year:~~

Revenue increased by 25% compared to the corresponding period in the prior year, driven by a 15% and 38% increase in revenue from our Enterprise Security and Consumer Digital Safety segments, respectively, primarily due to the contributions from the acquisitions of Blue Coat and LifeLock.

~~Gross margin decreased 1 percentage point compared to the corresponding period in the prior year, primarily due to increased amortization of intangible assets of $83 million~~isolation or as a ~~result of~~substitute for GAAP estimated direct customer revenues or other GAAP measures. We monitor APRU because it helps us understand the rate at which we are monetizing our ~~acquisitions of Blue Coat and LifeLock, partially offset by our higher margin Consumer Digital Safety segment contributing to a larger proportion of the total gross profit.~~

Operating margin decreased 2 percentage points compared to the corresponding period in the prior year, primarily due to the decreased gross margin, increased stock-based compensation expense and advertising and promotion expense, partly offset by savings from our ongoing cost reduction initiatives.

~~We repaid debt totaling $2.6 billion as part of our plan to deleverage our balance sheet.~~

~~We paid aggregate cash consideration of $402 million for our acquisitions.~~

~~RESULTS OF OPERATIONS~~

consumer customer base.

Net revenues by ~~geographic~~geographical region

~~Percentage of revenue by geographic region presented below is based on the billing location of the customer.~~


	Three Months Ended
	July 3, 2020		July 5, 2019
Americas	73	%	74	%
EMEA	16	%	15	%
APJ	11	%	11	%

~~Note:~~The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and ~~Japan~~Japan.

~~Our percentage~~Percentage of ~~revenues from the Americas for the three and nine months ended December 29, 2017 increased compared to prior year periods primarily as a result of LifeLock sales which are entirely U.S.-based.~~

~~Our international sales are expected to continue to be a significant portion of our revenue. As a result, we expect~~ revenue ~~to continue to be affected~~ by foreign currency exchange rates as compared to the U.S. dollar. We are unable to predict the extent to which revenue in future periods will be impacted by changes in foreign currency exchange rates. If international sales become a greater portion of our total sales in the future, changes in foreign currency exchange rates may have a potentially greater impact on our revenue and operating results.

~~Cost of revenues~~

Cost of revenues consists primarily of technical support costs, costs of billable services, fees to original equipment manufacturers under revenue-sharing agreements, hardware costs, and fulfillment costs, as well as intangible asset amortization expense. The amounts below are presented in millions and the percentages are a percentage of revenues.

~~Three Months Ended December 29, 2017 Compared with Three Months Ended December 30, 2016~~

Our cost of revenues increased $14 million, or 6%, primarily due to cost of revenues related to our acquired LifeLock products, partially offset by lower cost of revenues from our divested WSS and PKI solutions.

~~Nine Months Ended December 29, 2017 Compared with Nine Months Ended December 30, 2016~~

Our cost of revenues increased $174 million, or 29%, primarily due to cost of revenues related to our acquired Blue Coat and LifeLock products, including $83 million of increased amortization of acquired intangible assets and $52 million of increased technical support costs primarily driven by the LifeLock acquisition.

~~Operating expenses~~

~~The following amounts are in millions and the percentages are a percentage of revenues.~~

~~Three Months Ended December 29, 2017 Compared with Three Months Ended December 30, 2016~~

~~Sales and marketing expense were relatively flat compared to the corresponding period in fiscal 2017.~~

Research and development expense increased $21 million, or 10%, primarily due to an increase of $24 million in stock-based compensation expense primarily related to the equity awards assumed or granted in connection with our acquisitions.

~~General and administrative expense was relatively flat compared to the corresponding period in fiscal 2017.~~

~~Amortization of intangible assets increased $9 million primarily due to the intangible assets acquired in the LifeLock acquisition.~~

~~Nine Months Ended December 29, 2017 Compared with Nine Months Ended December 30, 2016~~

Sales and marketing expense increased $233 million, or 23%, primarily as a result of increased expenses from the Blue Coat and LifeLock acquisitions, including increases of $143 million in advertising and promotional expense, largely related to LifeLock, $60 million in stock-based compensation expense, primarily from awards assumed in acquisitions, and $36 million in other compensation and benefits expense. These increases were partially offset by the decreased expenses from our divested WSS and PKI solutions.

Research and development expense increased $125 million, or 22%, primarily as a result of increased expenses from the Blue Coat and LifeLock acquisitions, including increases of $79 million in stock-based compensation expense and $23 million in other compensation and benefits expense.

General and administrative expense increased $71 million primarily as a result of increases of $70 million in stock-based compensation expense and $28 million in other compensation and benefits expense, primarily due to the Blue Coat and LifeLock acquisitions, partially offset by a decrease of $34 million in acquisition-related costs due to a lower level of acquisition activities in fiscal 2018.

Our stock-based compensation expense included in operating expenses increased $209 million, or 96%, primarily due to the equity awards assumed in our acquisitions, and the expected level of achievement for performance-based equity awards.

~~Amortization of intangible assets increased $75 million primarily due to the intangible assets acquired in the Blue Coat and LifeLock acquisitions.~~

~~Restructuring, transition and other costs~~

~~We initiated a restructuring plan~~geographic region in the first quarter of fiscal ~~2017~~2021 was similar to ~~reduce complexity~~the corresponding period in the prior year.

Cost of revenues


	Three Months Ended
(In millions, except for percentages)	July 3, 2020		July 5, 2019		Change in %
Cost of revenues	$	86	$	96	(10)	%

Our cost of revenues decreased $10 million primarily due to decreases in technical support costs and royalty charges, partially offset by ~~means~~an increase in commissions reflecting higher investments in affiliate marketing programs.

Operating expenses


	Three Months Ended
(In millions, except for percentages)	July 3, 2020		July 5, 2019		Change in %
Sales and marketing	$	145	$	184	(21)	%
Research and development	65		101		(36)	%
General and administrative	53		96		(45)	%
Amortization of intangible assets	18		20		(10)	%
Restructuring and other costs	127		13		877	%
Total operating expenses	$	408	$	414	(1)	%

Sales and marketing expense decreased $39 million, primarily due to a $60 million decrease in compensation expense and allocated corporate costs, reflecting our cost reduction initiatives, partially offset by a $16 million increase in advertising and promotional expense reflecting our higher investments in direct marketing programs.

Research and development expense decreased $36 million, primarily due to a $35 million decrease in compensation expense and allocated corporate shared costs, reflecting our cost reduction initiatives.

General and administrative expense decreased $43 million, primarily due to a $34 million decrease in compensation expense and allocated corporate shared costs, and an $8 million decrease in outside services expense, reflecting our cost reduction initiatives.

Restructuring and other costs increased $114 million, primarily due to $48 million in contract cancellation charges, $55 million in assets write-offs and impairments, and $7 million in stock-based compensation associated with our restructuring plan approved in November 2019.

Table of ~~long-term structural improvements. We have reduced headcount~~Contents

Non-operating expense, net


	Three Months Ended
(In millions)	July 3, 2020		July 5, 2019
Interest expense	$	(40)	$	(49)
Interest income	2		10
Loss from equity interest	—		(11)
Foreign exchange gain (loss)	1		(1)
Gain on extinguishment of debt	20		—
Other	(4)		3
Total non-operating expense, net	$	(21)	$	(48)

Non-operating expense, net, decreased $27 million, primarily due to the gain on extinguishment of debt due to the repayment of our 2.0% Convertible Notes in the first quarter of fiscal 2021, the absence of loss from equity interest, which was divested in October 2019, and ~~closed certain facilities under the restructuring plan. During the three and nine months ended December 29, 2017, we also incurred divestiture costs~~lower interest expense as a result of the sale of our WSS and PKI solutions, as well as costs associated with our other transition and transformation programs including the implementation of a new enterprise resource planning system and costs to automate business processes. Restructuring, transition and other costs primarily consisted of $11 million and $75 million of severance costs and transition costs, respectively, during the third quarter in fiscal 2018, compared to $19 million and$26 million, respectively, during the same period in fiscal 2017. Restructuring, transition and other costs primarily consisted of $50 million and $195 million of severance costs and transition costs, respectively, during the first nine months of fiscal 2018, compared to $57 million and $71 million, respectively, during the same period in fiscal 2017. See Note 4 to the Condensed Consolidated Financial Statements for further information on our restructuring, transition and other costs.

~~Non-operating~~debt repayments. These decreases were partially offset by lower interest income ~~(expense), net~~

~~The following charts are in millions.~~

~~Non-operating income (expense), net, increased during the third quarter and the first nine months of fiscal 2018, compared to the same periods in fiscal 2017, primarily due to a $658 million gain~~ as a result of ~~our divestiture of our WSS~~lower investments in money market funds and ~~PKI solutions. See Note 6 to the Condensed Consolidated Financial Statements for more information on our divestiture.~~

The increase in non-operating income (expense), net, for the first nine months of fiscal 2018 from our divestiture was partially offset by increased interest expense of $65 million mainly related to the timing of the issuance of the borrowings in fiscal 2017 as well as a foreign currency net loss of $26 millionshort-term investments in the first ~~nine months~~quarter of fiscal ~~2018,~~2021 compared to athe prior year period, and net ~~gain~~transition service expense of $3$8 million in connection with the ~~same period in fiscal 2017.~~Broadcom sale.

Provision for income taxes

~~The following charts are in millions except for percentages.~~


	Three Months Ended
(In millions, except for percentages)	July 3, 2020			July 5, 2019
Income from continuing operations before income taxes	$	99		$	92
Income tax expense (benefit)	$	(50)		$	54
Effective tax rate	(51)		%	59		%

Our effective tax rate for income from continuing operations for the ~~three and nine months ended December 29, 2017~~first quarter of fiscal 2021 differs from the federal statutory income tax rate primarily due to ~~accounting for the effects of enactment of the Tax Cuts and Jobs Act (H.R.1) or the “Act” on December 22, 2017,~~a tax benefit related to a favorable tax ruling, the benefits of lower-taxed international earnings, and the research and development tax credit, ~~and excess tax benefits related to stock-based compensation,~~ partially offset by state taxes and various permanent ~~differences.~~differences.

Our effective tax rate for ~~loss~~income from continuing operations for the ~~three and nine months ended December 30, 2016 was based on the historic statutory tax rate~~first quarter of ~~35%. Our effective tax rate for loss from continuing operations for the three months ended December 30, 2016~~fiscal 2020 differs from the federal statutory income tax rate primarily due to tax expense related to the Ninth Circuit's holding in Altera Corp. v. Commissioner (which the Supreme Court declined to review in June 2020), various permanent differences, and state taxes, partially offset by the benefits of lower-taxed international earnings and the research and development ~~credit, partially offset by various permanent differences. Our effective~~ tax rate for loss from continuing operations for the nine months ended December 30, 2016 differs from the federal statutory income tax rate primarily due to the benefits of lower-taxed international earnings and the research and development credit, partially offset by various permanent differences and tax expense related to the loss of tax attributes due to restructuring activities. Additionally, as pre-tax income (loss) approaches break even, small changes can produce significant variability in the effective tax rate.

For the three and nine months ended December 29, 2017, we recorded an income tax benefit of $30 million and an income tax expense of $7 million on discontinued operations, respectively. For the three and nine months ended December 30, 2016, we recorded an income tax benefit of $85 million and an income tax expense of $49 million on discontinued operations, respectively. See Note 13 for further details regarding discontinued operations.

As of December 29, 2017, we have not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. These amounts may require further adjustments as a result of additional future guidance from the U.S. Department of the Treasury, changes in our assumptions, and the availability of further information and interpretations. In other cases, we have not been able to make a reasonable estimate and we continue to account for those items based on our existing accounting policies and the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which we were able to determine a reasonable estimate, we recognized a provisional tax benefit of $810 million, which is included as a component of income tax expense from continuing operations. See Note 5 to the Condensed Consolidated Financial Statements for more information for additional information regarding our estimates.credit.

We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.

The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions ~~involve~~involves multiple tax periods and jurisdictions, it is reasonably possible that the gross unrecognized tax benefits related to these audits could decrease, whether by payment, release, or a combination of both, in the next 12 months by ~~$13 million, which could reduce our income tax provision and therefore benefit the resulting effective tax rate.~~$90 million.

We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.

~~Segment operating results~~

~~Enterprise Security Segment~~

~~The following amounts are in millions and the percentages are a percentage of Enterprise Security segment revenues.~~

Note: We do not allocate to our operating segments certain operating expenses that we manage separately at the corporate level and are not used in evaluating the results of, or in allocating resources to, our segments. These unallocated expenses consist of stock-based compensation expense; amortization of intangible assets; restructuring, transition and other costs; and acquisition-related costs.

~~Three Months Ended December 29, 2017 Compared with Three Months Ended December 30, 2016~~

Revenue decreased $19 million, or 3%, primarily due to a $69 million decrease in revenue from our WSS and PKI solutions as a result of the divestiture on October 31, 2017, partially offset by an increase in revenue from our network protection solutions. Revenue during the third quarter of fiscal 2018 was also unfavorably affected by a shift in sales to products with ratable revenue recognition, and away from product and license sales, as customers are increasingly adopting our cloud, subscription and virtual appliance products in line with our business strategy. This resulted in less in-quarter recognized revenue and more revenue deferred to the balance sheet. We expect this trend to continue at least through the fourth quarter of fiscal 2018 as our business model continues to evolve to more arrangements subject to ratable revenue recognition. Operating income increased $78 million, or 134%, primarily due to improved gross margin and decreased sales and marketing expense.

~~Nine Months Ended December 29, 2017 Compared with Nine Months Ended December 30, 2016~~

Revenue increased $258 million, or 15%, primarily due to the full period impact of the Blue Coat acquisition, partially offset by a decrease of $80 million in revenue as a result of the divestiture of our WSS and PKI solutions on October 31, 2017. Revenue during the first nine months of fiscal 2018 was also unfavorably affected by our shift to products with ratable revenue recognition as described above. Operating income increased $266 million, or 240%, primarily due to the contribution from the Blue Coat acquisition.

~~Consumer Digital Safety Segment~~

~~The following amounts are in millions and the percentages are a percentage of Consumer Digital Safety Segment revenues.~~

~~Three Months Ended December 29, 2017 Compared with Three Months Ended December 30, 2016~~

Revenue increased $187 million, or 47%, primarily due to revenue from sales of LifeLock products in the third quarter of fiscal 2018, which were absent in the third quarter of fiscal 2017. Our revenue growth reflects the benefit of the shift to subscription-based contracts and combined packaging of our consumer products, which is helping to mitigate the trend of declining revenues from sales of stand-alone Norton-branded products. Operating income increased $89 million, or 42%, primarily due to the contribution from the LifeLock acquisition.

~~Nine Months Ended December 29, 2017 Compared with Nine Months Ended December 30, 2016~~

Revenue increased $462 million, or 38%, primarily due to revenue from sales of LifeLock products in the first nine months of fiscal 2018, which were absent in the same period in fiscal 2017. We were also impacted by the trends related to our Norton products discussed above. Operating income increased $122 million, or 18%, primarily due to the contribution from the LifeLock acquisition.

LIQUIDITY, ~~AND~~ CAPITAL RESOURCES AND CASH REQUIREMENTS

Liquidity

We have historically relied on cash ~~flow~~generated from operations, borrowings under credit facilities, issuances of debt, and ~~the sale of a business,~~proceeds from divestitures for our liquidity needs.

As of ~~December 29, 2017,~~July 3, 2020, we had cash, cash equivalents and short-term investments of ~~$2.5 billion.~~

~~We manage~~$1,131 million, of which $719 million was held by our ~~investment portfolio with the objective to achieve greater investment diversification and higher yields while preserving capital and liquidity.~~

~~Another potential source of liquidity is our unused credit facility of $1.0 billion, which expires in May 2021.~~

foreign subsidiaries. Our principal cash requirements primarily consist of acquisitions, operating expenses, payment of taxes, capital expenditures, and contractual payments of principal and interest on debt. As a part of our plan to deleverage our balance sheet, we may from time to time in the future make additional optional repayments of our debt obligations, which may include repurchases of our outstanding debt, depending on various factors such as market conditions.

~~As of December 29, 2017, $1.6 billion in~~ cash, cash equivalents and short-term investments ~~were held by our foreign subsidiaries.~~are managed with the objective to preserve principal, maintain liquidity, and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however these distributions may be subject to applicable state or non-U.S. taxes. We have ~~provided U.S.~~not recognized deferred income taxes for local country income and withholding taxes that could be incurred on ~~a portion~~distributions of certain non-U.S. earnings or for outside basis differences in our subsidiaries, because we plan to indefinitely reinvest such earnings and basis differences.

We also have an undrawn credit facility of $1,000 million which expires in November 2024.

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Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, funding capital expenditures, servicing existing debt, repurchasing shares of our ~~undistributed foreign earnings sufficient to address the incremental U.S. tax that would be due if we needed those funds to support our operations~~common stock, and investing in the U.S. As a result of the Act enacted on December 22, 2017, we have recorded a provisional liability for the one-time transition tax, payable over eight years, of $821 million. Approximately $92 million is reflected as a current tax payable and the remainder as a long-term liability.business acquisitions.

~~Furthermore, our~~Our capital allocation strategy ~~contemplates~~is to balance driving stockholder returns, managing financial risk, and preserving our flexibility to pursue strategic options, including acquisitions. Historically, this has included a quarterly cash dividend, the repayment of debt, and ~~an on-going evaluation~~the repurchase of ~~our ability to repurchase~~ shares of our common stock.

~~We initiated~~Divestiture of Enterprise Security business

In fiscal 2020, we completed the sale of certain assets and the assumption of certain liabilities of our Enterprise Security business to Broadcom. In the three months ended July 3, 2020, we paid approximately $1 million of U.S. a ~~restructuring plan~~nd foreign income taxes as a result of the transaction and we expect to pay additional income taxes of $73 million in fiscal 2021 as a result of the ~~first quarter~~transactions.

Debt

In May 2020, we settled the $625 million principal and conversion rights of ~~fiscal 2017 to reduce complexity by means~~our 2.0% Convertible Notes for $1,179 million in cash.

Sale of ~~long-term structural improvements. We have reduced headcount and closed~~ certain ~~facilities under~~assets

On July 27, 2020, we completed the ~~restructuring plan. We expect the plan to be substantially completed in the first half~~sale of ~~fiscal 2019 and expect additional~~certain assets, which were previously classified as held for sale, for cash ~~charges~~consideration of ~~approximately $70 million to $90 million, primarily related to severance benefits and facilities exit costs.~~ $120 million.

Cash flows

The following summarizes our cash flow activities:


	Three Months Ended
(In millions)	July 3, 2020		July 5, 2019
Net cash provided by (used in):
Operating activities	$	170	$	325
Investing activities	$	23	$	38
Financing activities	$	(1,305)	$	(625)

See Note 43 to the Condensed Consolidated Financial Statements for ~~more~~additional cash flow information onassociated with our ~~restructuring plan.~~discontinued operations.

Cash from operating activities

~~Sources and uses of~~Our cash

~~The following summarizes selected items in our Condensed Consolidated Statements of Cash Flows~~ flows for the ~~nine months ended December 29, 2017~~first quarter of fiscal 2021 reflected net income of $118 million, adjusted by non-cash items, consisting primarily of impairments of current and ~~December 30, 2016,~~long-lived assets of $85 million, amortization and depreciation of $46 million, stock-based compensation expense of $25 million, deferred income taxes of $20 million and gain on extinguishment of debt of $20 million. Our cash flows for the first quarter of fiscal 2020 reflected net income of $26 million adjusted by non-cash items, consisting primarily of amortization and depreciation of $158 million, stock-based compensation expense of $80 million and deferred income tax benefits of $30 million.

Changes in ~~millions.~~operating assets and liabilities in the first quarter of fiscal 2021 consisted primarily of the following:

Accounts receivable decreased $5 million, compared to $270 million in the first quarter of fiscal 2020, primarily due to the absence of Enterprise Security billings after the close of the Broadcom sale and collection of those receivables thereafter.

~~Operating~~Contract liabilities decreased $29 million, compared to $161 million in the first quarter of fiscal 2020, primarily due to the absence of Enterprise Security billings after the close of the Broadcom sale.

Income tax payable decreased by $88 million, compared to an increase of $72 million in the first quarter of fiscal 2020, primarily due to a decrease in unrecognized tax benefits as a result of a favorable tax ruling.

Cash from investing activities

Our ~~primary source~~investing activities in the first quarter of ~~cash has been cash collections~~fiscal 2021 consisted primarily of proceeds from ~~our customers. Due to seasonality, our orders are generally higher~~maturities and sales of short-term investments of $29 million. Our investing activities in ~~our third~~the first quarter of fiscal 2020 consisted primarily of proceeds from maturities and ~~fourth fiscal quarters and lower in our first and second fiscal quarters.~~ sales of short-term investments of $92 million, partially offset by capital expenditures of $49 million.

Cash ~~inflows are affected by these fluctuations in our billings and timing of the related collections.~~from financing activities

~~Our primary uses of cash include payments for compensation and related costs, payments to our resellers and distribution partners, payments for income taxes, and other general corporate expenditures.~~

Our cash flows from ~~operations for the first nine months of fiscal 2018 were $684 million, compared to net cash used of $564 million for the same period in fiscal 2017. Our cash flows~~financing activities in the first nine months of fiscal 2018 reflected $1.6 billion of discrete deferred income tax benefit related to adjustments of deferred taxes as a result of the enactment of the Act in December 2017 and $821 million~~in taxes~~payable as a result of transition taxes. Our cash flows in the first nine months of fiscal 2017 reflected a one-time tax payment of $887 million related to the gain on sale from the divestiture of Veritas. In addition, our cash flows from operations in the first nine months of fiscal 2018, compared to the corresponding period in the prior year, were favorably impacted by an increase in deferred revenue of $258 million, reflecting increased billings and collections for ratable contracts, as well as longer contract duration.

~~Investing activities~~

Our investing cash flows consist primarily of proceeds from divestitures, payments for acquisitions and net purchases of short-term investments. Our investing activities during the first nine months of fiscal 2018 included $946 million in net cash proceeds from the divestiture of our WSS and PKI solutions in the third quarter of fiscal 2018, partially offset by $402 million paid for acquisitions during the first nine months of fiscal 2018, compared to $4.5 billion paid during the same period for fiscal 2017 for the Blue Coat acquisition. See Note 6 to the Condensed Consolidated Financial Statements for more information on our divestiture and acquisitions. In addition, during the first nine months of fiscal 2018, we had net purchases of $383 million of short-term investments.

~~Financing activities~~

~~Our financing cash flows consist~~2021 consisted primarily of ~~issuances and~~ repayments of convertible debt of $1,179 million and payment of dividends and dividend equivalents ~~to stockholders, and tax payments related to shares withheld in the settlement~~ of ~~restricted stock units (“RSUs”).~~$105 million. Our ~~primary financing activities during the first nine months of fiscal 2018 consisted of debt repayments of $2.6 billion, while our primary~~ financing activities in the first ~~nine months~~quarter of fiscal ~~2017~~2020 consisted primarily of ~~borrowings~~common stock repurchases of ~~$5.0 billion, net~~$559 million, payment of ~~issuance costs.~~dividends and dividend equivalents of $51 million and tax withholding payments related to restricted stock units of $52 million.

~~Debt.~~

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Cash requirements

Debt - As of ~~December 29, 2017,~~July 3, 2020, our total outstanding principal amount of ~~our debt was~~ ~~$5.7 billion~~.indebtedness is summarized as follows. See Note 89 to the Condensed Consolidated Financial Statements for further information on our debt.


(In millions)	July 3, 2020
Senior Term Loan	$	500
Senior Notes	2,250
Convertible Senior Notes	875
Total debt	$	3,625

In our second quarter of fiscal 2021, we plan to borrow under the delayed draw term loan of $750 million, which will mature in November 2024, and use the proceeds to repay in full our 4.2% Senior Notes due September 2020.

Debt covenant compliance. The credit agreement we entered into in November 2019 contains customary representations and warranties, non-financial covenants for financial reporting, and affirmative and negative covenants, including compliance with specified financial ratios.As of July 3, 2020, we were in compliance with all debt covenants.

Dividends. On ~~January 31, 2018,~~August 6, 2020, we ~~declared~~announced the declaration of a cash dividend of ~~$0.075~~$0.125 per share of common stock to be paid on March 14, 2018, to all stockholders of record as of the close of business on February 20, 2018. All shares of common stock issued and outstanding and all shares of unvested restricted stock and performance-based stock as of the record date will be entitled to the dividend and dividend equivalents, respectively.in September 2020. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors. ~~See Note 10 to the Condensed Consolidated Financial Statements for more information on our dividends and dividend equivalents.~~

~~Share repurchases~~.Stock repurchases. Under our stock repurchase ~~programs,~~program, we may purchase shares of our outstanding common stock through ~~open market and through~~ accelerated stock repurchase ~~(“ASR”)~~transactions, open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and privately-negotiated transactions. As of ~~December 29, 2017,~~July 3, 2020, the remaining balance of our ~~share~~stock repurchase authorization ~~is $800~~was $578 million and does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities.

Restructuring. Under our restructuring plan approved by our Board of Directors in November 2019, we have incurred and expect to incur cash expenditures for severance and termination benefits and contract terminations. As of July 3, 2020, we estimate that we will incur total costs of $550 million in connection with the November 2019 Plan, excluding stock-based compensation expense, of which up to $225 million is expected to consist of cash expenditures for severance and termination benefits and up to $110 million is expected to consist of cash expenditures for contract terminations, and up to $240 million is expected to consist of asset write-offs and other restructuring costs. During the first three months of fiscal 2021, we made $39 million in cash payments related to the November 2019 Plan. These actions are expected to be substantially completed by September 2020. See Note 11 to the Condensed Consolidated Financial Statements for additional cash flow information associated with our restructuring activities.

Contractual obligations

~~Our contractual obligations primarily consist~~The following is a schedule of ~~future payments due under~~ our ~~debt, purchase orders, lease arrangements and certain tax regulations. The table below summarizes~~significant contractual obligations as of ~~December 29, 2017 that have materially changed from~~July 3, 2020, including those associated with our ~~disclosure~~discontinued operations. The expected timing of payments of the obligations in ~~Management’s Discussion~~the following table is estimated based on current information. Timing of payments and ~~Analysis~~actual amounts paid may be different, depending on the time of ~~Financial Condition and Results~~receipt of ~~Operations, set forth in Part II, Item 7, of our Annual Report on Form 10-K~~goods or services, or changes to agreed-upon amounts for ~~the fiscal year ended March 31, 2017.~~some obligations.

Payments Due by Fiscal Period
(In millions) Total Remainder of 2018 2019 - 2020 2021 - 2022 Thereafter
Debt ⁽¹⁾
$ 5,670
$ —
$ 1,170
$ 3,000
$ 1,500
Interest payments on debt ⁽²⁾
845
43
369
233
200
Purchase obligations ⁽³⁾
340
242
45
51
2
Deemed repatriation taxes ⁽⁴⁾
856
92
133
133
498


	Payments Due by Period
(In millions)	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		Thereafter
Debt	$	3,625	$	763	$	1,325	$	1,537	$	—
Interest payments on debt ⁽¹⁾	412		116		172		124		—
Purchase obligations ⁽²⁾	466		382		53		28		3
Deemed repatriation taxes ⁽³⁾	683		68		136		299		180
Operating leases ⁽⁴⁾	95		29		40		22		4
Total	$	5,281	$	1,358	$	1,726	$	2,010	$	187


~~(1)~~	~~See Note 8 to the Condensed Consolidated Financial Statements for further information on our debt.~~

~~(2)~~

Interest payments were calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes and Senior Term Facilities. Interest on variable rate debt was calculated using the interest rate in effect as of December 29, 2017. See Note 8 to the Condensed Consolidated Financial Statements for further information on the Senior Notes, Convertible Senior Notes and Senior Term Facilities.

~~(3)~~

These amounts are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The table above also includes agreements to purchase goods or services that have cancellation provisions requiring little or no payment. The amounts under such contracts are included in the table above because management believes that cancellation of these contracts is unlikely and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.


~~(4)~~	These amounts represent the transition tax on untaxed foreign earnings of foreign subsidiaries under the Act which may be paid in installments over an eight-year period. See Note 5 to the Condensed Consolidated Financial Statements for further information on our income taxes and the impact from the recently enacted legislation.

(1)Interest payments were calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes and Term Loans. Interest on variable rate debt was calculated using the interest rate in effect as of July 3, 2020. See Note 9 to the Condensed Consolidated Financial Statements for further information on the Senior Notes, Convertible Senior Notes and Term loans.

~~Indemnifications~~(2)These amounts are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. The table above also includes agreements to purchase goods or services that have cancellation provisions requiring little or no payment. The amounts under such contracts are included in the table above because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.

(3)These amounts represent the transition tax on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act which may be paid in installments through July 2025.

(4)We have entered into various non-cancelable operating lease agreements that expire on various dates through fiscal 2028. See Note 8 to the Condensed Consolidated Financial Statements for further information on leases.

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Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of July 3, 2020, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $576 million in long-term income taxes payable has been excluded from the contractual obligations table. See Note 12 to the Condensed Consolidated Financial Statements for further information.

Indemnifications

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In addition, our bylaws contain indemnification obligations to our directors, officers, employees and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.

In connection with the sale of Veritas and the sale of our Enterprise Security business to Broadcom, we assigned several leases to Veritas Technologies LLC or ~~its~~Broadcom and/or their related subsidiaries. ~~As a condition to consenting~~See Note 17 to the assignments, certain lessors required us to agree to indemnify the lessor under the applicable lease with respect to certain matters, including, but not limited to, losses arising out of Veritas Technologies LLC or its related subsidiaries’ breach of payment obligations under the terms of the lease. As with our other indemnification obligations discussed above and in general, it is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. As with our other indemnification obligations, such indemnification agreements might not be subject to maximum loss clauses and to date, generally under our real estate obligations, we have not incurred material costs as a result of such obligations under our leases and have not accrued any liabilities related to such indemnification obligations in our Condensed ~~Consolidated Financial Statements.~~

We provide limited product warranties and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.

~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES~~

~~There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated~~Consolidated Financial Statements during the nine months ended December 29, 2017, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for ~~the fiscal year ended March 31, 2017.~~

~~Recently issued authoritative guidance not yet adopted~~

~~Revenue Recognition - Contracts with Customers.~~ In May 2014, the Financial Accounting Standards Board (“FASB”) issued new authoritative guidance for revenue from contracts with customers. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration that the company expects to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. In March 2016, the FASB clarified implementation guidance on principal versus agent considerations. In April 2016, the FASB issued guidance related to identifying performance obligations and licensing which reduces the cost and complexity of applying certain aspects of the guidance both at implementation and on an ongoing basis.

The new guidance may be applied retrospectively to each prior period presented (“retrospective”) or retrospectively with cumulative effect recognized in retained earnings as of the date of adoption (“modified retrospective”). We expect to adopt the new standard on a modified retrospective basis in our first quarter of fiscal 2019.

~~We are continuing to assess the impact of this standard~~further information on our financial position, results of operations and related disclosures and have not yet determined whether the effect will be material. We do not expect that the adoption of this standard will have a material impact on our operating cash flows. We believe that the new guidance will impact our following policies and disclosures:indemnifications.

~~the pattern and timing of the recognition of revenue for certain license fees;~~

~~the allocation of revenue across performance obligations in multiple element arrangements; and~~

~~required disclosures, including information about the transaction price allocated to remaining performance obligations and expected timing of revenue recognition.~~

We will continue to assess the impact of new guidance including any changes to systems, processes and the control environment as we work through the adoption, and there remain areas still to be fully concluded upon.

~~Financial Instruments - Recognition and Measurement.~~ In January 2016, the FASB issued new authoritative guidance on financial instruments. The new guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The new guidance will be effective for us in our first quarter of fiscal 2019. Early adoption is permitted under limited circumstances but we do not intend to adopt the provisions of the new guidance early. We are currently evaluating the impact of the adoption of this guidance on our Consolidated Financial Statements.

~~Leases.~~ In February 2016, the FASB issued new guidance on lease accounting which will require lessees to recognize assets and liabilities on their balance sheet for the rights and obligations created by operating leases and will also require disclosures designed to give users of financial statements information on the amount, timing, and uncertainty of cash flows arising from leases. The new guidance will be effective for us in our first quarter of fiscal 2020. Early adoption is permitted but we do not plan to adopt the provisions of the new guidance early. We are currently evaluating the impact of the adoption of this guidance on our Consolidated Financial Statements. We are currently in the assessment phase to determine the adoption methodology and are evaluating the impact of this new standard on our consolidated financial statements and disclosures. We expect that most of our operating lease commitments will be subject to the new standard and recognized as lease liabilities and right-of-use assets upon adoption, which will increase the total assets and total liabilities we report. We are evaluating the impact to our consolidated financial statements as it relates to other aspects of the business.

~~Credit Losses.~~ In June 2016, the FASB issued new authoritative guidance on credit losses which changes the impairment model for most financial assets and certain other instruments. For trade receivables and other instruments, we will be required to use a new forward-looking “expected loss” model. Additionally, for available-for-sale debt securities with unrealized losses, we will measure credit losses in a manner similar to today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The standard will be effective for us in our first quarter of fiscal 2021. We are currently evaluating the impact of the adoption of this guidance on our Consolidated Financial Statements.

~~Income Taxes - Intra-Entity Asset Transfers Other Than Inventory.~~ In October 2016, the FASB issued new authoritative guidance that requires entities to immediately recognize the tax consequences of intercompany asset transfers, excluding inventory, at the transaction date, rather than deferring the tax consequences under current U.S. GAAP. The standard will be effective for us in our first quarter of fiscal 2019, and requires a modified retrospective transition method. We are currently evaluating the impact of the adoption of this guidance and anticipate it will have a material impact on our Consolidated Financial Statements.

Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our consolidated financial position, operating results or disclosures.

Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market Risk

~~Interest rate risk~~

There have been no significant changes into our ~~interest rate~~market risk exposures during the ~~nine~~first three months ~~ended December 29, 2017,~~of fiscal 2021, as compared to ~~the interest rate risk exposures~~those discussed in ~~Management’s Discussion~~Quantitative and ~~Analysis of Financial Condition and Results of Operations,~~Qualitative Disclosures About Market Risk, set forth in Part II, Item 7A, of our Annual Report on Form 10-K for the fiscal year ended ~~March 31, 2017.~~April 3, 2020.

~~Foreign currency exchange rate risk~~

There have been no significant changes to the estimated fair value change to our foreign currency hedging derivatives for a given change in foreign currency exchange rates during the nine months ended December 29, 2017, as compared to that discussed in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2017.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The ~~Securities and Exchange Commission (“SEC”)~~SEC defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our management (with the participation of our Chief Executive Officer ~~(“CEO”)~~ and Chief Financial ~~Officer (“CFO”))~~Officer) has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act). Based on such evaluation, our ~~CEO~~Chief Executive Officer and our ~~CFO~~Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal ~~control~~controls over financial reporting or in other factors during the ~~three months ended December 29, 2017,~~first quarter of fiscal 2021, that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

Our management, including our ~~CEO~~Chief Executive Officer and ~~CFO,~~Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. ~~Accordingly, our disclosure controls and procedures provide reasonable assurance~~

Table of ~~achieving their objectives.~~Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Information with respect to this Item may be found under the heading “Litigation contingencies” in Note 1217 to the Condensed Consolidated Financial Statements in this Form 10-Q, which information is incorporated herein by reference.

Item 1A. Risk Factors

A description of the ~~risks~~risk factors associated with our business is set forth below. The list is not exhaustive, and you should carefully consider these risks and uncertainties before investing in our common stock.

RISKS RELATED TO OUR BUSINESS STRATEGY AND INDUSTRY

The COVID-19 pandemic has affected how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal and state governments have implemented measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. To protect the health and well-being of our employees, partners and third-party service providers, we have implemented a near company-wide work-from-home requirement for most employees until further notice, made substantial modifications to employee travel policies, and cancelled or shifted our conferences and other marketing events to virtual-only for the foreseeable future. While we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, such precautionary measures could negatively affect our customer success efforts, sales and marketing efforts, or create operational or other challenges, such as a reduction in employee productivity because of the work from home requirement, any of which could harm our business and results of operations. Further, if the COVID-19 pandemic has a substantial impact on our employees, partners or third-party service providers’ health, attendance or productivity, our results of operations and overall financial performance may be adversely impacted. Additionally, if employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation.

The U.S. and global economies have reacted negatively in response to worldwide concerns due to the economic impacts of the COVID-19 pandemic, and on June 8, 2020, the National Bureau of Economic Research announced that the U.S. was in a recession. Although we have not yet experienced a material increase in customers cancellations or a material reduction in our retention rate in 2020, we may experience such an increase or reduction in the future, especially in the event of a prolonged recession as a result of the COVID-19 pandemic. A prolonged recession could result adversely affect demand for our offerings, retention rates and harm our business and results of operations, particularly in light of the fact that our solutions are discretionary purchases and thus may be more susceptible to macroeconomic pressures, as well impact the value of our common stock, ability to refinance our debt, and our access to capital.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of the disease, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and third-party service providers. If we are not able to respond to and manage the impact of such events effectively and if the macroeconomic conditions of the general economy or the industries in which we operate do not improve, or deteriorate further, our business, operating results, financial condition and cash flows could be adversely affected.

If we are unable to develop new and enhanced solutions, or if we are unable to continually improve the performance, features, and reliability of our existing solutions, our competitive position may weaken, and our business and operating results could be adversely affected.

Our future success depends on our ability to effectively respond to evolving threats to consumers, as well as competitive technological developments and industry changes, by developing or introducing new and enhanced solutions on a timely basis.

We have in the past incurred, and will continue to incur, significant research and development expenses as we strive to remain competitive, and as we focus on organic growth through internal innovation. Following the Broadcom sale (as defined below), our resources for research and development have decreased, which could put us at a competitive disadvantage. Nevertheless, we believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position, which include, for example, decreasing our reliance on third parties for our Engine-Related Services. If we are unable to anticipate or react to competitive challenges or if existing or new competitors gain market share in any of our markets, our competitive position could weaken, and we could experience a decline in our revenues that could adversely affect our business and operating results. If we do not achieve the benefits anticipated from these investments, or if the achievement of these benefits is delayed, our operating results may be adversely affected. Additionally, we must continually address the challenges of dynamic and accelerating market trends and competitive developments. Customers may require features and capabilities that our current solutions do not have. Our failure to develop new solutions and improve our existing solutions to satisfy customer preferences and effectively compete with other market offerings in a timely and cost-effective manner may harm our ability to retain our customers and to create or increase demand for our solutions, which may adversely impact our operating results.

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The development and introduction of new solutions involve a significant commitment of time and resources and are subject to a number of risks and challenges including but not limited to:

•Lengthy development cycles;

•Evolving industry and regulatory standards and technological developments by our competitors and customers;

•Rapidly changing customer preferences;

•Evolving platforms, operating systems, and hardware products, such as mobile devices, and related product and service interoperability challenges;

•Entering into new or unproven markets; and

•Executing new product and service strategies.

If we are not successful in managing these risks and challenges, or if our new or improved solutions are not technologically competitive or do not achieve market acceptance, our business and operating results could be adversely affected.

We operate in a highly competitive environment, and our competitors may gain market share in the markets for our solutions that could adversely affect our business and cause our revenues to decline.

We operate in intensely competitive markets that experience frequent technological developments, changes in industry and regulatory standards, changes in customer requirements, and frequent new product introductions and improvements. If we are unable to anticipate or react to these competitive challenges, or if existing or new competitors gain market share in any of our markets, our competitive position could weaken, and we could experience a decline in our revenues that could adversely affect our business and operating results. To compete successfully, we must maintain an innovative research and development effort to develop new solutions and enhance our existing solutions, effectively adapt to changes in the technology or product rights held by our competitors, appropriately respond to competitive strategies, and effectively adapt to technological changes and changes in the ways that our information is accessed, used, and stored by our customers. If we are unsuccessful in responding to our competitors or to changing technological and customer demands, our competitive position and our financial results could be adversely affected.

Our competitors include software vendors that offer solutions that directly compete with our offerings. In addition to competing with these vendors directly for sales to end-users of our solutions, we compete with them for the opportunity to have our solutions bundled with the offerings of our strategic partners, such as computer hardware original equipment manufacturers (OEMs) and internet service providers (ISPs) and Operating Systems. Our competitors could gain market share from us if any of these strategic partners replace our solutions with those of our competitors or if these partners more actively promote our competitors’ solutions than our own. In addition, software vendors who have bundled our solutions with theirs may choose to bundle their solutions with their own or other vendors’ solutions or may limit our access to standard interfaces and inhibit our ability to develop solutions for their platform. In the future, further product development by these vendors could cause our solutions to become redundant, which could significantly impact our sales and financial results.

We face growing competition from other technology companies, as well as from companies in the identity threat protection space such as credit bureaus. Many of these competitors are increasingly developing and incorporating into their products data protection software that competes at some levels with our offerings. Our competitive position could be adversely affected to the extent that our customers perceive the functionality incorporated into these products as replacing the need for our solutions.

Security protection is also offered by some of our competitors at prices lower than our prices or in some cases, is offered free of charge. Our competitive position could be adversely affected to the extent that our customers perceive these lower cost or free security products as replacing the need for full featured solutions like ours. The expansion of these competitive trends could have a significant negative impact on our revenues and operating results by causing, among other things, price reductions of our solutions, reduced profitability, and loss of market share.

Many of our competitors have greater financial, technical, marketing, or other resources than we do and consequently, may have the ability to influence customers to purchase their products instead of ours. Further consolidation within our industry or other changes in the competitive environment could result in larger competitors that compete with us. We also face competition from many smaller companies that specialize in particular segments of the market in which we compete.

We may need to change our pricing models to compete successfully.

The intense competition we face, in addition to general and economic business conditions, can put pressure on us to change our prices. If our competitors offer deep discounts on certain solutions or provide offerings, we may need to lower prices in order to compete successfully Similarly, if there is pressure by competitors to raise prices, our ability to acquire new customers and retain existing customers may be diminished. Any such changes may reduce revenue and margins and could adversely affect our financial results.

Additionally, our business may be affected by changes in the macroeconomic environment. Our solutions are discretionary purchases, and customers may reduce or eliminate their discretionary spending on our solutions during a difficult macroeconomic environment. Although we have not yet experienced a material increase in customers cancellations or a material reduction in our retention rate in 2020, we may experience such an increase or reduction in the future, especially in the event of a prolonged recession or a worsening of current conditions as a result of the COVID-19 pandemic. In addition, during a recession, consumers may experience a decline in their credit or disposable income, which may result in less demand for our

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solutions. As a result, we may have to lower our prices or make other changes to our pricing model to address these dynamics, any of which could adversely affect our business and financial results.

If we fail to manage our sales and distribution channels effectively, or if our partners choose not to market and sell our solutions to their customers, our operating results could be adversely affected.

A portion of our revenues is derived from sales through indirect channels, including, but not limited to, distributors that sell our products to end-users and other resellers, and OEM partners that incorporate our products into, or bundle our products with, their products. These channels involve a number of risks, including:

•Our resellers, distributors and OEMs are generally not subject to minimum sales requirements or any obligation to market our solutions to their customers;

•Our reseller and distributor agreements are generally nonexclusive and may be terminated at any time without cause and our OEM partners may terminate or renegotiate their arrangements with us and new terms may be less favorable due to competitive conditions in our markets and other factors;

•Our resellers, distributors and OEMs may encounter issues or have violations of applicable law or regulatory requirements or otherwise cause damage to our reputation through their actions;

•Our resellers and distributors frequently market and distribute competing solutions and may, from time to time, place greater emphasis on the sale of these solutions due to pricing, promotions, and other terms offered by our competitors;

•Any consolidation of electronics retailers can increase their negotiating power with respect to software providers such as us and any decline in the number of physical retailers could decrease the channels of distribution for us;

•The continued consolidation of online sales through a small number of larger channels has been increasing, which could reduce the channels available for online distribution of our solutions; and

•Sales through our partners are subject to changes in general economic conditions, strategic direction, competitive risks, and other issues that could result in a reduction of sales.

If we fail to manage our sales and distribution channels successfully, these channels may conflict with one another or otherwise fail to perform as we anticipate, which could reduce our sales and increase our expenses as well as weaken our competitive position. If our partners suffer financial difficulties in the future because of general economic conditions or for other reasons, these partners may delay paying their obligations to us, and we may have reduced revenues or collections that could adversely affect our operating results. In addition, reliance on multiple channels subjects us to events that could cause unpredictability in demand, which could increase the risk that we may be unable to plan effectively for the future and adversely affect our operating results.

Our revenue and operating results depend significantly on our ability to retain our existing customers, and add new customers, and any decline in our retention rates or failure to add new customers will harm our future revenue and operating results.

Our revenue and operating results depend significantly on our ability to retain our existing customers and add new customers. We sell our solutions to our customers on a monthly or annual subscription basis. Customers may cancel their membership with us at any time without penalty. We therefore may be unable to retain our existing customers on the same or on more profitable terms, if at all. In addition, we may not be able to predict or anticipate accurately future trends in customer retention or effectively respond to such trends. Our customer retention rates may decline or fluctuate due to a variety of factors, including the following:

•our customers’ levels of satisfaction or dissatisfaction with our solutions;

•the quality, breadth, and prices of our solutions;

•our general reputation and events impacting that reputation;

•the services and related pricing offered by our competitors;

•disruption by new services or changes in law or regulations that impact the need for efficacy of our products and services;

•our customer service and responsiveness to any customer complaints;

•customer dissatisfaction if they do not receive the full benefit of our services due to their failure to provide all relevant data;

•customer dissatisfaction with the methods or extent of our remediation services;

•our guarantee may not meet our customers’ expectations; and

•changes in our target customers’ spending levels as a result of general economic conditions or other factors.

If we do not retain our existing customers and add new customers, our revenue may grow more slowly than expected or decline, and our operating results and gross margins will be harmed. In addition, our business and operating results may be harmed if we are unable to increase our retention rates.

We also must continually add new customers both to replace customers who cancel or elect not to renew their agreements with us and to grow our business beyond our current customer base. If we are unable to attract new customers in numbers greater than the percentage of customers who cancel or elect not to renew their agreements with us, our customer base will decrease, and our business, operating results, and financial condition could be adversely affected.

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Our acquisitions and divestitures create special risks and challenges that could adversely affect our financial results.

As part of our business strategy, we may acquire or divest businesses or assets. For example, we recently completed the sale of certain of our enterprise security assets to Broadcom Inc. (the “Broadcom sale”). These activities can involve a number of risks and challenges, including:

•Complexity, time, and costs associated with managing these transactions, including the integration of acquired and the winding down of divested business operations, workforce, products, IT systems, and technologies;

•Diversion of management time and attention;

•Loss or termination of employees, including costs associated with the termination or replacement of those employees;

•Assumption of liabilities of the acquired and divested business or assets, including pending or future litigation, investigations or claims related to the acquired business or assets;

•The addition of acquisition-related debt;

•Increased or unexpected costs and working capital requirements;

•Dilution of stock ownership of existing stockholders;

•Unanticipated delays or failure to meet contractual obligations; and

•Substantial accounting charges for acquisition-related costs, amortization of intangible assets, and higher levels of stock-based compensation expense.

We have invested and continue to invest and devote significant resources in the integration of businesses we acquire. The success of each acquisition depends in part on our ability to realize the anticipated business opportunities, including certain cost savings and operational efficiencies, or synergies and growth prospects from integrating these businesses in an efficient and effective manner. If integration of our acquired businesses is not successful, we may not realize the potential benefits of an acquisition or suffer other adverse effects. To integrate acquired businesses, we must integrate and manage the personnel and business systems of the acquired operations. Further, we may need to enter new markets in which we have no or limited experience and where competitors in such markets have stronger market positions. Moreover, to be successful, large complex acquisitions depend on large-scale product, technology, and sales force integrations that are difficult to complete on a timely basis or at all and may be more susceptible to the special risks and challenges described above.

In addition, we have, and may in the future, divest businesses, product lines, or assets, with the Broadcom sale being a recent example. Such initiatives may require significant separation activities that could result in the diversion of management’s time and attention, loss of employees, substantial separation costs, and accounting charges for asset impairments. Please see “Risks Related to the Broadcom sale,” below, for additional information regarding our divestiture risks.

Any of the foregoing, and other factors, could harm our ability to achieve anticipated levels of profitability or other financial benefits from our acquired or divested businesses, product lines or assets or to realize other anticipated benefits of divestitures or acquisitions.

RISKS RELATED TO THE BROADCOM SALE

We may not achieve the intended benefits of the Broadcom sale.

We may not realize some or all of the anticipated benefits from the Broadcom sale. The resource constraints that resulted from the completion of the transaction, included the loss of employees, and could have a continuing impact on the execution of our business strategy and our overall operating results. Further, our remaining employees may become concerned about the future of our remaining operations and lose focus or seek other employment.

We are dependent upon Broadcom for certain engineering and threat response services, which are critical to our products and business. We could lose our access to these or other data sources, including threat intelligence, which could cause us competitive harm and have a material adverse effect on our business, operating results, and financial condition.

Our endpoint security solution has historically relied upon certain threat analytics software engines and other software (the Engine-Related Services) that have been developed and provided by engineering teams that have transferred to Broadcom as part of the Broadcom sale. The technology, including source code, at issue is shared, and pursuant to the terms of the Broadcom sale, we retain rights to use, modify, enhance and create derivative works from such technology. Broadcom has committed to provide these Engine-Related Services under a transition services agreement, substantially to the same extent and in substantially the same manner, as has been historically provided. As a result, we are dependent on Broadcom for services and technology that are critical to our business, and if Broadcom fails to deliver these Engine-Related Services it would result in significant business disruption, and our business and operating results and financial condition could be materially and adversely affected. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative or additional sources if our current sources become unavailable, and if we are able to obtain alternative sources, we could be unable to integrate or deploy them in time, which could cause us competitive harm and have a material adverse effect on our business. Additionally, in connection with the Broadcom sale, we lost many industry-specific engineers and other capabilities, including certain threat intelligence data which were historically provided by our former Enterprise Security business, the lack of which could have a negative impact on our business and products.

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Any cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business.

In November 2019, our Board of Directors approved a restructuring plan (the November 2019 Plan) in connection with the strategic decision to divest our Enterprise Security business. Actions under this plan include the reduction of our workforce by approximately 3,100 employees, as well as asset write-offs, contract terminations, facilities closures, and the sale of underutilized facilities. We estimate that we will incur total costs of $550 million in connection with the November 2019 Plan, excluding stock-based compensation expense, of which up to $225 million is expected to consist of cash expenditures for severance and termination benefits and up to $110 million is expected to consist of cash expenditures for contract terminations. Non-cash costs are estimated to be up to $240 million related to asset write-offs and other restructuring costs. These actions are expected to be substantially completed by September 2020. This initiative could result in disruptions to our operations. Any cost-cutting measures could also negatively impact our business by delaying the introduction of new products or technologies, interrupting service of additional products, or impacting employee retention. In addition, we cannot assure you that the cost reduction and streamlining initiatives will be as successful in reducing our overall expenses as we expect or that additional costs will not offset any such reductions or streamlining of our operations. If our operating costs are higher than we expect, if the expected proceeds from the sale of under-utilized assets do not meet expectations, or if we do not maintain adequate control of our costs and expenses, our results of operations will suffer.

If we are unsuccessful at executing the transition of the Enterprise Security Business assets from the Broadcom sale, our business and results of operations may be adversely affected and our ability to invest in and grow our business could be limited.

For the last several years, we have experienced transitions in our business with the integration of two major acquisitions, the completion of several smaller acquisitions, and the Broadcom sale, which comprised an operating segment. These transitions have involved significant turnover in executive management and other key personnel and changes in our strategic direction, as well as resulted in the relocation of our headquarters to Tempe, Arizona. Transitions of this type can be disruptive, result in the loss of focus and employee morale and make the execution of business strategies more difficult. We may experience delays in the anticipated timing of activities related to such transitions and higher than expected or unanticipated execution costs. If we do not succeed in these efforts, or if these efforts are more costly or time-consuming than expected, our business and results of operations may be adversely affected, which could limit our ability to invest in and grow our business.

Changes in industry structure and market conditions could lead to charges related to discontinuance of certain of our products or businesses and asset impairments.

In response to changes in industry structure and market conditions and in connection with the Broadcom sale, we may be required to strategically reallocate our resources and consider restructuring, disposing of, or otherwise exiting certain businesses. Any decision to limit investment in or dispose of or otherwise exit businesses may result in the recording of special charges, such as inventory and technology-related write-offs, workforce reduction costs, charges relating to consolidation of excess facilities, or claims from third parties who were resellers or users of discontinued products. Our estimates with respect to the useful life or ultimate recoverability of our carrying basis of assets, including purchased intangible assets, could change as a result of such assessments and decisions. Although in certain instances our vendor agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers.

Further, our estimates relating to the liabilities for excess facilities are affected by changes in real estate market conditions. Additionally, we are required to evaluate goodwill impairment on an annual basis and between annual evaluations in certain circumstances, and future goodwill impairment evaluations may result in a charge to earnings.

RISKS RELATED TO OUR OPERATIONS

If we are unable to attract and retain qualified employees, lose key personnel, fail to integrate replacement personnel successfully, or fail to manage our employee base effectively, we may be unable to develop new and enhanced solutions, effectively manage or expand our business, or increase our revenues.

Our future success depends upon our ability to recruit and retain key management, technical (including cyber security experts), sales, marketing, e-commerce, finance, and other personnel. Our officers and other key personnel are “at will” employees and we generally do not have employment or non-compete agreements with our employees, and we cannot assure you that we will be able to retain them. Competition for people with the specific skills that we require is significant. In connection with the Broadcom sale, we experienced employee attrition and related difficulties and these difficulties and loss of certain expertise and capabilities may continue or increase.

In order to attract and retain personnel in a competitive marketplace, we must provide competitive pay packages, including cash and equity-based compensation. Additionally, changes in immigration laws could impair our ability to attract and retain highly qualified employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business, results of operations and future growth prospects could suffer. The volatility in our stock price may from time to time adversely affect our ability to recruit or retain employees. In addition, we may be unable to obtain required stockholder approvals of future increases in the number of shares required for issuance under our equity compensation plans. As a result, we may issue fewer equity-based incentives and may be impaired in our efforts to attract and retain necessary personnel. If we are unable to hire and retain qualified employees, or conversely, if we fail to manage employee performance or reduce staffing levels when required by market conditions, our business and operating results could be adversely affected.

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Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution. From time to time, key personnel leave our company and the frequency and number of such departures has widely varied and have resulted in significant changes to our executive leadership team. Although we strive to reduce the negative impact of changes in our leadership, the loss of any key employee could result in significant disruptions to our operations, including adversely affecting the timeliness of product releases, the successful implementation and completion of company initiatives, our internal control over financial reporting, and our results of operations. In addition, hiring, training, and successfully integrating replacement sales and other personnel could be time consuming and expensive, may cause additional disruptions to our operations, and may be unsuccessful, which could negatively impact future financial results.

Our inability to successfully recover from a disaster or other business continuity event could impair our ability to deliver our products and services and harm our business.

We are heavily reliant on our technology and infrastructure to provide our products and services to our customers. For example, we host many of our products using third-party data center facilities, and we do not control the operation of these facilities. These facilities are vulnerable to damage, interruption, or performance problems from earthquakes, hurricanes, floods, fires, power loss, telecommunications failures, pandemics, such as the recent COVID-19 pandemic and similar events. They are also subject to break-ins, computer viruses, sabotage, intentional acts of vandalism, and other misconduct. The occurrence of a natural disaster, an act of terrorism, a pandemic, such as the ongoing COVID-19 pandemic, and similar events could result in a decision to close the facilities without adequate notice or other unanticipated problems, which in turn, could result in lengthy interruptions in the delivery of our products and services, which could negatively impact our sales and operating results.

Furthermore, our business administration, human resources, compliance efforts, and finance services depend on the proper functioning of our computer, telecommunication, and other related systems and operations. A disruption or failure of these systems or operations because of a disaster or other business continuity event, such as the ongoing COVID-19 pandemic, could cause data to be lost or otherwise delay our ability to complete sales and provide the highest level of service to our customers. In addition, we could have difficulty producing accurate financial statements on a timely basis, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results, all of which could adversely affect the trading value of our stock. Although we endeavor to ensure there is redundancy in these systems and that they are regularly backed-up, there are no assurances that data recovery in the event of a disaster would be effective or occur in an efficient manner, including the operation of our global civilian cyber intelligence threat network. If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

In light of the ongoing COVID-19 pandemic, we have implemented a near company-wide work-from-home requirement for most employees until further notice. While we have not experienced any material disruptions to date, there can be no assurance that our technological systems or infrastructure is or will be equipped to facilitate effective remote working arrangements and effectively operate in full compliance with all laws and regulations for our employees in the short or long term.

Our international operations involve risks that could increase our expenses, adversely affect our operating results, and require increased time and attention of our management.

We derive a portion of our revenues from customers located outside of the U.S., and we have significant operations outside of the U.S., including engineering, sales and customer support. Our international operations are subject to risks in addition to those faced by our domestic operations, including:

•Potential loss of proprietary information due to misappropriation or laws that may be less protective of our intellectual property rights than U.S. laws or that may not be adequately enforced;

•Requirements of foreign laws and other governmental controls, including tariffs, trade barriers and labor restrictions, and related laws that reduce the flexibility of our business operations;

•Potential changes in trade relations arising from policy initiatives or other political factors;

•Regulations or restrictions on the use, import, or export of encryption technologies that could delay or prevent the acceptance and use of encryption products and public networks for secure communications;

•Local business and cultural factors that differ from our normal standards and practices, including business practices that we are prohibited from engaging in by the Foreign Corrupt Practices Act and other anti-corruption laws and regulations;

•Central bank and other restrictions on our ability to repatriate cash from our international subsidiaries or to exchange cash in international subsidiaries into cash available for use in the U.S.;

•Fluctuations in currency exchange rates, economic instability, and inflationary conditions could make our solutions more expensive or could increase our costs of doing business in certain countries;

•Limitations on future growth or inability to maintain current levels of revenues from international sales if we do not invest sufficiently in our international operations;

•Difficulties in staffing, managing, and operating our international operations;

•Difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations;

•Costs and delays associated with developing software and providing support in multiple languages; and

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•Political unrest, war, or terrorism, or regional natural disasters, particularly in areas in which we have facilities.

A significant portion of our transactions outside of the U.S. is denominated in foreign currencies. Accordingly, our revenues and expenses will continue to be subject to fluctuations in foreign currency rates. We have in the past and expect in the future to be affected by fluctuations in foreign currency rates, especially if international sales grow as a percentage of our total sales or our operations outside the U.S. continue to increase and foreign currency rates continue to experience increased volatility due to the COVID-19 pandemics.

RISKS RELATED TO OUR SOLUTIONS

Our solutions, systems, and website and the data on these sources may be subject to intentional disruption that could materially harm to our reputation and future sales.

Despite our precautions and significant ongoing investments to protect against security risks, data protection breaches, cyber-attacks, and other intentional disruptions of our solutions, we expect to be an ongoing target of attacks specifically designed to impede the performance and availability of our offerings and harm our reputation as a company. Similarly, experienced computer programmers or other sophisticated individuals or entities, including malicious hackers, state-sponsored organizations, and insider threats including actions by employees and third-party service providers, may attempt to penetrate our network security or the security of our systems and websites and misappropriate proprietary information or cause interruptions of our services, including the operation of the global civilian cyber intelligence threat network. This risk may be increased during the current COVID-19 pandemic as more individuals are work from home and utilize home networks for the transmission of sensitive information. Such attempts are increasing in number and in technical sophistication, and if successful could expose us and the affected parties, to risk of loss or misuse of proprietary or confidential information or disruptions of our business operations.

While we engage in a number of measures aimed to protect against security breaches and to minimize problems if a data breach were to occur, our information technology systems and infrastructure may be vulnerable to damage, compromise, disruption, and shutdown due to attacks or breaches by hackers or due to other circumstances, such as error or malfeasance by employees or third party service providers or technology malfunction. The occurrence of any of these events, as well as a failure to promptly remedy these events should they occur, could compromise our systems, and the information stored in our systems could be accessed, publicly disclosed, lost, stolen, or damaged. Any such circumstance could adversely affect our ability to attract and maintain customers as well as strategic partners, cause us to suffer negative publicity, and subject us to legal claims and liabilities or regulatory penalties. In addition, unauthorized parties might alter information in our databases, which would adversely affect both the reliability of that information and our ability to market and perform our services. Techniques used to obtain unauthorized access or to sabotage systems change frequently, are constantly evolving and generally are difficult to recognize and react to effectively. We may be unable to anticipate these techniques or to implement adequate preventive or reactive measures. Several recent, highly publicized data security breaches at other companies have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our strategic partners or enterprise customers.

Our solutions are complex and operate in a wide variety of environments, systems and configurations, which could result in failures of our solutions to function as designed and negatively impact our brand recognition and reputation.

Because we offer very complex solutions, errors, defects, disruptions, or other performance problems with our solutions may and have occurred. For example, we may experience disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due to an overwhelming number of users accessing our websites simultaneously, fraud, or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Interruptions in our solutions, including the operation of the global civilian cyber intelligence threat network, could impact our revenues or cause customers to cease doing business with us. Our operations are dependent upon our ability to protect our technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. We could potentially lose customer data or experience material adverse interruptions to our operations or delivery of solutions to our clients in a disaster recovery scenario.

Further, our business would be harmed if any of the events of this nature caused our customers and potential customers to believe our solutions are unreliable. Our brand recognition and reputation are critical aspects of our business to retaining existing customers and attracting new customers. Furthermore, negative publicity, whether or not justified, relating to events or activities attributed to us, our employees, our strategic partners, our affiliates, or others associated with any of these parties, may tarnish our reputation and reduce the value of our brands. Damage to our reputation and loss of brand equity may reduce demand for our solutions and have an adverse effect on our business, operating results, and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brands may be costly and time consuming, and such efforts may not ultimately be successful.

We collect, use, disclose, store, or otherwise process personal information, which subjects us to privacy and data security laws and contractual commitments, and our actual or perceived failure to comply with such laws and commitments could harm our business.

We collect, use, process, store, transmit or disclose (collectively, process) an increasingly large amount of confidential information, including personally identifiable information, credit card information and other critical data from employees and customers, in connection with the operation of our business, particularly in relation to our identity and information protection offerings.

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The personal information we process is subject to an increasing number of federal, state, local, and foreign laws regarding privacy and data security, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions, fines, litigation, or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

Additionally, changes to applicable privacy or data security laws could impact how we process personal information and therefore limit the effectiveness of our solutions or our ability to develop new solutions. For example, the European Union General Data Protection Regulation imposes more stringent data protection requirements and provides for greater penalties for noncompliance of up to the greater of €20 million or four percent of worldwide annual revenues.

Data protection legislation is also becoming increasingly common in the U.S. at both the federal and state level. For example, the California Consumer Privacy Act of 2018 (the CCPA), came into effect on January 1, 2020. The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use, and sharing practices, allows consumers to opt out of certain data sharing with third parties, and provides a new cause of action for data breaches. Additionally, the Federal Trade Commission (the FTC) and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. The burdens imposed by the CCPA and other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices and policies and to incur substantial expenditures in order to comply.

Global privacy and data protection legislation, enforcement, and policy activity are rapidly expanding and evolving, and may be inconsistent from jurisdiction to jurisdiction. We may be or become subject to data localization laws mandating that data collected in a foreign country be processed and stored only within that country. If any country in which we have customers were to adopt a data localization law, we could be required to expand our data storage facilities there or build new ones in order to comply. The expenditure this would require, as well as costs of compliance generally, could harm our financial condition.

Additionally, third parties with whom we work, such as vendors or developers, may violate applicable laws or our policies and such violations can place personal information of our customers at risk. In addition, our customers may also accidentally disclose their passwords or store them on a device that is lost or stolen, creating the perception that our systems are not secure against third-party access. This could have an adverse effect on our reputation and business. In addition, such third parties could be the target of cyberattack and other data breaches which could impact our systems or our customers’ records.

LEGAL AND COMPLIANCE RISKS

Matters relating to or arising from our completed Audit Committee Investigation, including regulatory investigations and proceedings, litigation matters, and potential additional expenses, may adversely affect our business and results of operations.

As previously disclosed in our public filings, the Audit Committee completed its internal investigation in September 2018. In connection with the Audit Committee Investigation, we voluntarily self-reported to the SEC. The SEC commenced a formal investigation, and we continue to cooperate with that investigation. The outcome of such an investigation is difficult to predict. If the SEC commences legal action, we could be required to pay significant penalties and become subject to injunctions, a cease and desist order, and other equitable remedies. We can provide no assurances as to the outcome of any governmental investigation.

We have incurred, and will continue to incur, significant expenses related to legal and other professional services in connection with the ongoing SEC investigation, which may continue to adversely affect our business and financial condition. In addition, securities class actions and other lawsuits have been filed against us, our directors, and officers. The outcome of the securities class actions and other litigation and regulatory proceedings or government enforcement actions is difficult to predict, and the cost to defend, settle, or otherwise resolve these matters may be significant. Plaintiffs or regulatory agencies or authorities in these matters may seek recovery of very large or indeterminate amounts or seek to impose sanctions, including significant monetary penalties. The monetary and other impact of these litigations, proceedings, or actions may remain unknown for substantial periods of time. Further, an unfavorable resolution of litigations, proceedings or actions could have a material adverse effect on our business, financial condition, and results of operations ~~is set forth~~and cash flows. Any future investigations or additional lawsuits may also adversely affect our business, financial condition, results of operations, and cash flows.

Our solutions are highly regulated, which could impede our ability to market and provide our solutions or adversely affect our business, financial position, and results of operations.

Our solutions are subject to a high degree of regulation, including a wide variety of federal, state, and local laws and regulations, such as the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the Federal Trade Commission Act (FTC Act), and comparable state laws that are patterned after the FTC Act. LifeLock has previously entered into consent decrees and similar arrangements with the FTC and the attorney generals of 35 states as well as a settlement with the FTC relating to allegations that certain of LifeLock’s advertising, marketing and security practices constituted deceptive acts or practices in ~~Part I, Item 1A,~~violation of the FTC Act, which impose additional restrictions on our business, including prohibitions against making any misrepresentation of “the means, methods, procedures, effects, effectiveness, coverage, or scope of” our solutions. Any of the laws and regulations that apply to our business are subject to revision or new or changed interpretations, and we cannot predict the impact of such changes on our business.

Additionally, the nature of our ~~Annual Report~~identity and information protection products subjects us to the broad regulatory, supervisory, and enforcement powers of the Consumer Financial Protection Bureau which may exercise authority with respect to our services,

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or the marketing and servicing of those services, by overseeing our financial institution or credit reporting agency customers and suppliers, or by otherwise exercising its supervisory, regulatory, or enforcement authority over consumer financial products and services.

If we do not protect our proprietary information and prevent third parties from making unauthorized use of our products and technology, our financial results could be harmed.

Much of our software and underlying technology is proprietary. We seek to protect our proprietary rights through a combination of confidentiality agreements and procedures and through copyright, patent, trademark, and trade secret laws. However, these measures afford only limited protection and may be challenged, invalidated, or circumvented by third parties. Third parties may copy all or portions of our products or otherwise obtain, use, distribute, and sell our proprietary information without authorization.

Third parties may also develop similar or superior technology independently by designing around our patents. Our consumer agreements do not require a signature and therefore may be unenforceable under the laws of some jurisdictions. Furthermore, the laws of some foreign countries do not offer the same level of protection of our proprietary rights as the laws of the U.S., and we may be subject to unauthorized use of our products in those countries. The unauthorized copying or use of our products or proprietary information could result in reduced sales of our products. Any legal action to protect proprietary information that we may bring or be engaged in with a strategic partner or vendor could adversely affect our ability to access software, operating system, and hardware platforms of such partner or vendor, or cause such partner or vendor to choose not to offer our products to their customers. In addition, any legal action to protect proprietary information that we may bring or be engaged in, could be costly, may distract management from day-to-day operations, and may lead to additional claims against us, which could adversely affect our operating results.

From time to time we are a party to lawsuits and investigations, which typically require significant management time and attention and result in significant legal expenses, and which could negatively impact our business, financial condition, results of operations, and cash flows.

We have initiated and been named as a party to lawsuits, including patent litigation, class actions, and governmental claims, and we may be named in additional litigation. The expense of initiating and defending, and in some cases settling, such litigation may be costly and divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations, and cash flows. In addition, an unfavorable outcome in such litigation could result in significant fines, settlements, monetary damages, or injunctive relief that could negatively impact our ability to conduct our business, results of operations, and cash flows.

Third parties claiming that we infringe their proprietary rights could cause us to incur significant legal expenses and prevent us from selling our products.

From time to time, third parties may claim that we have infringed their intellectual property rights, including claims regarding patents, copyrights, and trademarks. Because of constant technological change in the segments in which we compete, the extensive patent coverage of existing technologies, and the rapid rate of issuance of new patents, it is possible that the number of these claims may grow. In addition, former employers of our former, current, or future employees may assert claims that such employees have improperly disclosed to us confidential or proprietary information of these former employers. Any such claim, with or without merit, could result in costly litigation and distract management from day-to-day operations. If we are not successful in defending such claims, we could be required to stop selling, delay shipments of, or redesign our solutions, pay monetary amounts as damages, enter into royalty or licensing arrangements, or satisfy indemnification obligations that we have with some of our customers. We cannot assure you that any royalty or licensing arrangements that we may seek in such circumstances will be available to us on ~~Form 10-K~~commercially reasonable terms or at all. We have made and expect to continue making significant expenditures to investigate, defend, and settle claims related to the use of technology and intellectual property rights as part of our strategy to manage this risk.

In addition, we license and use software from third parties in our business. These third-party software licenses may not continue to be available to us on acceptable terms or at all and may expose us to additional liability. This liability, or our inability to use any of this third-party software, could result in delivery delays or other disruptions in our business that could materially and adversely affect our operating results.

Some of our products contain “open source” software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Certain of our products are distributed with software licensed by its authors or other third parties under so-called “open source” licenses, which may include, by way of example, the GNU General Public License, GNU Lesser General Public License, the Mozilla Public License, the BSD License, and the Apache License.

Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software if we combine our proprietary software with open source software in a certain manner. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the ~~fiscal year ended March 31, 2017. There have been no material changes from the risk factors previously disclosed~~use of open source, but we cannot be sure

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that all open source is submitted for approval prior to use in our ~~Annual Report, except~~products. In addition, many of the risks associated with usage of open source cannot be eliminated and could, if not properly addressed, negatively affect our business.

RISKS RELATED TO OUR FINANCIAL RESULTS

Fluctuations in our quarterly financial results have affected the trading price of our outstanding securities in the past and could affect the trading price of our outstanding securities in the future.

Our quarterly financial results have fluctuated in the past and are likely to vary in the future due to a number of factors, many of which are outside of our control. If our quarterly financial results or our predictions of future financial results fail to meet our expectations or the expectations of securities analysts and investors, the trading price of our outstanding securities could be negatively affected. Volatility in our quarterly financial results may make it more difficult for us to raise capital in the ~~following risk factor.~~ future or pursue acquisitions. Our operating results for prior periods may not be effective predictors of our future performance.

•Factors associated with our industry, the operation of our business, and the markets for our solutions may cause our quarterly financial results to fluctuate, including but not limited to:

•Fluctuations in demand for our solutions;

•Disruptions in our business operations or target markets caused by, among other things, terrorism or other intentional acts, outbreaks of disease, such as the COVID-19 pandemic, or earthquakes, floods, or other natural disasters;

•Entry of new competition into our markets;

•Our ability to achieve targeted operating income and margins and revenues;

•Competitive pricing pressure for one or more of our solutions;

•Our ability to timely complete the release of new or enhanced versions of our solutions;

•The ~~risk factor below should be read in conjunction with the risk factors~~amount and timing of commencement and termination of major marketing campaigns;

•The number, severity, and timing of threat outbreaks (e.g. worms, viruses, malware, ransomware, and other ~~information disclosed~~malicious threats) and cyber security incidents (e.g., large scale data breaches);

•Loss of customers or strategic partners;

•Changes in the mix or type of solutions and subscriptions sold and changes in consumer retention rates;

•The rate of adoption of new technologies and new releases of operating systems, and new business processes;

•Consumer confidence and spending changes, which could be impacted by market changes and general economic conditions, among other reasons;

•The impact of litigation, regulatory inquiries, or investigations;

•The impact of acquisitions and divestitures and our ~~Form 10-K.~~ability to achieve expected synergies or attendant cost savings;

•Fluctuations in foreign currency exchange rates;

•Movements in interest rates;

•Changes in tax laws, rules, and regulations; and

•Changes in consumer protection laws and regulations.

Any of the foregoing factors could cause the trading price of our outstanding securities to fluctuate significantly.

Changes to our effective tax rate could increase our income tax expense and reduce (increase) our net income (loss)., cash flows and working capital.

Our effective tax rate could be adversely affected by several factors, many of which are outside of our control, including:

•Changes to the U.S. federal income tax laws, including impacts of the ~~recently enacted~~ Tax Cuts and Jobs Act (H.R.1) (the 2017 Tax Act) arising from future interpretations of the ~~consequences of which have not yet been fully determined;~~2017 Tax Act;

•Changes to other tax laws, regulations, and interpretations in multiple jurisdictions in which we operate, including actions resulting from the Organisation for Economic Co-operation and ~~Development’s~~Development's base erosion and profit shifting project, proposed actions by international bodies such as digital services taxation, as well as the requirements of certain tax rulings;

•Changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates;

•The tax effects of ~~purchase accounting for acquisitions and restructuring charges~~significant infrequently occurring events that may cause fluctuations between reporting periods; ~~and~~

•Tax assessments, or any related tax interest or penalties, that could significantly affect our income tax expense for the period in which the settlements take ~~place.~~place;

•Taxes arising in connection with the Broadcom sale;

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•Taxes arising in connection to changes in our workforce, corporate entity structure or operations as they relate to tax incentives and tax rates.

We report our results of operations based on our determination of the aggregate amount of taxes owed in the tax jurisdictions in which we operate. From time to time, we receive notices that a tax authority in a particular jurisdiction believes that we owe a greater amount of tax than we have reported to such authority. We are regularly engaged in discussions and sometimes disputes with these tax authorities. ~~We are engaged in disputes of this nature at this time.~~ If the ultimate determination of our taxes owed in any of these jurisdictions is for an amount in excess of the tax provision we have recorded or reserved for, our operating results, cash flows, and financial condition could be adversely affected.

RISKS RELATED TO OUR LIQUIDITY AND INDEBTEDNESS

We cannot predict our future capital needs, and we may be unable to obtain financing, which could have a material adverse effect on our business, results of operations, and financial condition.

Adverse economic conditions or a change in our business performance may make it more difficult to obtain financing for our operations, investing activities (including potential acquisitions or divestitures), or financing activities. Any required financing may not be available on terms acceptable to us, or at all. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our financial or operational flexibility and would also require us to fund additional interest expense. If additional financing is not available when required or is not available on acceptable terms, we may be unable to successfully develop or enhance our solutions through acquisitions in order to take advantage of business opportunities or respond to competitive pressures, which could have a material adverse effect on our solutions offerings, revenues, results of operations, and financial condition.

Failure to maintain our credit ratings could adversely affect our liquidity, capital position, ability to hedge certain financial risks, borrowing costs, and access to capital markets.

Our credit risk is evaluated by the major independent rating agencies, and such agencies have in the past and could in the future downgrade our ratings. We cannot assure you that we will be able to maintain our current credit ratings, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, may have a negative impact on our liquidity, capital position, ability to hedge certain financial risks, and access to capital markets. In addition, changes by any rating agency to our outlook or credit rating could increase the interest we pay on outstanding or future debt.

There are risks associated with our outstanding and future indebtedness that could adversely affect our financial condition.

As of July 3, 2020, we had an aggregate of $3,600 million of outstanding indebtedness that will mature in calendar years 2020 through 2025, including approximately $1 billion in aggregate principal amount of existing convertible notes, $2,300 million of senior notes and $500 million of outstanding term loans under our senior secured credit facility, and we may incur additional indebtedness in the future and/or enter into new financing arrangements. In addition, as of July 3, 2020, we had $1,000 million available for borrowing under our revolving credit facility. Our ability to meet expenses, to remain in compliance with the covenants under our debt instruments, and to pay interest and repay principal for our substantial level of indebtedness depends on, among other things, our operating performance, competitive developments, and financial market conditions, all of which are significantly affected by financial, business, economic, and other factors. We are not able to control many of these factors. Accordingly, our cash flow may not be sufficient to allow us to pay principal and interest on our debt, including the notes, and meet our other obligations.

Our level of indebtedness could have other important consequences, including the following:

•We must use a substantial portion of our cash flow from operations to pay interest and principal on the term loans and revolving credit facility, our existing senior notes, and other indebtedness, which reduces funds available to us for other purposes such as working capital, capital expenditures, other general corporate purposes, and potential acquisitions;

•We may be unable to refinance our indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions, or general corporate purposes;

•We are exposed to fluctuations in interest rates because borrowings under our senior credit facilities bear interest at variable rates;

•Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce our flexibility in responding to current and changing industry and financial market conditions;

•We may be more vulnerable to an economic downturn or recession and adverse developments in our business;

•We may be unable to comply with financial and other covenants in our debt agreements, which could result in an event of default that, if not cured or waived, may result in acceleration of certain of our debt and would have an adverse effect on our business and prospects and could force us into bankruptcy or liquidation;

•Changes by any rating agency to our outlook or credit rating could negatively affect the value of our debt and/or our common stock, adversely affect our access to debt markets, and increase the interest we pay on outstanding or future debt; and

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•Conversion of our convertible notes could result in significant dilution of our common stock, which could result in significant dilution to our existing stockholders and cause the market price of our common stock to decline.

There can be no assurance that we will be able to manage any of these risks successfully.

In addition, we conduct a significant portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness will be dependent in part on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment, or otherwise. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and under certain circumstances legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make the required principal and interest payments on our indebtedness.

Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates on our current or future indebtedness and may otherwise adversely affect our financial condition and results of operations.

Certain of our indebtedness is made at variable interest rates that use the London Interbank Offered Rate, or LIBOR (or metrics derived from or related to LIBOR), as a benchmark for establishing the interest rate. In 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. If LIBOR ceases to exist, we may need to renegotiate our debt arrangements that extend beyond 2021 that utilize LIBOR as a factor in determining the interest rate, which may negatively impact the terms of such indebtedness. In addition, the overall financial markets may be disrupted as a result of the phase out or replacement of LIBOR. Disruption in the financial markets could have an adverse effect on our financial position, results of operations, and liquidity.

Our existing credit agreements impose operating and financial restrictions on us.

The existing credit agreements contain covenants that limit our ability and the ability of our restricted subsidiaries to:

•Incur additional debt;

•Create liens on certain assets to secure debt;

•Enter into certain sale and leaseback transactions;

•Pay dividends on or make other distributions in respect of our capital stock or make other restricted payments; and

•Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.

All of these covenants may adversely affect our ability to finance our operations, meet or otherwise address our capital needs, pursue business opportunities, react to market conditions, or otherwise restrict activities or business plans. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and, to the extent such indebtedness is secured in the future, proceed against any collateral securing that indebtedness.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~(a)~~ Repurchase of equity securities

Under our stock repurchase programs, shares may be repurchased on the open market and through accelerated stock repurchase transactions. As of July 3, 2020, we have $578 million remaining authorized to be completed in future periods with no expiration date. No shares were repurchased during the three months ended July 3, 2020.

Item 5. Other Information

None.

~~(b) None.~~

~~(c) None.~~

Item 6. Exhibits

Exhibit

Number

Incorporated by Reference

Filed with this 10-Q

Exhibit Description

Form

File Number

Exhibit

File Date

10.01

FY21 Executive Annual Incentive Plan – Chief Executive Officer

10.02

FY21 Executive Annual Incentive Plan – Vice Presidents and Above

10.03

Form s of FY21 Performance Based Restricted Stock Unit Award Agreements under 2013 Equity Incentive Plan

10.04

Offer Letter with Natalie M. Derse dated June 19, 2020

8-K

000-17781

10.01

7/8/2020

31.01

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Table of Contents

Exhibit

Number

Incorporated by Reference

Filed with this 10-Q

Exhibit Description

Form

File Number

Exhibit

File Date

10.01*31.02

~~Symantec Corporation 2013 Equity Incentive Plan, as amended.~~

~~10-Q~~

~~000-17781~~

~~10.01~~

~~11/3/2017~~

~~31.01~~

~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.02~~

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002..

32.01†

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.02†

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002..

101.INS

~~XBRL Instance Document~~The following financial information from NortonLifeLock Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 3, 2020 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Equity (Deficit), (vi) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

~~101.SCH~~104

Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Schema Linkbase Document~~and contained in Exhibit 101)

~~101.CAL~~

~~XBRL Taxonomy Calculation Linkbase Document~~

~~101.DEF~~

~~XBRL Taxonomy Definition Linkbase Document~~

~~101.LAB~~

~~XBRL Taxonomy Labels Linkbase Document~~

~~101.PRE~~

~~XBRL Taxonomy Presentation Linkbase Document~~



*	~~Indicates a management contract or compensatory plan or arrangement.~~
†		This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		NORTONLIFELOCK INC.
		(Registrant)

		~~SYMANTEC CORPORATION~~By:	/s/ Vincent Pilette
		~~(Registrant)~~

~~By:~~	~~/s/ Gregory S. Clark~~
	~~Gregory S. Clark~~ Vincent Pilette Chief Executive Officer ~~and Director~~

		By:	/s/ ~~Nicholas R. Noviello~~Natalie Derse
			~~Nicholas R. Noviello~~ Natalie Derse ~~Executive Vice President and~~ Chief Financial Officer

~~February 2, 2018~~

August 6, 2020


	December 29, 2017		March 31, 2017 ⁽¹⁾				July 3, 2020		April 3, 2020
ASSETS	ASSETS					ASSETS
Current assets:						Current assets:
Cash and cash equivalents	$	2,142	$	4,247		Cash and cash equivalents	$	1,073	$	2,177
Short-term investments	390		9			Short-term investments	58		86
Accounts receivable, net	666		649			Accounts receivable, net	102		111
Other current assets	369		419			Other current assets	364		435
Assets held for sale						Assets held for sale	353		270

Total current assets	3,567		5,324			Total current assets	1,950		3,079
Property and equipment, net	838		937			Property and equipment, net	88		238
Operating lease assets						Operating lease assets	62		88
Intangible assets, net	2,754		3,004			Intangible assets, net	1,042		1,067
Goodwill	8,318		8,627			Goodwill	2,588		2,585
Equity investments	332		158
Other long-term assets	171		124			Other long-term assets	675		678

Total assets	$	15,980	$	18,174		Total assets	$	6,405	$	7,735
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:						Current liabilities:
Accounts payable	$	181	$	180		Accounts payable	$	60	$	87
Accrued compensation and benefits	215		272			Accrued compensation and benefits	71		115
Current portion of long-term debt	—		1,310			Current portion of long-term debt	763		756
Deferred revenue	2,151		2,353
Income taxes payable	186		30
Contract liabilities						Contract liabilities	1,028		1,049
Current operating lease liabilities						Current operating lease liabilities	26		28
Other current liabilities	368		477			Other current liabilities	600		587

Total current liabilities	3,101		4,622			Total current liabilities	2,548		2,622
Long-term debt	5,587		6,876			Long-term debt	2,841		3,465
Long-term deferred revenue	579		434
Long-term contract liabilities						Long-term contract liabilities	30		27
Deferred income tax liabilities	618		2,401			Deferred income tax liabilities	170		149
Long-term income taxes payable	1,051		251			Long-term income taxes payable	1,191		1,310
Other long-term obligations	86		103
Long-term operating lease liabilities						Long-term operating lease liabilities	61		73
Other long-term liabilities						Other long-term liabilities	67		79

Total liabilities	11,022		14,687			Total liabilities	6,908		7,725
Contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value: 1,000 shares authorized; 21 shares issued; 0 outstanding	—		—
Common stock and additional paid-in capital, $0.01 par value: 3,000,000 shares authorized; 621,351 and 608,019 shares issued and outstanding as of December 29, 2017 and March 31, 2017, respectively	4,507		4,236
Accumulated other comprehensive income	15		12
Retained earnings (accumulated deficit)	436		(761		)
Total stockholders’ equity	4,958		3,487
Total liabilities and stockholders’ equity	$	15,980	$	18,174
Commitments and contingencies (Note 17)						Commitments and contingencies (Note 17)
Stockholders’ equity (deficit):						Stockholders’ equity (deficit):
Common stock and additional paid-in capital, $0.01 par value: 3,000 shares authorized; 591 and 589 shares issued and outstanding as of July 3, 2020 and April 3, 2020, respectively						Common stock and additional paid-in capital, $0.01 par value: 3,000 shares authorized; 591 and 589 shares issued and outstanding as of July 3, 2020 and April 3, 2020, respectively	2,713		3,356
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(4)		(16)
Accumulated deficit						Accumulated deficit	(3,212)		(3,330)
Total stockholders’ equity (deficit)						Total stockholders’ equity (deficit)	(503)		10
Total liabilities and stockholders’ equity (deficit)						Total liabilities and stockholders’ equity (deficit)	$	6,405	$	7,735



	Nine Months Ended
	December 29, 2017			December 30, 2016
OPERATING ACTIVITIES:
Net income	$	1,197		$	37
Income from discontinued operations, net of income taxes	(12		)	(96		)
Adjustments to continuing operating activities:
Depreciation and amortization, including debt issuance costs and discounts	526			356
Stock-based compensation expense	448			231
Deferred income taxes	(1,821		)	33
Gain on divestiture	(658		)	—
Other	43			43
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable, net	(38		)	114
Accounts payable	5			(72		)
Accrued compensation and benefits	(53		)	(10		)
Deferred revenue	187			(71		)
Income taxes	945			(981		)
Other assets	(3		)	16
Other liabilities	(85		)	(60		)
Net cash provided by (used in) continuing operating activities	681			(460		)
Net cash provided by (used in) discontinued operating activities	3			(104		)
Net cash provided by (used in) operating activities	684			(564		)
INVESTING ACTIVITIES:
Additions to property and equipment	(105		)	(57		)
Payments for acquisitions, net of cash acquired	(402		)	(4,533		)
Purchases of short-term investments	(408		)	—
Proceeds from maturities and sales of short-term investments	25			31
Proceeds from divestitures, net of cash contributed	946			7
Other	(20		)	2
Net cash provided by (used in) investing activities	36			(4,550		)
FINANCING ACTIVITIES:
Repayments of debt and other obligations	(2,640		)	(62		)
Proceeds from issuance of debt, net of issuance costs	—			4,993
Net proceeds from sales of common stock under employee stock benefit plans	83			53
Tax payments related to restricted stock units	(97		)	(50		)
Dividends and dividend equivalents paid	(163		)	(173		)
Payment for dissenting LifeLock shareholder settlement	(68		)	—
Other	—			10
Net cash provided by (used in) financing activities	(2,885		)	4,771
Effect of exchange rate fluctuations on cash and cash equivalents	60			(65		)
Change in cash and cash equivalents	(2,105		)	(408		)
Beginning cash and cash equivalents	4,247			5,983
Ending cash and cash equivalents	$	2,142		$	5,575
Supplemental disclosure of cash flow information
Income taxes paid, net of refunds	$	200		$	1,044


	Three Months Ended
	July 3, 2020		July 5, 2019
OPERATING ACTIVITIES:
Net income	$	118	$	26
Adjustments:
Amortization and depreciation	46		158
Impairments of current and long-lived assets	85		3
Stock-based compensation expense	25		80
Deferred income taxes	20		(30)
Gain on extinguishment of debt	(20)		—
Loss from equity interest	—		11


Non-cash operating lease expense	6		12
Other	24		1
Changes in operating assets and liabilities:
Accounts receivable, net	5		270
Accounts payable	(28)		(21)
Accrued compensation and benefits	(39)		(46)
Contract liabilities	(29)		(161)
Income taxes payable	(88)		72
Other assets	62		5
Other liabilities	(17)		(55)
Net cash provided by operating activities	170		325
INVESTING ACTIVITIES:
Purchases of property and equipment	(1)		(49)

Proceeds from maturities and sales of short-term investments	29		92

Other	(5)		(5)
Net cash provided by investing activities	23		38
FINANCING ACTIVITIES:
Repayments of debt and related equity component	(1,179)		—

Net proceeds from sales of common stock under employee stock incentive plans	2		37
Tax payments related to restricted stock units	(23)		(52)
Dividends and dividend equivalents paid	(105)		(51)
Repurchases of common stock	—		(559)

Net cash used in financing activities	(1,305)		(625)
Effect of exchange rate fluctuations on cash and cash equivalents	8		3
Change in cash and cash equivalents	(1,104)		(259)
Beginning cash and cash equivalents	2,177		1,791
Ending cash and cash equivalents	$	1,073	$	1,532


(In millions)
Balance as of April 3, 2020	$	2,585
Translation adjustments	3
Balance as of July 3, 2020	$	2,588


	July 3, 2020		April 3, 2020
Cash	$	500	$	483
Cash equivalents	573		1,694
Total cash and cash equivalents	$	1,073	$	2,177



þ☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


~~(1)~~	~~Net income per share amounts may not add due to rounding.~~


Three months ended July 3, 2020	Common Stock and Additional Paid-In Capital					Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of April 3, 2020	589	$	3,356	$	(16)	$	(3,330)	$	10
Net income	—	—		—		118		118
Other comprehensive income	—	—		12		—		12
Common stock issued under employee stock incentive plans	3	2		—		—		2
Shares withheld for taxes related to vesting of restricted stock units	(1)	(17)		—		—		(17)
Cash dividends declared ($0.125 per share of common stock) and dividend equivalents accrued	—	(72)		—		—		(72)
Stock-based compensation	—	25		—		—		25
Extinguishment of convertible debt	—	(581)		—		—		(581)
Balance as of July 3, 2020	591	$	2,713	$	(4)	$	(3,212)	$	(503)


Three months ended July 5, 2019	Common Stock and Additional Paid-In Capital					Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance as of March 29, 2019	630	$	4,812	$	(7)	$	933	$	5,738
Net income	—	—		—		26		26
Other comprehensive loss	—	—		(5)		—		(5)
Common stock issued under employee stock incentive plans	16	37		—		—		37

Shares withheld for taxes related to vesting of restricted stock units	(3)	(57)		—		—		(57)
Repurchases of common stock	(26)	(190)		—		(351)		(541)
Cash dividends declared ($0.075 per share of common stock) and dividend equivalents accrued	—	—		—		(47)		(47)
Stock-based compensation	—	99		—		—		99

Balance as of July 5, 2019	617	$	4,701	$	(12)	$	561	$	5,250


	Three Months Ended					Statements of Operations Classification
(In millions)	July 3, 2020		July 5, 2019
Customer relationships and other	$	18	$	20	Operating expenses
Developed technology	7		7		Cost of revenues
Total	$	25	$	27


(In millions)	July 3, 2020
Remainder of 2021	$	73
2022	92
2023	72
2024	60
2025	1

Total	$	298


	July 3, 2020		April 3, 2020
Prepaid expenses	$	81	$	110
Income tax receivable and prepaid income taxes	148		150
Other tax receivable	63		88
Other	72		87
Total other current assets	$	364	$	435


	July 3, 2020		April 3, 2020
Land	$	1	$	7
Computer hardware and software	533		746
Office furniture and equipment	67		88
Buildings	15		108
Leasehold improvements	63		128
Construction in progress	1		1
Total property and equipment, gross	680		1,078
Accumulated depreciation and amortization	(592)		(840)
Total property and equipment, net	$	88	$	238


	July 3, 2020		April 3, 2020
Non-marketable equity investments	$	188	$	187
Long-term income tax receivable and prepaid income taxes	38		38
Deferred income tax assets	389		387
Other	60		66
Total other long-term assets	$	675	$	678


~~(1)~~	~~Derived from audited financial statements.~~


	July 3, 2020		April 3, 2020
Deemed repatriation tax payable	$	615	$	615
Uncertain tax positions (including interest and penalties)	576		695
Total long-term income taxes payable	$	1,191	$	1,310


(In millions)	Fair Value
Due in one year or less	$	35
Due after one year through five years	23
Total	$	58



Weighted-average remaining lease term	4.1 years
Weighted-average discount rate	4.14	%


(In millions, except percentages)	July 3, 2020		April 3, 2020		Effective Interest Rate
4.2% Senior Notes due September 15, 2020	$	750	$	750	4.25	%
New 2.5% Convertible Senior Notes due April 1, 2022	250		250		2.63	%
3.95% Senior Notes due June 15, 2022	400		400		4.05	%
2.0% Convertible Senior Notes due August 15, 2022	—		625		2.66	%
New 2.0% Convertible Senior Notes due August 15, 2022	625		625		2.62	%
Term Loan due November 4, 2024	500		500		LIBOR plus ⁽¹⁾
5.0% Senior Notes due April 15, 2025	1,100		1,100		5.23	%
Total principal amount	3,625		4,250
Less: unamortized discount and issuance costs	(21)		(29)
Total debt	3,604		4,221
Less: current portion	(763)		(756)
Total long-term debt	$	2,841	$	3,465


(In millions)	Liability Balance as of April 3, 2020		Net Charges		Cash Payments		Non-Cash Items		Liability Balance as of July 3, 2020
Severance and termination benefit costs	$	35	$	51	$	(32)	$	—	$	54
Contract cancellation charges	7		48		(4)		(35)		16
Stock-based compensation charges	—		7		—		(7)		—
Asset write-offs and impairments	—		55		—		(55)		—
Other exit and disposal costs	—		3		(3)		—		—
Total	$	42	$	164	$	(39)	$	(97)	$	70


(In millions)
Balance as of April 3, 2020	$	724
Lapse of statute of limitations	(12)
Increase related to prior period tax positions	5
Decrease related to prior period tax positions	(49)
Increase related to current year tax positions	4
Balance as of July 3, 2020	$	672


	Three Months Ended July 5, 2019
(In millions, except per share amounts)
Number of shares repurchased	25
Average price per share	$	21.85
Aggregate purchase price	$	541


(In millions)	Foreign Currency Translation Adjustments		Unrealized Gain on Available-For-Sale Securities		Total
Balance as of April 3, 2020	$	(16)	$	—	$	(16)
Other comprehensive income before reclassifications	11		1		12

Balance as of July 3, 2020	$	(5)	$	1	$	(4)


	Three Months Ended
(In millions, except per grant data)	July 3, 2020			July 5, 2019
Restricted stock units (RSUs):
Weighted-average fair value per award granted	$	20.86		$	19.39
Awards granted	—		(1)	12
Total fair value of awards released	$	56		$	174
Outstanding and unvested	4			22
Performance-based restricted stock units (PRUs):
Weighted-average fair value per award granted	$	—		$	19.21
Awards granted	—			2
Total fair value of awards released	$	3		$	26
Outstanding and unvested at target payout	1			3
Stock options:
Weight-average fair value per award granted	$	—		$	4.76
Awards granted	—			2
Total intrinsic value of stock options exercised	$	3		$	71
Outstanding	1			8
Exercisable	—		(1)	6



(In millions)	Three Months Ended December 29, 2017			Nine Months Ended December 29, 2017
Severance and termination benefit costs	$	11		$	50
Other exit and disposal costs (benefit)	(2		)	15
Asset write-offs	9			18
Transition costs	75			195
Total	$	93		$	278



(In millions)	Balance as of March 31, 2017		Costs, Net of Adjustments		Cash Payments			Non-Cash Charges			Balance as of December 29, 2017		Cumulative Incurred to Date
Severance and termination benefit costs	$	20	$	50	$	(58	)	$	—		$	12	$	126
Other exit and disposal costs	26		15		(22		)	(7		)	12		94
Total	$	46	$	65	$	(80	)	$	(7	)	$	24	$	220



(In millions, except useful lives)	July 24, 2017			Weighted-Average Estimated Useful Life
Developed technology	$	123		5.5 years
Customer relationships	11			7 years
Goodwill	247
Deferred income tax liabilities	(35		)
Other liabilities	(1		)
Total purchase price	$	345



	December 30, 2016
(In millions)	Three Months Ended		Nine Months Ended
Net revenues	$	1,041	$	3,127
Net income (loss)	$	55	$	(64	)



(In millions)	October 31, 2017
Assets:
Cash and cash equivalents	$	2
Accounts receivable, net	34
Goodwill and intangible assets, net	670
Other assets	40
Total assets	746
Liabilities:
Deferred revenue	285
Other liabilities	11
Total liabilities	$	296



(In millions)
Gain on divestiture:
Gain on sale of short-term investment	$	7
Gain on sale of other assets and liabilities	651
Total gain on divestiture	$	658



(In millions)	Enterprise Security			Consumer Digital Safety			Total
Net balance as of March 31, 2017	$	6,078		$	2,549		$	8,627
Acquisitions	256			39			295
Divestiture	(606		)	—			(606		)
Translation and other adjustments	5			(3		)	2
Net balance as of December 29, 2017	$	5,733		$	2,585		$	8,318



	December 29, 2017							March 31, 2017
(In millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	1,462	$	(305	)	$	1,157	$	1,646	$	(322	)	$	1,324
Developed technology	1,043		(323		)	720		1,006		(229		)	777
Finite-lived trade names and other	13		(7		)	6		46		(26		)	20
Total finite-lived intangible assets	2,518		(635		)	1,883		2,698		(577		)	2,121
Indefinite-lived trade names	852		—			852		864		—			864
In-process research and development	19		—			19		19		—			19
Total intangible assets	$	3,389	$	(635	)	$	2,754	$	3,581	$	(577	)	$	3,004



(In millions)	December 29, 2017
Remainder of 2018	$	110
2019	436
2020	431
2021	321
2022	259
Thereafter	326
Total	$	1,883



(In millions, except percentages)	December 29, 2017			March 31, 2017			Effective Interest Rate
2.75% Senior Notes due June 15, 2017	$	—		$	600		2.79	%
Senior Term Loan A-1 due May 10, 2019	300			1,000			LIBOR plus ⁽¹⁾
Senior Term Loan A-2 due August 1, 2019	800			800			LIBOR plus ⁽¹⁾
Senior Term Loan A-3 due August 1, 2019	70			200			LIBOR plus ⁽¹⁾
4.2% Senior Notes due September 15, 2020	750			750			4.25	%
2.5% Convertible Senior Notes due April 1, 2021	500			500			3.76	%
Senior Term Loan A-5 due August 1, 2021	500			1,710			LIBOR plus ⁽¹⁾
2.0% Convertible Senior Notes due August 15, 2021	1,250			1,250			2.66	%
3.95% Senior Notes due June 15, 2022	400			400			4.05	%
5.0% Senior Notes due April 15, 2025	1,100			1,100			5.23	%
Total principal amount	5,670			8,310
Less: Unamortized discount and issuance costs	(83		)	(124		)
Total debt	5,587			8,186
Less: Current portion	—			(1,310		)
Total long-term portion	$	5,587		$	6,876



	Three Months Ended				Nine Months Ended
(In millions, except per share data)	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
Dividends declared and paid	$	47	$	46	$	139	$	139
Dividend equivalents paid	2		7		24		34
Total dividends and dividend equivalents paid	$	49	$	53	$	163	$	173
Cash dividends declared per common share	$	0.075	$	0.075	$	0.225	$	0.225