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) and the Exchange Act of 1934, as amended (the 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; anticipated growth and trends in our businesses and in our industries; the consummation of or anticipated impacts of acquisitions (including the recent acquisition of Avira and the Proposed Merger with Avast and related financing), divestitures, restructurings, stock repurchases, and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our solutions; anticipated tax rates, benefits and expenses; the impact of the COVID-19 pandemic on our operations and financial performance; 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 Part II Item 1A, of this Quarterly Report on Form 10-Q. We encourage you to read that section carefully.



                                    OVERVIEW

NortonLifeLock Inc. has the largest consumer Cyber Safety platform in the world, empowering nearly 80 million users in more than 150 countries. We are the trusted and number one top of mind brand in consumer Cyber Safety, according to the 2022 NortonLifeLock brand tracking study. We help prevent, detect and restore potential damages caused by many cyber criminals.

Fiscal calendar

We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three months ended July 1, 2022 and July 2, 2021 each consisted of 13 and 13 weeks, respectively. Our 2023 fiscal year consists of 52 weeks and ends on March 31, 2023.

Key financial metrics

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


                                                               Three Months Ended
(In millions, except for per share amounts)              July 1, 2022        July 2, 2021
Net revenues                                          $      707            $        686
Operating income (loss)                               $      261            $        287
Net income (loss)                                     $      200            $        181
Net income (loss) per share - diluted                 $     0.33            $       0.31
Net cash provided by (used in) operating activities   $      215            $        258


                                                                     As Of
(In millions)                                          July 1, 2022       April 1, 2022

Cash, cash equivalents and short-term investments $ 1,291 $ 1,891 Contract liabilities

$       1,220      $        1,306

Below are our financial highlights for the first quarter of fiscal 2023, compared to the corresponding period in the prior year:

•Net revenues increased $21 million, due to higher sales in both our consumer security products and our identity and information protection products.

•Net income increased $19 million, primarily due to a decrease in income tax expense.

•Net income per share - diluted increased $0.02, due to the increase in net income, offset by the adoption of ASU 2020-06.

•Cash, cash equivalents and short-term investments decreased by $600 million compared to April 1, 2022, primarily due to the repayment of our Senior 3.95% Senior Notes and repurchases of common stock during the first three months of fiscal 2023.

•Contract liabilities decreased $86 million compared to April 1, 2022, primarily due to a decline in billings due to seasonality and fluctuations in foreign currency rates.



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Proposed Merger with Avast

On August 10, 2021, we announced a transaction under which we intend to acquire the entire issued and to be issued ordinary share capital of Avast plc, a public company incorporated in England and Wales and a global leader of digital security and privacy headquartered in Prague, Czech Republic (Avast and such transaction, the Proposed Merger). The Proposed Merger will be implemented by means of a court-sanctioned scheme of arrangement under the UK Companies Act 2006, as amended (the Scheme), and remains subject to a certain number of conditions. Under the terms of the Proposed Merger, Avast shareholders will be entitled to elect to receive, for each ordinary share of Avast held, in respect of their entire holding of Avast shares, either: (i) $7.61 in cash and 0.0302 of a new share of our common stock (such option, the Majority Cash Option); or (ii) $2.37 in cash and 0.1937 of a new share of our common stock (such option, the Majority Stock Option). Based on our undisturbed closing share price of $27.20 on July 13, 2021, and depending on the Avast shareholder elections, the estimated purchase price range for the Avast shares under the Proposed Merger is $8.1 billion to $8.6 billion. Each of the directors of Avast who holds shares has undertaken to elect for the Majority Stock Option in respect of their entire beneficial holdings of Avast shares. We plan to finance the Proposed Merger with existing cash, cash to be generated by operations and new debt financing.

In conjunction with the Proposed Merger, on August 10, 2021, we entered into an agreement (as amended, the Interim Facilities Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $3,600 million term loan interim facility B (the Interim Facility B), (ii) $750 million term loan interim facility A1 (the Interim Facility A1) and $3,500 million term loan interim facility A2 (the Interim Facility A2), and (iii) a $1,500 million interim revolving facility (the Interim Revolving Facility) (collectively, the Interim Facilities) and a commitment letter (as amended, the Commitment Letter) with certain financial institutions, in which they agreed to provide us with financing no less than the financing available under the Interim Facilities (the Definitive Facilities and, together with the Interim Facilities, the Facilities) to finance the cash consideration payable in connection with the Proposed Merger. The Definitive Facilities will be financed by a syndicate of lenders led by Bank of America, N.A. and Wells Fargo Bank N.A. On January 28, 2022, Bank of America, N.A. and Wells Fargo Bank N.A. agreed to arrange, on a best efforts basis, additional term loans under the Definitive Facilities in an amount up to $500 million. The Interim Facilities Agreement contains, and any definitive financing documentation for the Definitive Facilities entered into in connection with the Commitment Letter (the Facilities Agreement) will contain, customary representations and warranties, events of default and covenants for transactions of this type. The Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction.

In conjunction with the Proposed Merger, on August 10, 2021, we entered into a Co-operation Agreement (the Co-operation Agreement) with Nitro Bidco Limited, our wholly-owned subsidiary (Bidco), and Avast, pursuant to which we and Bidco agreed to, among other things, use all reasonable endeavors for the purposes of obtaining any regulatory authorizations which are required to implement the Proposed Merger, and we, Bidco and Avast agreed to cooperate with each other in preparing required transaction documents and certain other matters in connection with the Proposed Merger. The Co-operation Agreement also contains certain termination rights. The Co-operation Agreement also provides that, if we fail to receive approval from the U.K Competition and Markets Authority and cannot consummate the Proposed Merger, we may be required to pay Avast a break fee of up to $200 million.

The Proposed Merger was approved by our Board of Directors and by our shareholders, the Board of Directors and shareholders of Avast and regulators including the Federal Trade Commission under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) and in Europe, the German Federal Cartel Office and the Spanish National Markets and Competition Commission. On August 3, 2022, the U.K. Competition and Markets Authority (CMA) provisionally cleared the Proposed Merger. Subject to final approval by the CMA and changes based on operational considerations mutually agreed upon by the parties and other requirements, the closing is anticipated to be between mid-September to early October 2022, given the CMA's published schedule and the currently scheduled U.K. Court Hearing to approve the scheme.



                                COVID-19 UPDATE

The COVID-19 pandemic has had widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. At the onset of the pandemic, to protect the health and well-being of our employees, partners and third-party service providers, we facilitated a work-from-home requirement for most employees and established site-specific COVID-19 prevention protocols. We continue to monitor the situation and over the past several months have adjusted our policies and protocols to reflect changes to public health regulations and guidance. Our offices are now open to employees on a voluntary basis. To date, we have not seen any meaningful negative impact on our employee productivity. Nevertheless, as more 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.

While the COVID-19 pandemic has negatively impacted many sectors of the U.S. and global economies, the consumer Cyber Safety market experienced increased demand as the pandemic greatly accelerated the digital lives of people around the world. However, with the extended duration of the pandemic and the easing of prevention protocols and restrictions, we are seeing decreasing demand and increased competition. In addition, while we did not experience a material increase in cancellations by customers or a material reduction in retention rate in fiscal 2022 or in the first quarter of fiscal 2023, should the negative macroeconomic impacts of the COVID-19 pandemic persist or worsen, we may experience continued slowdowns in our business activity and an increase in cancellations by customers or a material reduction in our retention rate in the future, especially in the event of a prolonged recession. A prolonged recession could 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.



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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 new variants of the disease, the extent, effectiveness and acceptance of containment actions, such as vaccination programs, and the impact of these and other factors on our employees, customers, partners and third-party service providers. For more information on the 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 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 position and 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 included in our Annual Report on Form 10-K for the fiscal year ended April 1, 2022. There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three months ended July 1, 2022.



                             RESULTS OF OPERATIONS

The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated:


                                              Three Months Ended
                                        July 1, 2022         July 2, 2021
Net revenues                                      100  %            100  %
Cost of revenues                                   14                15
Gross profit                                       86                85
Operating expenses:
Sales and marketing                                22                23
Research and development                            9                10
General and administrative                         15                 7
Amortization of intangible assets                   3                 3
Restructuring and other costs                       0                 1
Total operating expenses                           49                43
Operating income (loss)                            37                42
Interest expense                                   (4)               (5)
Other income (expense), net                         0                 0
Income (loss) before income taxes                  32                37
Income tax expense (benefit)                        4                10
Net income (loss)                                  28  %             26  %

Note: Percentages may not add due to rounding.

Net revenues


                                                            Three Months Ended

(In millions, except for percentages) July 1, 2022 July 2, 2021 Change in % Net revenues

$     707             $         686               3  %

Net revenues increased $21 million, primarily due to a $20 million increase in sales of our identity and information protection products. Net revenues were impacted by $27 million of foreign exchange headwinds, primarily in our consumer security solutions.



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Performance Metrics

We regularly monitor a number of metrics in order to measure our 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 supplemental key performance metrics:



                                                      Three Months Ended

(In millions, except for per user amounts) July 1, 2022 July 2, 2021 Direct customer revenues (1)

$      620            $        611
Partner revenues                             $       88            $         80
Average direct customer count                      23.4                    23.0
Direct customer count (at quarter end)             23.3                    23.1
Direct average revenue per user (ARPU)       $     8.82            $       8.84

(1) Direct customer revenues during the three months ended July 1, 2022 and July 2, 2021 excludes a $1 million and $5 million reduction of revenue, respectively, from a contract liability purchase accounting adjustment. We believe that eliminating the impact of this adjustment improves the comparability of revenues between periods. In addition, although the adjustment amounts will never be recognized in our GAAP financial statements, we do not expect the acquisitions to affect the future renewal rates of revenues excluded by the adjustments.

We define direct customer revenues as revenues from sales of our 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. We exclude users on free trials and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscription directly with us, or sign up for a paid membership through our web store.

Average direct customer count presents the average of the total number of direct customers at the beginning and end of the fiscal quarter.

ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP estimated direct customer revenues or other GAAP measures. We monitor ARPU because it helps us understand the rate at which we are monetizing our consumer customer base.

Net revenues by geographical region



                     Three Months Ended
               July 1, 2022         July 2, 2021
Americas                  72  %             70  %
EMEA                      17  %             19  %
APJ                       11  %             11  %

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

Percentage of revenue by geographic region in the three months ended July 1, 2022 remained consistent with the corresponding period in the prior year.

Cost of revenues


                                                            Three Months Ended

(In millions, except for percentages) July 1, 2022 July 2, 2021 Change in % Cost of revenues

$     102             $         102               -  %

Our cost of revenues remained relatively flat.

Operating expenses



                                                            Three Months Ended

(In millions, except for percentages) July 1, 2022 July 2, 2021 Change in % Sales and marketing

$     156             $         156               -  %
Research and development                         61                        68             (10) %
General and administrative                      104                        45             131  %
Amortization of intangible assets                21                        21               -  %
Restructuring and other costs                     2                         7             (71) %
Total operating expenses                  $     344             $         297              16  %


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Sales and marketing expense, research and development expense and amortization of intangible assets remained relatively flat.

General and administrative expense increased $59 million, primarily due to a $52 million increase of a legal accrual, of which $45 million was prejudgment interest, relating to an ongoing patent infringement lawsuit and the corresponding legal fees. See Note 18 of the Notes to the Condensed Consolidated Financial Statements for further information.

Restructuring and other costs decreased $5 million, in connection with the December 2020 Plan, which was completed in the fourth quarter of fiscal 2022 . See Note 12 of the Notes to the Condensed Consolidated Financial Statements for details of our restructuring activities.

Non-operating income (expense), net



                                                          Three Months Ended
(In millions)                                       July 1, 2022         July 2, 2021
Interest expense                                $      (31)             $         (32)
Interest income                                          2                          -
Foreign exchange gain (loss)                            (1)                         1
Gain (loss) on early extinguishment of debt              -                         (5)

Other                                                   (2)                         1
Total non-operating income (expense), net       $      (32)             $         (35)

Non-operating income (expense), net, remained relatively flat.

Provision for income taxes



                                                    Three Months Ended
(In millions, except for percentages)      July 1, 2022             July 2, 2021
Income (loss) before income taxes         $       229              $      252
Income tax expense (benefit)              $        29              $       71
Effective tax rate                                 13   %                  28   %

Our effective tax rate for income for the three months ended July 1, 2022 differs from the federal statutory income tax rate primarily due to tax benefits related to the foreign currency remeasurement of an Irish deferred tax asset and discrete legal expenses booked during the quarter, partially offset by state taxes.

Our effective tax rate for the three months ended July 2, 2021 differs from the federal statutory income tax rate primarily due to state taxes, partially offset by the benefits of lower-tax international earnings and various permanent differences.

We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. 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 therefore, is 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. Given the potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, we are unable to accurately estimate when these unrecognized tax benefits will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months.

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.



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               LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS

Liquidity and Capital Resources

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

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

Cash flows

The following summarizes our cash flow activities:



                                              Three Months Ended
(In millions)                           July 1, 2022         July 2, 2021
Net cash provided by (used in):
Operating activities                $       215             $         258
Investing activities                $         4             $          (1)
Financing activities                $      (807)            $          44

See Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for our supplemental cash flow information.

Cash from operating activities

Our cash flows provided by operating activities decreased by $43 million, primarily due to a decrease in accounts payable as a result of higher cash payments and a decrease in contract liabilities reflecting higher revenue recognized than billings compared to the first three months of fiscal 2022.

Cash from investing activities

Our cash flows provided by investing activities remained relatively flat.

Cash from financing activities

Our cash flows used in financing activities decreased $851 million, primarily due to the absence of proceeds from issuance of debt and the continuation of our stock repurchase program. The first three months of fiscal 2023 reflects the $400 million repayment of our 3.95% Senior Notes and $300 million of repurchases of common stock, compared to the $512 million of proceeds from the issuance of our Initial Term Loan which was partially offset by the $364 million settlement of our New 2.5% Convertible Notes during the first three months of fiscal 2022.

Cash and cash equivalents

As of July 1, 2022, we had cash, cash equivalents and short-term investments of $1,291 million, of which $694 million was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments 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 foreign taxes.

Debt

We have an undrawn revolving credit facility of $1 billion, which expires in May 2026.

On June 1, 2022, we fully repaid the principal and accrued interest under the 3.95% Senior Notes due June 2022, which had an aggregate principal amount outstanding of $400 million. In addition, we paid $7 million of accrued and unpaid interest through the redemption date.

Cash Requirements

Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers.



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Proposed Merger with Avast

On August 10, 2021, the Company announced a transaction under which we intend to acquire the entire issued and to be issued ordinary share capital of Avast plc, a public company incorporated in England and Wales and a global leader of digital security and privacy headquartered in Prague, Czech Republic (Avast and such transaction, the Proposed Merger). Based on our undisturbed closing share price of $27.20 on July 13, 2021, and depending on the Avast shareholder elections, the estimated purchase price range for the Avast shares under the Proposed Merger is $8.1 billion to $8.6 billion. In conjunction with the Proposed Merger, we and certain financial institution parties entered into an Interim Facilities Agreement, under which Bank of America, N.A. and Wells Fargo Bank N.A., as interim lenders, agreed to provide us with certain term loan and revolving facilities in order to finance the cash consideration payable and based on the terms and conditions set forth in a commitment letter. The Interim Facilities Agreement includes (i) the Interim Facility B, (ii) the Interim Facility A1 and the Interim Facility A2, and (iii) the Interim Revolving Facility which, on or before the final repayment date, are to be repaid/replaced in full by loans made under the definitive financing documentation for the Definitive Facilities (the Facilities Agreement). The obligations under the Facilities Agreement will be guaranteed, jointly and severally, by all of our present and future domestic subsidiaries, with certain exceptions, as applicable. The Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction.

Debt instruments



As of July 1, 2022, our total outstanding principal amount of indebtedness is
summarized as follows. See Note 10 of the Notes to the Condensed Consolidated
Financial Statements included in this Quarterly Report on Form 10-Q for further
information on our debt.

(In millions)               July 1, 2022
Term Loans                 $       1,703
Senior Notes                       1,100
Convertible Senior Notes             525
Mortgage Loans                         8
Total debt                 $       3,336

Our credit agreement maturing in May 2026 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 1, 2022, we were in compliance with all debt covenants. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding financial ratios and debt covenant compliance.

Dividends

On August 4, 2022, we announced a cash dividend of $0.125 per share of common stock to be paid in September 2022. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors.

Share repurchase program

Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and through accelerated stock repurchase transactions. As of July 1, 2022, the remaining balance of our stock repurchase authorization was $1,474 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.

Contractual obligations

Our principal commitments consist of principal and interest payments related to our debt instruments, obligations under our purchase agreements, repatriation tax payments under the Tax Cuts and Jobs Acts and obligations under various non-cancellable leases. 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 1, 2022, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $556 million in long-term income taxes payable has been excluded from our quarterly review of timing of contractual obligations.

Commitments related to the principal payments of our debt instruments decreased $411 million from our Annual Report on Form 10-K for the fiscal year ended April 1, 2022 primarily due to the repayment of our 3.95% Senior Notes. There have been no other material changes, outside the ordinary course of business, to the contractual obligations reported in our Annual Report. For additional information about our debt obligations and certain other contingencies, see Note 10 and Note 18, respectively, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Under the terms of the Proposed Merger, we expect to pay a purchase price for the Avast shares ranging from $8.1 billion to $8.6 billion upon the completion of the transaction in late calendar year 2022. In conjunction with the Proposed Merger, we have secured debt under the Interim Facilities which will be available upon the close of the transaction. If the Proposed Merger is completed, our debt obligations will include principal and interest payments related to these credit facilities. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding this business combination and the related debt instruments.



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Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations and amounts available under our credit facility, will be sufficient to meet our working capital needs and support on-going business activities through at least the next 12 months and to meet our known long-term contractual obligations. We plan to finance the cash consideration payable to Avast primarily with borrowings under our Interim Facilities. We believe that our existing cash and cash to be generated by operations, along with amounts available under the new credit facility, will satisfy our long-term cash requirements for this transaction. However, our future liquidity and capital requirements may vary materially from those as of July 1, 2022 depending on several factors, including, but not limited to, economic conditions; political climate; the expansion of sales and marketing activities; the costs to acquire or invest in businesses; and the risks and uncertainties discussed in "Risk Factors" in Part II, Item 1A below.

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 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 Broadcom and/or their related subsidiaries. See Note 18 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our indemnifications.

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