NortonLifeLock Inc. (NLOK) Q4 2021 Earnings Call Transcript

NortonLifeLock Inc. (NASDAQ: NLOK) Q4 2021 earnings call dated May. 11, 2021.

Corporate Participants:

Mary Lai — Head of Investor Relations

Vincent Pilette — Chief Executive Officer

Natalie Derse — Chief Financial Officer

Gagan Singh — Chief Product Officer

Krista Todd — Vice President of Marketing and Communications

Analysts:

Fatima Boolani — UBS Securities LLC — Analyst

Hamza Fodderwala — Morgan Stanley — Analyst

Robert Clarkson — Chief Commercial Officer

Saket Kalia — Barclays Capital Inc. — Analyst

Gregg Moskowitz — Mizuho Securities — Analyst

Robert Majek — Raymond James — Analyst

Matthew Hedberg — RBC Capital Markets — Analyst

Ryan Flanagan — Monness Crespi Hardt — Analyst

Presentation:

Mary Lai — Head of Investor Relations

Good morning, everyone. Thank you for tuning in. I’m Mary Lai, Head of Investor Relations at NortonLifeLock. Welcome to NortonLifeLock first Investor Day. For Q&A discussion today, we have a great line up for you, including Vincent Pilette, CEO; Natalie Derse, CFO and other members of the leadership team. As a reminder, there will be a replay of this event posted on the IR website and by now you should have seen our press release and have accessed all the video presentations.

I’d like to remind everyone that during this call, comments and statements may contain forward-looking statements, including statements regarding our business, financial performance and operations. These statements are based on current expectations and assumptions that are subject to risks and uncertainties and actual results could differ materially. For more information, please refer to the cautionary statement in our press release and the risk factors in our filings with the SEC and in particular, our Annual Report on Form 10-K and recently filed quarterly reports on Form 10-Q.

In addition, we may also make references to financial metrics that are non-GAAP. Please refer to our IR website for reconciliation of non-GAAP to GAAP measures.

Before we start our Q&A session, let me pass the mic over to our CEO to kick-off event. Vincent?

Vincent Pilette — Chief Executive Officer

Thank you, Mary and good morning, everyone. I hope you are all safe and well, as you may have read we just delivered a record quarter closing a very strong year. Since becoming NortonLifeLock we achieved a lot delivering on every one of our commitments. The more important of which was returning the Company to growth. In the last quarter, reported billings was up 17% and revenue up 11%, record numbers. And in the last year, we increased our direct customer count to almost 3 million to a total direct customer count of 23 million. But for this team, it is just the beginning. We have a broad vision of protecting and empowering everyone to live their digital lives safely. We have big goals of drastically improving customer experience and making cyber safety mainstream.

Our strategy is simple and is working. We are building the best integrated cyber safety platform which we are expanding with adjacent trust based products and services. Through our results, through the videos we posted yesterday, today and of course ongoing weeks [Phonetic], I hope you can sense the passion and the drive that this new leadership team brings to the opportunity. We have the capabilities and the confidence to accelerate our growth to double-digit and double our EPS in the next three to five years.

You know Natalie, you know me, we have decided to bring a subset of our leadership team to this session. This is about teamwork, you can get a better appreciation of who we are. How we look at our opportunity and how we drive together with a common set of values in pursuit of our vision. So with no further due, let’s move to Q&A. Mary, back to you.

Questions and Answers:

Mary Lai — Head of Investor Relations

Thank you, Vincent. All right. Let’s get started. We will now open up for Q&A. Our first question comes from Saket at Barclays.

Saket Kalia — Barclays Capital Inc. — Analyst

Okay, great. Thanks, Mary. Can you hear me okay?

Vincent Pilette — Chief Executive Officer

Yes. Hi, Saket.

Saket Kalia — Barclays Capital Inc. — Analyst

Okay, excellent. Hey, Vincent. And Natalie and team. Thank you so much for taking my questions here and for the very helpful presentations posted last night. Maybe I’ll start with you, Vincent. First, I appreciate all the triple double goals. I think it all starts with doubling customers. So I’d like to zero in and that just to start. Doubling customers from 50 to 100 million, I think over the next three to five years. I think it was said, can you just talk a little bit about some of the drivers there? Right, on kind of that path and kind of how you think about broad brush, that potential split between sort of direct customers right, which we’ve been beating here for the last for several quarters and indirect customers as well. Does that makes sense?

Vincent Pilette — Chief Executive Officer

That makes perfect sense. And what you referred to about the triple double is what Natalie in her presentation go up and it’s somehow quantifying the objective, double number of customers, double-digit growth delivered in the next three to five years and double our EPS. When we set our big goals, actually had a fourth one, as you know and it all start with doubling the customer experience, improving that which means really doubling the net promoter score. I think it’s all about making cyber safety, relatable, easy to use, easy to benefit from, giving the true peace of mind to customers.

When we look at the market itself, market or marketers are going to define the market as they know it today, but when we look at the opportunity, we know that 5 billion people connected to the Internet and those have their digital lives, growing exponentially and you’ve seen it over the last 12 months. How many more activities have moved online, right, students now moving online, socializing. Many of the activities we used to do in the physical which are not overlapping with the digital world.

And that has opened the door for cyber criminals to attack in many different ways and doing ransomware on student scorecards and asking rents and otherwise embarrassing them on social media. And everything is increased increasingly at risk if you want as what we value in the past has now moved online. So we see the overall need for cyber safety to only increase.

Today, less than 5% of people who have a digital life pay for Cyber Safety plan and if you compare that to the physical world, in the physical was 90% of people who have a car have a car insurance, 30% of the homeowners have home alarm system or home insurance. Yet. When you talk about a digital live and what you valued online, less than 5% of people are paying for Cyber Safety plan that’s fully protecting them, that’s how we look at the opportunity. And so the second big goal after experiencing improving customer is really about making Cyber Safety mainstream by then doubling the customer that we have is one way of course.

As you also know, we acquired a freemium capability after the 80 million users. So 30 million of our users are not paying customers because they just use the basic simple of cyber protection. We also want to increase that number tremendously and you’ll see us do that. When it comes to the driver of that growth, it’s really around three axis. The first one is increasing our international penetration. Today, we’re very focused, 70% of our business is in the US and we expand exponentially internationally. We are acquired Avira to get more operations, in Europe, we actually saw a strong double-digit growth in international in the last quarter with Europe in addition to Avira growing double-digit. We had our core business, Norton growing double-digit as well. So very strong capability to expand internationally.

The second one is to continue to push the boundaries of Cyber Safety, add new products and new services, addressing the new needs and you’ve seen us launch the Privacy Monitoring system which has been really well received. It’s not only about security, it’s about you Privacy managing your persona on the Internet. And the third driver of growth for us is scaling up Cyber Safety through partnership, you’ve seen us last year signing up with studies to go into in Canada to go with Aon [Phonetic] to develop a novel Cyber Safety Protection. To partner with these are recently that we announced to be at the moment of truth when you use your credit card or when you pay to have you identity protected online, and I think that overall set of activities like International expansion, expansion of our product and services and partnership expansion will help us get to our big goals.

Mary Lai — Head of Investor Relations

Thank you, Vincent.

Saket Kalia — Barclays Capital Inc. — Analyst

Got it. Sorry. Can ask last one follow-up?

Vincent Pilette — Chief Executive Officer

Of course.

Saket Kalia — Barclays Capital Inc. — Analyst

Excellent. Natalie maybe for my follow-up for you. It was great to see the retention rates at 85% again this quarter. I think it was mentioned in one of the presentations that the first year retention — retention rates are about 10 points lower than that. Can you just maybe talk through some of the — some of the things that you feel like, can do to improve those first year retention rates in particular. Thank you.

Natalie Derse — Chief Financial Officer

Yeah, thanks for the question. Look, yes. 85% retention rate is our average. It has been for a while. We’ve been on that clip for a while. Industry-leading retention. So we’re very, very proud of that. But look, we look at that retention rate as only opportunity and when you think about how we bring that opportunity to life, what I would say is, look for me it’s product, brand, service go-to-market. And I would say we’re going to bring retention increase opportunities to life in all four of those buckets across, you’ve heard from all the leaders on the screen here today. During their analyst videos what they’re going to prioritize, how they’re going to focus, but it gets back to, I think, you know, the great thing is we’ve got a lot of help at the top of the funnel to everything that you just heard from Vincent in terms of on our path to doubling customers. So we’ve got that growth at the top of the funnel. Now how we increase engagement how we increase customer experience. How we increased product usage, how we leverage our brand, the brand strength and how we really, really deliver on our value proposition in our commitment to our customers is obviously so incredibly critical in only increasingly so.

When I go back to the whiteboard and I think about all the — all of those levers coming together, not only to drive top line growth, but again at from a customer perspective, those engagement metrics, the math becomes really, really simple. And what I mean by that is let’s just — let’s go fast forward or maybe get to extreme math day 1, 5 points of retention on a base of customers, 23 million, growing multiply that by our current ARPU over the next five years is just exponential growth that we are just really, really excited about. And so I think it’s — look, we talked about a flywheel, right. We’ve got the top of the funnel, you’ve got these leaders in our, in our cross our teams just a relentless focus on driving more and more value for our customers being very customer centric, and we really think we’ve got the levers to bring that to life and you’ll see that in some of our metrics, like retention, like ARPU, like revenue growth, EPS.

Vincent Pilette — Chief Executive Officer

If I can add on retention, I want to pass the ball to Gagan. In the past we had like three views like when you on board, then at the time of renewal, and then at the time where you leave. When Gagan joined us and Krista joined on the same time, we redefined what the consumer cyber safety journey would be and how we would interact with them in product on the side of the product at the right moment of truth. And now with Norton’s is 360 platform that has enabled us even if you want to engage even more. Gagan, do you want to talk little bit about the product and what you’re doing in that area?

Gagan Singh — Chief Product Officer

Yeah, I think both of you covered it quite well. But, listen, it starts with simplifying the choice for the end consumer as they are making a decision about which Cyber Safety product which aspect of Cyber Safety product are they most concerned with. Then carrying them all the way into the product and building points and engagement that not only provides us an opportunity to perhaps educate that customer on the need, they have in that specific moment, but also migrate them either to another product or move them up the value chain in our membership portfolio. And then it goes to each point of engagement or interaction that you have live with Patrick and his team coming on board. When you complete the full circle starting with simplifying the choices, engaging with them in moments of truth, and then delivering world-class customer service, I think that’s where you really kick it up a notch in terms of driving higher retention.

Mary Lai — Head of Investor Relations

Thank you, Gagan.

Saket Kalia — Barclays Capital Inc. — Analyst

Thanks very much folks.

Gagan Singh — Chief Product Officer

Thanks, Saket.

Mary Lai — Head of Investor Relations

Thank you. Our next question comes from Fatima, UBS.

Fatima Boolani — UBS Securities LLC — Analyst

Good afternoon. Thanks for taking my questions and nice to see you all in a Brady bunch format. My first question, I’ll start with you, Vincent. Just to put a finer point on the double-digit revenue growth expectation and Natalie please also chime in here. May be being greedy here, but double-digit, as you know I learned from 10 to 99, but may be narrowing that down a little bit what are maybe the most sensitive inputs for you to get into the 10% to 15% growth zone? And what needs to go really right for you to move into the 15% to 20%, 20% plus growth zone?

Vincent Pilette — Chief Executive Officer

And before we talk about the double-digit exactly. Let me talk to you about what I’m excited. I believe in business, it’s all about momentum and as you know, when we started, a year ago when we separated Symantec between an enterprise business that we sold to Broadcom and created NortonLifeLock, the first dedicated consumer Cyber Safety company at scale. Nobody told we could grow as you remember. We say, hey, we’re going to launch Norton 360, redefine what Cyber Safety means and we know that the digital life will only increase and with that, the need for protection will continue to increase. And of course the last year as just created a step function, and we move from low digit growth rate to mid-single digit growth rate. We’re guiding the quarter at high single-digit growth rate and then we delivered here a revenue up 11% supported by a billing growth of 17%.

And I think it’s on that momentum that we want to build in, of course, investor and analyst will want to say which quarter, do I put what number? But I think the acceleration of our momentum is what we want to focus on, then we jump into, hey look, it doesn’t matter what we grow out. We still have 5 billion of people having a digital live that are the left as a risk of being attacked by cyber criminals. And let’s go and reach the maximum number of people. Now to come back to your question, we guided 10% to 12% for the next quarter. We put an annual guidance at 8% to 10% and put a little plus behind the 10%, because we know, there are lot of activities we’re driving that we can knock that investor to already put that into their model, but we know we’re going to deliver our results on those and we’ll quantify them at the right time.

And so we focus on what we control, which is again I’ll repeat which is improving the customer experience, continuously developing those new go-to-market routes that Robert is driving, developing the portfolio and redefining what Cyber Safety means I predict that in three to five years as we achieve all of our long-term goals, Cyber Safety defined at that time will be very different than today, because we have pushed the boundaries of those. And so that’s the overall framework obviously every quarter, we’ll try to go after the best result looking at all of those people unprotected from cyber criminals versus just the short-term results.

Natalie Derse — Chief Financial Officer

Yeah. And just to build on that, right, you asked about maybe a 10% to 15% or what kicks us into a different, a different clip, of course, the core business and the investment there and the continuous acceleration that we’ve got a plan around is critically important, and that’s really the fundamentals and the foundation of our guidance ranges. I would call out as you heard in the videos and you hear — you see in our capital allocation, M&A is going to be a huge focus for us, we’re going to deploy capital in a growth focused manner and M&A, the way we look at it as an accelerator to the growth plans that we — that we’ve laid out for you.

And so you’ll see us be very, very active, they’re very aggressive. We’re very interested in that and as we progress, we will leverage the healthy balance sheet we’ve got. We’ve got flexibility in our capital allocation to really be driving again focused on growth and delivering incremental EPS along the way. No matter what opportunity that we’re taking advantage of.

Fatima Boolani — UBS Securities LLC — Analyst

Just to — as I’m jumping-off point, kind of drill into the cost and investment side of the equation that contributes to your long-term outlook. Clearly several pathways that you’ve identified that Robert identified in his session with respect to the funnel right direct acquisitions marketing partnerships and benefits. Not only, I’m curious how does this change the composition of the sales and marketing investment on below and does that $300 million that you seared into our brains, does that change dramatically in the context of your longer-term guidance.

Natalie Derse — Chief Financial Officer

Yeah, the way I would look at that is from our core business, we are going to continue to invest for growth and when we get that growth, when we see that accelerating momentum that leverage that comes from that top line at an 85% gross margin business allowed us massive investment capability and flexibility. We are very, very clear, we are going to prioritize continued rate of investment in product and technology to drive innovation, speed to — bringing market, excuse me, products to market faster as well as sales and marketing. From a go-to-market perspective, our dry powder in our investment in sales and marketing is going to get behind again growth, it’s not going to be solely on acquisition that’s going to be a component of it. We’ve been investing behind acquisition in a diverse manner. And we believe that’s working. We believe that top of the funnel health is started is there and is the momentum continues to build. You’ll see us diversify into all of the go-to-market channels that Robert talked about, because we believe consumers, how they how they are — how they engage in their online digital lives is going to continue to evolve.

And we need to evolve right there with them, right. I mean, even in the last year how consumers engage online is dramatically changed. The pandemic has taught us that or and brought more awareness to that. And we’re going to iterate as we navigate through our three to five-year plan. But for sure, without a doubt you can count on. Vincent and I, the rest of the leadership team, honestly the operating team across the business, we are relentlessly going to go after driving more productivity, driving more efficiencies and immediately reinvesting those into product and technology as well as sales and marketing. We’re very, very hungry for growth and we’re couldn’t put all of our resources that we identify right behind that.

Vincent Pilette — Chief Executive Officer

And I think you bring a good point earlier, which is, every investor is asking us, hey, we raised our marketing envelope from $200 million to $300 million, the same $300 million, the mentioned, was going to grow that, I mean let’s say how much more do you have to do is a step function to sustain your growth? And the reality is we still have inefficiencies working in our construction every day when we capture those we didn’t rebalance the investment and investing into our new product is as critical is investing in our go-to market model. In the last year, you’ve seen us launch eight new products, which was like tripling or quadrupling the rate of new products, we had launched in the prior years.

And I think building up that product innovation, momentum is extremely important. We’ve redirect some investing into Patrick’s area and we talk about the overall as service level that consumers expect and how we build more services into our product to offer solution for customers. We invested into our brand and trying to simplify the brand framework and doubling down to our Norton. And then of course we have the — the marketing, but also the partner, the channel, the employee benefit channel that we invest into spot. So it’s really an end to an investment number.

Fatima Boolani — UBS Securities LLC — Analyst

Fair enough. I’ll jump back in line and see before. Thank you.

Vincent Pilette — Chief Executive Officer

Good, thanks.

Mary Lai — Head of Investor Relations

Thank you, Fatima. All right. Let’s go to the next question. I have Morgan Stanley, Hamza.

Hamza Fodderwala — Morgan Stanley — Analyst

My question — can you hear me okay?

Vincent Pilette — Chief Executive Officer

Yes. Hey, Hamza.

Hamza Fodderwala — Morgan Stanley — Analyst

All right. Great. Well, really appreciate all the details that you provided on the long-term drivers in that whiteboard slide. Maybe first question for Vincent and or Natalie. Just when we think about the drivers. I think you mentioned, it seems like 8% to 10% organic revenue growth minus acquisitions over the next three to five years. About 5 points of that is coming from sort of sustainable momentum, which is roughly in line with were the organic growth doing today. So I’m just curious, you know — what is the sustainable momentum part entail? How are the drivers behind that different relative to some of the things you called out like higher cross-sell and upsell or converting more users from the top of the funnel.

Natalie Derse — Chief Financial Officer

Yeah, the sustainable growth momentum is critical and we feel, we feel great about it in terms of if we rewind the clock just a year ago. We’ve been building accelerating momentum throughout fiscal year ’21, capping it off in Q4 with just a such a great quarter. We believe that momentum is going to continue into fiscal year ’22. We’ve got an incredible organic growth plan already kicked off with the teams focused on all of the things we talked about in the organic side. Right. Again product brand service go to market, all reaching and kicking up into a different, a different notch across the board. In terms of sustainability momentum keep in mind, just when you think about how we progressed through ’21, we haven’t yet seen the full year impact to revenue. Right. That’s going to catch up as we navigate through the next couple of quarters. And then in parallel, we’re building, building, building and driving, driving, driving those things are going to continue. Just to scale up into the right. And then of course on top of that, I know you’re touching on just more of the organic side, but again really in parallel driving across the globe. International expansion, we are driving the diversity and the go-to-market channels with Robert.

We’re again expanding the portfolio, and the pillars that we are engaging and bringing value propositions to market and then coming with our existing user base and as we add those new cohorts in just focused on increased customer engagement. Its product usage, it’s making sure that they are aware of everything in our value proposition that they can take advantage of making sure that we are are driving more and more happy customers and the engagement in our flywheel is massively important.

And then on top of that, the M&A, right, again getting after M&A really moving into adjacent markets, adjacent services acquiring new cohorts of customers, all of that is going to help us drive towards that, the path to doubling the rate of growth.

Vincent Pilette — Chief Executive Officer

Gagan, Robert, I don’t know if you have anything to had. Robert you’re on mute.

Robert Clarkson — Chief Commercial Officer

I say that — the beginning, focusing on that first year retention also goes into that sustainable growth and as we add more customers in the first year, and we close that gap between our ongoing retention rate of 85% and for fuel retention rates that helps as well. And so as Natalie pointed out, that’s about consumer engagement. We talked about awareness to consumers and then kind of brings up in the — into the Norton family, but also that first year continuously reinforcing the value proposition, the product benefits of what we’re doing for them and their families, help to encourage that 75% to grow 85% in — the rest of our retention numbers. And that goes into that sustainable growth as well.

Hamza Fodderwala — Morgan Stanley — Analyst

Yeah, I think that segues nicely into the brief follow-up question on retention, you mentioned 85% ongoing retention on the direct subscribers. Do you think that there is any sort of upside to that over time as you drive more engagement as you have more multi-product customers which I presume are stickier. Can you give us any color as whether you see that 85% going to 90% over time.

Natalie Derse — Chief Financial Officer

All the clear, simple answer is, absolutely. Honestly, when we look at the 85% rate, we’ve been at that rate for, when I look at the historical trends, we’ve been at that, and that gives us great confidence for sure, at least in the stability of that industry-leading retention, but without a doubt our sites are on much higher or retention. Robert can’t wait to jump in and tell you what he’s going to do; Patrick, the same; Gagan, the same, it’s all, all of those levers that we talked about again underpin with that strong brand awareness, the branch to branch strength that we’ve got and just delivering on that value proposition for sure is a main priority for us. Sorry, Robert. Go ahead.

Robert Clarkson — Chief Commercial Officer

No, no, I — that’s great answer, Natalie. I would also add that, one of the — one of the opportunities we have is to capitalize on changes in the family and our customer dynamics. So as they originally joined us as an individual user. And now they have a family and maybe they have gamers in the family, and maybe they move overseas, they become travelers. We want to make sure that we feel relevant and that gives us the ability, because some of the reasons that we have 85% versus 86% or 87% is the fact that we want to make sure that the world relevant as these people progress through their life and then their situation changes. So with — we’ve been producing products that make us more relevant at different points in people’s lives, which will help that retention number.

Natalie Derse — Chief Financial Officer

And Patrick, I’m sure you have things to add in terms of our path to happier and happier customers.

Patrick —

No, I completely agree the whole experience we keep talking about increase the customer experience, play the huge role and retention and we actually have dove into it. And looked at people that give us promoter score, retain at a higher rate as well. It is kind of the reason we made it a foundation for the entire Company to focus advocate and think customer first across the entire end to end journey.

Hamza Fodderwala — Morgan Stanley — Analyst

Got it. Thank you.

Mary Lai — Head of Investor Relations

Thank you. Our next question comes from Gregg from Mizuho.

Gregg Moskowitz — Mizuho Securities — Analyst

All right. Thanks, Mary. Nice to see everybody. So my first question is for Gagan actually. So yesterday, you hinted at potential expansion for NortonLifeLock into some other areas such as digital persona, online reputation, anti-bullying, access management. So the question is, do you have the engineering bandwidth to accomplish this today. And then also how should we think about the cadence of significant product releases in these or other areas going forward.

Gagan Singh — Chief Product Officer

Yeah, look, I would love to give you my roadmap for the year. I’m not sure, Vincent is going to be too happy about that. But let me take a step back. Look, I think this came up earlier, there is a — when you look at the opportunities for improving on that experience. I mean you heard from Natalie saying, look, there were a lot of inefficiencies that existed that we continue to clean through and produce capacity in making further investments. And I think I have full support from Natalie and Vincent, and talking about as we — as we create those efficiencies to go reinvest in product, reinvest in acquisition so far.

So I feel absolutely confident that we have the capacity. We’re also getting more agile and more nimble and how we pursue opportunities test amount at a smaller scale. And then, and then double down on it, if we find early signs of success. You saw the, the way I talked about in Privacy Monitor assistant, I talked about anti a bit. So it’s not so much about bringing 100 people into the next — into investing into the next capability. It’s much more about bringing 10 proving that capability out and then and then doubling down on it as we see success. And one of the advantages of having 80 million user base is that we can deploy different capabilities on different cohorts of customers, in a different region in a different cohorts and test it out and test out the validity of that offering. And then quickly release across the board.

So yeah I feel very confident that we have the support, we have the wherewithal to continue to invest in that innovation as we go into the year and beyond.

Gregg Moskowitz — Mizuho Securities — Analyst

Okay, that’s helpful, thanks. And then just follow-up for Natalie. So I think the path to $3 in EPS over the next three to five years. I think that includes the potential for $0.30 to $0.35 of accretion from M&A, can you just walk through what gives you the confidence that you can drive that level of accretion that presumably having identified a specific M&A targets. At this time. Is it just a function of I a massive installed base and the power of the NortonLifeLock brand etc. or is there anything else that you would sort of add to that.

Natalie Derse — Chief Financial Officer

Yeah, I would go back to our — to our vision and driving Cyber Safety, cyber protection to more and more of the growing market, but massively under-penetrated market. We have a lot of opportunity. The way I would look at it from a EPS white-boarding exercise we showed both M&A and share buyback. We’ve talked to you guys about we will deploy our capital and growth focused manner, you know there is multiple paths, there is multiple ways to get to that $3 EPS, I feel confident in our capital allocation strategy rate, a third of it dividend and then the other two-thirds of it going to going, set aside for both M&A as well as share buyback. Look, we can find ourselves in different situations, we may find ourselves in a situation where all of that goes to M&A, we may find ourselves in, where we — where we don’t find ourselves in an acquisitive fashion. And we’ll go more share buyback or a combination of the two.

Honestly it’s about that flexibility. It’s about making sure that we’re deploying capital in a growth focused manner and relentless focus on delivering 100% free cash flow back to our shareholders excluding M&A. And so those are — those are our priorities. Those are our tenants, and after, but we have multiple ways to get there with so much opportunity. I’m going to ask Vincent to jump in on your M&A portion of your question.

Vincent Pilette — Chief Executive Officer

Yeah. So quickly and to close on the capital allocation, last year was the most balanced year, as you know we generated about $900 million plus of free cash flow, and the third was used for the dividend, a third for the acquisition of Avira, and the third for buyback. And as Natalie mentioned, dividend is secure and then between buyback and M&A will have flexibility. Now, I don’t want to over focus on M&A as the word because frankly when you look at Avira, we acquired customer, 1.6 million customers that are now part of the Norton family. If I had to spend the same amount in marketing to acquire 1.6 million you would have said, yeah, for sure, invest in marketing, we did increase margin by $100 million. I would just have increased by $200 million, I would acquired those customers. I think that’s one of the elements that you need to understand.

And the second one is, once a customer has a minimum of Cyber Safety, we continue to build two new products, new function and you mentioned and as Gagan if we have the capability, we definitely have the capabilities and the skill set to do that in house and we continue to increase more into our — into our R&D engine. And then that enables us to then drive the ARPU up, right. And so we acquired a customer which see inorganic organic doesn’t matter to me, it’s — you paid to acquire a customer that is now being protected and you can move up the ARPU as it comes. Avira came with an ARPU up a roughly under $5. You know that the average customer in Norton families at $9 a month and the highest is actually, I’d say $18 to $20 a month. And so we have the opportunity to expose the customer to a higher value portfolio and membership and that’s what we do.

And then the last element is Patrick and his customer experience that he is driving on our collective behalf for the customer, it’s about the engagement and the retention and they are too. We have an aggregate retention rate of 85%, Avira came at about 80% and we have more opportunity to engage more as we move up through the value. And then with that, we have some in our portfolio and retention with some core, and retention rate in the 90% plus. And so moving them up to the high level.

And so it’s a whole customer journey if you, one, that you take from awareness on behalf of the customers to acquisition to enrollment to engagement and to all the way to be fully protected. That’s how we look at deploying our capital, whether that is opex or capex, frankly.

Gregg Moskowitz — Mizuho Securities — Analyst

Very helpful, thank you guys.

Natalie Derse — Chief Financial Officer

Thanks.

Mary Lai — Head of Investor Relations

Thank you, Gregg. Let’s go to our next question from Raymond James, Robert. You’re on.

Vincent Pilette — Chief Executive Officer

Hey, Robert.

Robert Majek — Raymond James — Analyst

Great. Thanks. Nice to see you all. My question is on Avira. You noted the first integrated product is expected to launch in June. Can you just talk about your acquisition integration strategy and the thought process behind each future acquisition? What makes sense to integrate versus what brands as they make sense demand separately? Thanks.

Vincent Pilette — Chief Executive Officer

Yeah. Very good question. So there was three type of initiatives that we drive. One is to bring more customer to our platform, was it spending in marketing or acquiring an asset that’s already on one platform. The second one is to add product to the current Cyber Safety platform as it is defined today. The third one is to push the boundaries of Cyber Safety to redefine what it really means and we’re uniquely positioned to drive on all three criterias. Avira actually met a few of those, acquired 1.6 million customers, added a few functionalities inside our current portfolio and that’s what you’re talking about product integration. And then we’ve been together build up additional products and services.

When it comes to operational excellence, there is no better team that the team you see here right now. We’ve integrated the back end of the Avira business in 86 days. All on our ERPs on our common system, synergies have been realized not fully flowing through the P&L, but realized within the quarter in that 86-day timeframe. So I give A plus to this team. Plus, frankly the collaboration and contribution of the average that we understood our vision of fully integrated company when it comes to product integration to ensure we can offer every customer the upmost value of our Norton 360 Ultimate platform if you want over time, and that’s where the product integration, start to matter. And I’ll pass it to Gagan, who can talk a little bit about without repeating everything that we’re going to do of course.

And then some acquisition, before I pass it to Gagan may be fully integrating the back-end but kept separate because it redefines the value and the first one to capitalize on that value. So that’s how we define our strategic framework. And it’s no different, frankly, again, I think there’s a lot of talk about M&A, here, there is no different than an inorganic investment. Some investment we say, okay, let’s go and acquire new customer, some investment we say, okay, let’s push new functionality, we had our privacy monitoring, we added privacy monitoring assist in working between Patrick and Gagan’s team, and then we have, say, okay, how do we define new services, all organically? And so that’s how we drive the business fully. Gagan, do you want to talk little bit about where you are in bringing all the organizations together?

Gagan Singh — Chief Product Officer

Yeah, I mean look the organizations are integrated — fully integrated. I think when it comes to product and you’ve already delivered the synergies that the business case was built on, you really look at what capabilities do we want to bring in-house, what capabilities are redundant that we think we should have shared across the board. And also you trade off against time to market. You look at what is the richness of experience that you can create and where the opportunities are for the highest gain and you look at that entire experience holistically and then you just continue marching on. And I think as you alluded to, in our first integrated capability coming out in June, but that also creates tying it to the earlier question creates an opportunity for further investment when you’re not looking to and know you’re not so much distracted with integrating back end systems and so forth. You’ve gotten that out of the way, you can look at where can we deploy that capability to bring on new products, new experiences into different geographies, for that matter, as well.

Vincent Pilette — Chief Executive Officer

If I can add, we spend a lot of time inside, we should be thinking about our big bet what that if we have the next one. And when do you put it, how do you get there and what is in line with the strategy of doubling the customer count making Cyber Safety mainstream redefining the boundaries. Where do we go, how do we go and today in our quarterly Board Meeting, we spent 70% of our time talking about strategy organic investment, how do we put the boundaries of our value proposition.

Mary Lai — Head of Investor Relations

Robert, did you have a follow-up?

Robert Majek — Raymond James — Analyst

Helpful. Thank you. Maybe one more if I can. Yeah. Does everyone hear me?

Mary Lai — Head of Investor Relations

Yes.

Robert Majek — Raymond James — Analyst

Yeah. So I’ll just add — I’ll add my appreciation for the whiteboard slide as it lays out the necessary steps nicely to get to $3 in EPS. But perhaps approaching the question in a different way, could we break down those components into more near-term versus long term buckets. When do you expect to see each of these drivers really kick in such as the NPS improvement improved cross sell motion and so on.

Natalie Derse — Chief Financial Officer

Yeah, we’re not waiting, that’s for sure. And we started the efforts in ’21, we started to accelerate momentum, we started just as we stood up NortonLifeLock just a reinvigorated relentless focus on the customer on operational efficiency, to be experts in our craft and to execute every single day. And I think if, as I look back to reflect on ’21, I believe, the team is built up a high level of credibility, a very high say do ratio in terms of do you do or what you say you’re going to do and do we hit or exceed commitments, and we’ve done all of that in ’21. That momentum will not only continue, it will continue and build as we enter into ’22. Fiscal year ’22 is the first year and the journey that we are articulating on that whiteboard. And so make no mistake, we’re getting after it quick. We’ve got our priorities. We’ve got our plan. We are funded and resourced and the teams are already off to the races and driving all of those levers.

Now how we get there, how do we achieve that 8% to 10% plus growth. How do we achieve that incremental EPS that EPS accretion of course are going to, we’re going to have multiple ways to get there. We got a lot of levers on that whiteboard and you could probably double and triple-click into each and every single one of those, but we’ve got just an enormous amount of opportunity ahead of us. You’ve got incredibly hungry leadership team not only the folks that you see on the screen here, but across the business. And look, we will continue to be an efficient machine. We will continue to be high execution. We will — like I said on my video, we will continue to inspect, what we expect and be very, very data driven all through a growth focused mindset.

Vincent Pilette — Chief Executive Officer

If I can add a couple of things, because your question also come from our past. So, the Company was or the division NortonLifeLock as we focus on the installed base and then the bottom line. And when we separated the asset and became, NortonLifeLock, we’ve returned to growth.

At that point in time, we launched Norton 360 and we put a $100 million of Marketing at work. And then of course we build the leadership team and the capability, but those two were really clearly highlighted and easy to understand and we delivered and over delivered in many of our metrics. Now in the first year of a full fiscal year for NortonLifeLock, we’ve taken approach much more balance. We’ve squeezed as much as we could, in the short term. The inefficiencies in our cost structure and redirect investment across or there is none one, here partners of mine that does not have a budget that includes incremental investment to drive on the big objectives we guided this year at 8% to 10% plus.

We gave you the three to five year target of double-digit growth and $3 EPS, and I think what I want everyone to work away from this meeting is the understanding that we have a lot of levers at our disposal, maybe back to Fatima’s question, if every one of those plans, getting into a blue-sky scenario will be the number by a mile. And so, keeping the flexibility and the intellectual agility to take risk, learn from the mistake, turning the mistake into an asset a learning for the customers and constantly adjusting on all of those levers is really what we’re building here in our culture.

Robert Majek — Raymond James — Analyst

Thanks a lot.

Vincent Pilette — Chief Executive Officer

Thank you.

Mary Lai — Head of Investor Relations

Thank you. Let’s go to our next question from RBC. Matt, you’re on.

Vincent Pilette — Chief Executive Officer

Hey, Matt.

Matthew Hedberg — RBC Capital Markets — Analyst

Hey, guys. Thanks for the — thanks for the time. This has been great. The presentation last night was super helpful. I guess when I reflected all the opportunities for growth. I look at international as a massive opportunity. So I guess for Robert or Krista, you’ve had success internationally, Canada, obviously, but it’s only 30% of your business today. I guess the question is how realizable is the international opportunity? And how do you effectively target that versus maybe what works here in the US?

Vincent Pilette — Chief Executive Officer

And maybe we’ll start with Krista, since you have not heard from Krista yet. And then, she’ll pass it to Robert. Krista, the ball is yours.

Krista Todd — Vice President of Marketing and Communications

I think that you’re right there. We talked about the balance of our business right now, domestically and internationally, which just simply means we have a huge opportunity in front of us. And so we can take learnings from what we do in any market and apply it really well to other markets to scale, to drive efficiency very quickly. From a brand perspective, we see a lot of promise with our Norton brand internationally. We are number 1 or number 2 in all of our key markets today. The one exception is Germany. We were number 3, but Avira is now number 1 in Germany. So when we think about the strength of brand and we’re in a category where brand matters, building a trusted brand in Cyber Safety is critically important. We also heard from consumers around the world, we have brand momentum, which means they believe that we are moving forward, not standing still going backwards. So we will use the power of brand, the differentiation of our brand to understand consumers deliver platform needs for them really understanding consumers in other markets and going to market with them to connect deeply to bring them in to our solutions.

Robert Clarkson — Chief Commercial Officer

[Speech Overlap] We have a number of levers, right. So we talk about the direct to consumer being one of the levers, the partner lever being another one and obviously, if you’re being of the third and also an important lever. I just had dial in a little bit on the partner side, each one of these partners brings a local perspective rates in some cases, they are more local partners, they could be a retailers or e-tailers in those partners. They could be affinity group, they could be affiliates, so they have a local expertise that we can partner with, so that our marketing goes much further, right. Because it’s much more informed. So we — while we think global, we act yet local and that’s through a partnership with e-tailers and retailers around the world. In addition to the fact that Avira widens our net considerable pricing, that will be bringing in a new type of consumer who are looking for this product, but had a different price point that they were looking at.

So we can pull them in from international markets as well and then put them into the — into the fabric of Norton to move them up as their life changes or as their situation changes. So it’s all part of passing the widest net, but also being relevant at the geographic level not just at the socioeconomic level or at the age level, right.

Vincent Pilette — Chief Executive Officer

If I — you can — it’s all about the operational plans and so you’ve seen that our penetration in the next 10 countries after the US is half of what it is in the US and we believe also it’s because we’ve taken too big of a global approach in the past and we want to make it much more local. Every week now, every Friday, we meet with the country would be one of the country strategy, who are the competitors, what are the customer, what are the customer characteristics, what feedback, do we do we get and then we’ve been Patrick in who is kind of the voice of the customer in the last, Patrick, maybe you can share a bit what you do in term of making your support and services more localized.

Patrick —

Yeah, one of the really exciting things to report if that an entire year of product to unify all of the customer experience to be able to control the journey. So what we’ve been able to do is create a superior close to world-class customer support team, because we could actually know exactly why customers come in, one of the issues they are having, Vincent talked about earlier, what’s the moments of truth that allows us to put high touch, high value, people are local resources to make sure that they end up having their issue disposition quickly and correctly. It’s one of the things that allow know very quickly to, so we can move to new markets, from a service standpoint very quickly now, which we couldn’t have done a couple of years ago.

Matthew Hedberg — RBC Capital Markets — Analyst

Super helpful. And then Vincent…

Natalie Derse — Chief Financial Officer

And just — sorry, go ahead.

Matthew Hedberg — RBC Capital Markets — Analyst

No, no, please, please.

Natalie Derse — Chief Financial Officer

I was just going to cap it up to numbers. Look we’ve said, we’re coming off a solid year, a very, very strong Q4, we’ve got momentum to build on as well, that momentum is across products, it’s across regions. We grew double digit both domestically, as internationally, across Europe, across APAC, with, without Avira. And so we are just really trying to capitalize again on, to Vincent’s point right. The momentum is still critically important, we got it and now we’re really trying to take that forward. My apologies. Go ahead with your follow-up.

Matthew Hedberg — RBC Capital Markets — Analyst

No, no, that’s great. That was a good question. You touched on everybody, on the product side, on that one. And I guess for Vincent or Natalie, obviously, it really does seem like you’ve got an opportunity to drive higher renewal rates, I mean, Natalie you talked about sort of the potential and what that could mean for your growth? And maybe this question is hard to answer, because I’m sure it’s an evolving thing, but when you study the cohort — the cohort of COVID subs, do you foresee them acting any differently when they come up for renewal that maybe is that the different than other cohorts? Just sort of wondering on and what drove what you think drove them to the franchise here and how you think that might behave in the future?

Natalie Derse — Chief Financial Officer

Yeah. I appreciate the question. We spend a lot of time looking at this. Thinking about it, etc. First, I would say look retention at 85%, in the new cohorts, of course they’re lower. We’ve been — we’ve been open in sharing about that. But that’s nothing new, right. We’ve seen the both of these trends for a while, as it pertains to the growth related to COVID, you know, I’ll just throw out there for me, I look at specifically just being in the data and the analytics, is it causation, correlation, of course the pandemic increased the awareness of the need for more and more cyber safety across a broader population. The pandemic, really drove just change in all our lives. For me, though, I step back and I look at it for growth. Yes, that growth timing kind of correlated with the pandemic, but we were doing a lot of different things. And I believe that growth results was driven by a lot of different things.

For sure, the awareness beyond the shadow would have accelerated. Secondly, we were investing in marketing significantly. I think greater than a 50% increase year-over-year clip. In addition, we launched our Norton 360-integrated platform where you know this was a new integrated platform that offer the multi-tier membership profile and solution. And so all of that coming together during that same time frame. And then now I have the luxury of looking back and reflecting on ’21. Yes, Q1, our fiscal Q1 that laddered up or lined up with the pandemic, the early pandemic timing but three out of the four quarters, we added around 300,000 to 400,000 customers, net new locking in at 6 consecutive quarter of ads and this year, just being the first year we’ve added net customer growth since 2014, so a step back. The sentiment is the same. How are we going to get after increased retention?

Overall, how are we going to bring that first year renewal rate up and that gets back to the levers that we’ve been talking about? Product service brand go to market and we’re just trying to get out of the gate strong on all of those again just high quality products faster innovation pace to market. Great customer service, making sure that our customers understand the current usage of their products that they already pay for increasing that up into the right, and then obviously really getting after just diversed go to market channels to make sure that you know, as the customers engage, as they operate online, that’s going to continuously evolve over the next few years. Again the pandemic taught us that as well. And so we’re just, we’re right there where the customers are, where they’re making these critically important decisions on how to protect themselves and their family. And so we’ll evolve along with them, but in the meantime, absolutely focused on happy customers, happy customers, happy customers.

Vincent Pilette — Chief Executive Officer

And if I can add, so clearly Natalie highlighted for you, how we think we have a structural growth opportunity in front of us with underpenetrated Cyber Safety and all the levers we have at our disposal to drive towards that growth. Last year, the increase in our digital lives has created step function at the minimum in term of awareness, but frankly it’s not like because the pandemic is stopping definitely cyber criminals will go home and stop attacking. Right. So I think that’s awareness is here to stay, that step function is here to stay. And if I make it numbers, we finished very strong in March with a very strong month of March, and maybe March could be the first month of growth under the aspect of a pandemic as you know. We’ve seen a solid April and so we do not see at this point in time a change in behavior of new customers, compared to a year ago if you want, but that being said, we have many levers to continue to increase our retention as we said Norton 360, higher engagement, higher retention, first cohort, international cohort’s lower retention. Those are the normal dynamic, we are seeing as opportunities.

Matthew Hedberg — RBC Capital Markets — Analyst

Super helpful. Great answers and best of luck team.

Vincent Pilette — Chief Executive Officer

Thank you.

Mary Lai — Head of Investor Relations

All right. Let’s go to our next question from Monness Crespi, Ryan.

Ryan Flanagan — Monness Crespi Hardt — Analyst

Great, thanks for taking my questions. And I really appreciate the format, we can see everyone. I wanted to ask about Avira and the freemium model. Is freemium something we can expect to see rolled out more broadly through the portfolio? I’m thinking maybe testing new products or specific geos. And then related to that, on the conversion to paying, I’m just curious how predictable that transition is and what sort of visibility you have there?

Vincent Pilette — Chief Executive Officer

Yeah. So clearly for us, freemium is a capability and it’s not as simple as saying I’ll make my product for free. It’s about making a product that’s relevant a minimum set of functionality. So the customer can experience Cyber Safety and then building of the interaction identifying the moment of truth or the moment of risk if you’re consumer during which you can then move into the higher value set of the portfolio, engaging. Identifying engagement and driving that upside is a capability. We have acquired — we have acquired a team that has experience in that and we make it in many aspects of our portfolio. You don’t have to come at the core on just a simple AV on a device, you could come into Cyber Safety from, either some functioning of the security pillar or some functionalities of the privacy period or some functionalities of the identity pillars. And it’s all about getting into Cyber Safety and then engaging into that high level protection. You will see us use that more and one more around basic.

Our goal again would be that, one day everyone, the 5 billion Internet users have a minimum of Cyber Safety that they have consciously chosen to go and drive, because that increase the awareness and make the cyber world, safer. Gagan, do you want to add anything on freemium?

Gagan Singh — Chief Product Officer

No, I think you said it right, say, it’s a — as framing back so what Vincent started off the conversation with there’s 5 billion connected users and less than 5% penetration freemium is only one of the many ways for us to go grab those customers and then allow and tying it into what Patrick does and product team does in building the long-term relationship with that user, turn them into a customer, and then there are really no different than any — than a customer that you perhaps acquired in any other way or any other format or product etc. So I think it’s really as simple as that. And the fact that Avira has a concentration in Europe, just further ties into our bigger term goals around international expansion and support.

Ryan Flanagan — Monness Crespi Hardt — Analyst

Great. And then a quick follow up. I can see it in, you guys have done a lot of work over the last several quarters here to shed the image of a sort of this legacy desktop antivirus vendor. What are the primary marketing efforts to kind of further this awareness sort of NortonLifeLock being a holistic platform for consumer identity and security?

Vincent Pilette — Chief Executive Officer

I’ll pass it to Natalie or Krista, but first I want to say that, it has been many years not just last year that there, NortonLifeLock team was thinking about moving from being device-centric and a protection of a weak operating system to really protecting digital lives and becoming a lot more user centric. And so we were the first at introducing an identity protection, then building up the first Cyber Safety integration, a food platform where we can add the new functionality with a common architecture. And that’s because we are all user-centric and the effort of the last year has been really to refocus on growth, but the overall momentum we’ve had is, thanks to the team. My predecessor in the role and the entire NortonLifeLock team to really drive that conscious change in the market and where the customer will be in five years from now, they did that five years ago. We do it today. We spend a lot of time today and say what would a digital would look like in five years from now and what can our Cyber Safety plan look like when we do that. So with that Natalie maybe you want to pick it up on…

Natalie Derse — Chief Financial Officer

No, that’s a perfect question for Krista.

Vincent Pilette — Chief Executive Officer

Okay, good.

Krista Todd — Vice President of Marketing and Communications

Absolutely. I think the opportunity we have is really to make Norton, the bright side to a pretty dark problem out there. We know that cyber criminality has only increased and we need to be there to protect and empower consumers to live their digital lives safely. So all that we do, we focus on that effort and that includes making sure that they feel safe when they’re jumping on as well.

Natalie Derse — Chief Financial Officer

And look, we’ve got — we’ve got the investment behind it. I think if I can just go down the path of marketing investment for a second, we’ve been on, not only a path to increase it right, Fatima’s back on the phone with the $300 million reference. We’ll continue to get behind it, but it’s about diversification. And I think again, it’s not just from one lens or one path, we will put the marketing investment behind the priorities, whether that is acquisition, whether that is diversification either internationally or in some of our partner channels as well as driving the customer engagement, making sure that our consumers either existing or potential. No, the innovative products that we are bringing to market, the new pillars that we’re expanding into, the new services that we are trying to build out from.

And you know at the end of it, I think this relentless focus on customer, we believe, even in our retention metric we focus on a user retention metrics, not a dollar retention metric. There is multiple ways to look at every metric. But when you’re solely focusing relentlessly focused on driving that on behalf of the customer. I think it just, it provides you a lot of clarity as to what you need to focus on how you prioritize, what you put powder behind and to drive those priorities.

Ryan Flanagan — Monness Crespi Hardt — Analyst

Appreciate the details. Thanks.

Natalie Derse — Chief Financial Officer

Thank you.

Mary Lai — Head of Investor Relations

Thank you, Ryan. We have some additional follow-ups here. Yeah. Next question goes to Fatima, I guess.

Vincent Pilette — Chief Executive Officer

Hi, Fatima.

Fatima Boolani — UBS Securities LLC — Analyst

Now for the second. Thank you. And this is a jump ball just around ARPU, I think related to that a little bit more explicitly we’ve addressed the concept of ARPU in a number of different ways as it relates to retention and the efforts you have there, but maybe more specifically, what is the priority sequence will actually may be to take a step back, what type of our crews are you anticipating or contemplating and certainly the near term and over the course of the next three to five years, bringing to your guide.

And if you can help us think about it in the context of the bookends [Phonetic] you shared with Avira being sort of a little south of $5 and organic ARPU, a little south of $9. So if you can help contextualize, how you’re thinking about ARPU and really between your ability to nudge and separate customers into with the higher price bundles and selling all the current offerings, how should we think about the overall ARPU completion from the baseline levels that you’re expecting, short-term and long term.

Vincent Pilette — Chief Executive Officer

Great. Simple question on ARPU that could almost summarize our entire strategy, because it really comes first with our vision, which is everyone would be cyber safe when they leave their digital lives. And at a minimum have access to a freemium that gives them a first level of protection that would be an ARPU of 0 as you know and we want to really make that cyber safety mainstream and then is about building the capabilities to really identify those moment of truth, moment of risk for the customer when can the cyber criminals attack you, put you your assets, your values, everything you have online all the way to your digital reputation at risk and identifying those one, providing a value for the customer either would pay for it that they get something out of it, so they fully are protected. And then we move them up from protecting your device and you data to protecting your overall information and going into a privacy angle then protecting your identity and go into the identity angle, all the way to our ultimate offering which is Norton 360 with all of the functionalities, we would feel confident you’re fully digitally protected. And where the tools cannot, because it’s not 100% always, have the condition to evolve.

Then we have a follow-up restoration services all the way to an insurance services if you experience a lot. So the full end-to-end protection and then the customer journey would move, some would choose directly because they are either more aware or more exposed or have high intensity in their digital live, so join directly on Norton 360, which is the majority of our new customer coming in. Then they’ll say, I joined on the Norton 360 level 3 and I need more identity protection and here is. I’m doing a lot of processing and all my credit card have been breach or other things. And then you move into the higher level all the way to the ultimate as I mentioned. There you have an ARPU of $20 a month. Now, it would be a mistake, I think to only solely focused on an aggregated ARPU for our business, it’s really by cohort, by moment of truth, making sure people get more and more cyber safe ultimately when 5 billion Internet users will be for the protecting of Norton 360, you can imply what the ARPU is.

And I think it’s the right balance between, hey, bringing new customers, moving internationally, adding more values, retaining high, improving the expense. And so between retention rates, ARPU, would you drive that new customer versus all one, partner customer versus direct customer, but also the ARPU change as you know, in a partner relationship we shared the ARPU with our partners, and then as we move them up through the cycle of the cyber safety journey, we have an opportunity to up-sell and cross-sell our offering. And so it’s, again it’s a little bit back to Natalie’s capital allocation. It’s a balanced set of levers to achieve our ultimate vision, which is everyone would be, sound the same.

Mary Lai — Head of Investor Relations

Thank you, Fatima.

Fatima Boolani — UBS Securities LLC — Analyst

Yes. Very clear. Thank you.

Natalie Derse — Chief Financial Officer

Come back for a third.

Mary Lai — Head of Investor Relations

Well, it’s been a great discussion. We actually have time for a couple more. Let’s go to Saket at Barclays.

Saket Kalia — Barclays Capital Inc. — Analyst

Yes. Great. Thank you. Mary, can you hear me still okay?

Mary Lai — Head of Investor Relations

Yes, please, great.

Saket Kalia — Barclays Capital Inc. — Analyst

Okay. Excellent. Maybe for a quick follow-up for Krista, enjoyed some of the marketing videos, by the way around reinforcing the brand, but maybe just thinking about a little bit, a little bit more broader, how do you think about marketing, the message of paid security versus something free and in particular by free economy Microsoft Defender, does that makes sense?

Vincent Pilette — Chief Executive Officer

Krista, before you answer, you think your answer, I want to share a little anecdote with everyone. So in the interview, Krista, we’re looking for someone really understand how to talk to consumers and Krista has had the long expense really designing and helping designing a brand and products for consumer. And when the interview result say, well, Vincent, the problem you have is, cyber criminals are scary, but when you talk to customers and new consumers you make everything looks so scary. And so we really need to work on, if we are delivering a peace of mind, we need to make cyber safety relatable, where consumer can really understand, yes, cyber criminals are scary, we shouldn’t be scary for you, because we are offering you that protection that peace of mind. And so immediately when she came in, she started to, she told me, Vincent, if you — if I joined only one thing you need to do is make sure you listen to me, and boy, I’m glad I did. So with that Krista, I’ll pass it you.

Krista Todd — Vice President of Marketing and Communications

No, it’s fantastic and it’s such a good question. I’m glad you, the videos resonate with you. I’m glad, the messaging at that brand level really resonates with me, because it’s truly what we’re all doing today. I mean, when we’ve talked about it a lot in our videos in today, but we are all spending so much more time online, we’re inherently opening ourselves up to more risk, because we’re doing so many activities and so taking one step up, and just a step back, there. We have to make cyber safety. We have to build the education for it and then we have to make it mainstream or popularize it and make it relatable, easy to understand, easy to buy, easier to use.

And then to your question, when we think about the differentiation of marketing messages from a free to paid service, I still believe we have to inject some feelings with our consumers. People need to feel empowered to take control of their digital life. They have to be inspired to do whatever they want to do online and feel safe and have this peace of mind. But we also need them to recognize us as the leader, the undisputed category leader that we’re going to protect them and we’re going to constantly bring innovation. So once we get to that level, the differentiation of marketing features by feature or product platform by platform, that actually becomes easier because there is differentiation and then we can actually grow together. So what might be free for a moment and they get on board with the freemium solution. If we do our job right with protection innovation, quality, making it simple, then we’ll continue to grow them in our journey and their journey.

Vincent Pilette — Chief Executive Officer

If I can add one more thing, I got a few question, I mean we think about, which is, I still have a few misunderstanding in this overall area. One of them which is a question I get very often from investors. Well, if you really an antivirus, now you have maybe Microsoft that has a better system and maybe they have defender, it’s been long time since we’ve changed our strategy and we decided to focus on the user, the user digital life, everything sitting in the cloud that you value some we may control to device some you may not. And how do you offer that full protection for your digital lives starting of course with their antivirus, but moving into information, moving into privacy, moving into identity, moving into a full management of a digital persona, if I can call it that way or multiple identities and that’s what we’re about. That’s our focus. That’s where we’re going. And I can tell you, of course products and services have to constantly being developed and customer experience has to improve and we have a lot of room for innovation. But as we define it as we see it. This is a massively under-penetrated market. And that’s how we look at that opportunity.

Mary Lai — Head of Investor Relations

Thank you, Vincent. We actually have time for one more question. Saket, would you like to ask the final question?

Saket Kalia — Barclays Capital Inc. — Analyst

Oh, boy, that’s a lot of pressure. Well, I think if I can keep a tactical actually maybe just to go back to the ARPU question. Vincent, really, really interesting part in your presentation, you talked about some ARPU opportunities with Norton 360 specifically And I think you said right 55% of the big customer base, the majority of new customer adds, but actually 80% of those Norton 360 customers are on lower price tier. And so maybe the question is, what are some of the things that you can do to help drive that higher value over time, if you will, and that kind of growing part of.

Vincent Pilette — Chief Executive Officer

At 100% so you mentioned we launched Norton 360 18 months ago, first cyber safety fully integrated platform. And we really see there’s a platform, common architecture in which we can interact with the customers, increase the functionalities add the new services, if you want and then build on top of that platform additional adjacent digital solutions, which we are working and Gagan and everybody is working on those. So, definitely a lot of benefit in seeing security at the core Norton 360 as a platform. We were really glad to see the adoption rates in 18 months and we moved from 0 to now 55% of our customer base on Norton 360 giving us a common platform and when you upgrade from today. We have six levels from a Level 1 to Level 2 a Level 3, which is the first set of values, it seems that for you, you don’t have to download a new app we upgraded functionalities and you move up into the membership plan, then you touch, what still has to be more awareness Cyber Safety is not just security it’s security, it’s privacy, it’s identity. Those are the current pillars of our portfolio that we offer.

And we’re thinking about new pillars. And then we’re thinking about products and functioning on top of that and then the awareness as to continue to increase. So we’ve seen, we’ve seen about 20% of those 13. I mean on 60 members moving for fully higher level, we have more that are still on the single product LifeLock right. So we have about 5 million, but they still need to adapt the whole platform and we really are consumer led if you want, we make them more aware we create, but it’s really consumer deciding to adopt the right way. I see. This is a tremendous opportunity to continue to drive higher engagement, higher protection, higher retention, and higher ARPU for those who are already into that platform.

Saket Kalia — Barclays Capital Inc. — Analyst

Very helpful, thanks.

Mary Lai — Head of Investor Relations

Well, thank you for that last question. I will now turn it back to Vincent for closing remarks. Vincent?

Vincent Pilette — Chief Executive Officer

Thank you, Mary. I’ll try to do as well as the last question that Saket asked. So thank you, everyone. I hope you learn something today that you discovered who the key leaders of our Company are. And I hope that you are as excited as we are about our plan for growth. We’ve embarked on a mission to build most Comprehensive Cyber Safety platform and then expanded it with trust based digital products and services. As I’ve discussed we’ll continue to build on this strong foundation then focus on transforming in pursuit of that broad vision of protecting everyone from cyber criminals. So, I believe, we believe this team believes that our future is very bright. The 3,000 employees at NortonLifeLock are really truly just getting started. It’s as someone said, day one, every day for us. So thanks for being with us. Thank you for your support. We look forward to catching up with many of you very soon.

Gagan Singh — Chief Product Officer

Thank you.

Mary Lai — Head of Investor Relations

Thank you, Vincent. This concludes today’s event. Thank you.