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Gen Digital Does Not Plan To Correct Inaccurate Key Metrics

Ominous new warning from cyber security firm sows doubt about the accuracy of non-GAAP key metrics.

August 7, 2023

Gen Digital Inc. (GEN), a maker of cyber safety products for personal computers, included a new footnote in its latest quarterly filing that calls into question the company's methodology for calculating adjusted or non-GAAP key metrics. The new language indicates the methodologies used to calculate Gen Digital’s non-GAAP key metrics are subject to change due to “improvements or revisions” to the methodologies.

The new warning includes language that suggest the company may have recently discovered an issue impacting the accuracy of key metrics like Direct customer revenue, Direct customer count, or Direct average revenue per user:

“From time to time, we review our metrics and may discover inaccuracies or make adjustments to improve their accuracy, which can result in adjustments to our historical metrics.”

Even if the warning is telegraphing future trouble, investors cannot count on Gen Digital to disclose inaccuracies in previous filings. In addition to not being able to recalculate historical metrics due to data limitations or other factors requiring different methodologies to make adjustments, Gen Digital added:

“We generally do not intend to update previously disclosed metrics for any such inaccuracies or adjustments that are deemed not material.”

We suspect the issue is customer count.

Later in the filing, Gen Digital indicating its methodologies for calculating Direct customer count differs across brands, platforms, regions, and internal systems. Not only does can this
impact Gen Digital’s ability to measure the addition of new customers, but the methodological inputs may contain errors:

“The methodologies used to measure these metrics require judgment and are also susceptible to algorithms or other technical errors. We continually seek to improve our estimates of our user base, and these estimates are subject to change due to improvements or revisions to our methodology.”

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