LifeLock Announces 2015 Fourth Quarter Results

Recorded the 43rd consecutive quarter of sequential growth in revenue and cumulative ending members

Fiscal year adjusted net income per diluted share was up 31% year over year

Cumulative ending members of approximately 4.2 million, up 16% year-over-year

TEMPE, Ariz. -- LifeLock, Inc. (NYSE: LOCK), an industry leader in identity theft protection, today announced financial results for the fourth quarter ended December 31, 2015.

Fourth Quarter 2015 Financial Highlights:

Revenue: Total revenue was $156.2 million for the fourth quarter of 2015, up 20% from $129.7 million for the fourth quarter of 2014. Consumer revenue was $148.3 million for the fourth quarter of 2015, up 21% from $122.7 million for the fourth quarter of 2014. Enterprise revenue was $7.9 million for the fourth quarter of 2015, up 13% from $6.9 million for the fourth quarter of 2014.

Net income: Net income was $21.7 million for the fourth quarter of 2015, compared with net income of $2.8 million for the fourth quarter of 2014, which included $20.0 million related to a potential settlement with the FTC which was partially offset by a $5.0 million legal settlement in our favor resulting from indemnification claims we previously made with respect to our Lemon acquisition. Net income per diluted share was $0.22 for the fourth quarter of 2015 based on 100.9 million weighted-average shares outstanding, compared with net income per diluted share of $0.03 for the fourth quarter of 2014 based on 99.6 million weighted-average shares outstanding.

Adjusted Net Income*: Adjusted net income was $30.5 million for the fourth quarter of 2015, compared with adjusted net income of $27.7 million for the fourth quarter of 2014. Adjusted net income per diluted share was $0.30 for the fourth quarter of 2015 based on 100.9 million weighted-average shares outstanding, compared with adjusted net income per diluted share of $0.28 for the fourth quarter of 2014 based on 99.6 million weighted-average shares outstanding.

Adjusted EBITDA*: Adjusted EBITDA was $33.0 million for the fourth quarter of 2015, compared with $30.2 million for the fourth quarter of 2014.

Cash Flow: Net cash used in operations was $79.5 million for the fourth quarter of 2015, leading to free cash flow* of $21.2 million after taking into consideration the $100.0 million settlement payment made to settle actions brought by the FTC and a nationwide consumer class action, $5.1 million of capital expenditures, and $5.8 million of payments for expenses incurred in connection with the litigation surrounding the actions mentioned above. This compares with cash flow from operations of $37.0 million and free cash flow of $28.6 million, after taking into consideration $3.4 million of capital expenditures and the $5.0 million received from the legal settlement resulting from indemnification claims we previously made with respect to our Lemon acquisition, for the fourth quarter of 2014.

Balance Sheet: Total cash and marketable securities at the end of the fourth quarter of 2015 was $246.7 million, down from $332.2 million at the end of the third quarter of 2015, primarily as a result of the $100.0 million settlement paid to the FTC and the nationwide consumer class action.

* A reconciliation of GAAP to non-GAAP financial measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

"LifeLock delivered its 43rd consecutive quarter of sequential growth in both revenue and cumulative ending members in the fourth quarter, despite the headwinds from the FTC litigation, which has now been resolved," Todd Davis said. "A major highlight was our best-ever quarter in the employee benefits channel, which contributed to an 18% increase in gross new members."

"In January, we announced that Hilary Schneider will succeed me as CEO effective March 1st. With her leadership skills, technology expertise and clear vision for our company, there is no one I trust more to build on all we have achieved to date. I know LifeLock has a tremendous future ahead."

Hilary Schneider said, "Our ability to deliver solid growth in a challenging quarter gives me great confidence in the future of LifeLock. We continued to expand our product offerings and build out our operations to enhance our position as the most trusted identity theft solution provider in the industry. Our products are more important than ever, and we are ideally situated to pioneer the next generation of advanced tools that consumers need to not only protect their identities, but to also manage them. I look forward to working with the fantastic team at LifeLock to seize this great opportunity."

LifeLock also announced that it intends to enter into an accelerated share repurchase agreement, or ASR, to repurchase $50 million of LifeLock's common stock and continues to expect that it will complete the full $100 million repurchase program announced in November 2015 by the end of calendar 2016.

Fourth Quarter 2015 & Recent Business Highlights:

• Hilary Schneider, the company's president, will succeed Todd Davis as chief executive officer, effective March 1, 2016, and Roy Guthrie, the company's lead director, will become independent chairman. Mr. Davis will continue with the Company as executive vice chairman.
• Recorded the 43rd consecutive quarter of sequential growth in revenue and cumulative ending members.
• Added approximately 296,000 gross new members in the fourth quarter of 2015 and ended the quarter with approximately 4.2 million members.
• Increased monthly average revenue per member to $11.97 for the fourth quarter of 2015 from $11.43 for the fourth quarter of 2014.

Fiscal Year 2015 Financial Highlights:

Revenue: Total revenue was $587.5 million for the fiscal year 2015, up 23% from $476.0 million for the fiscal year 2014. Consumer revenue was $559.5 million for the fiscal year 2015, up 25% from $449.2 million for the fiscal year 2014. Enterprise revenue was $28.0 million for the fiscal year 2015, up 4% from $26.8 million for the fiscal year 2014.

Net income (loss): Net loss was $52.0 million for the fiscal year 2015, which included a pre-tax charge of $96.0 million related to a settlement with the FTC, a nationwide consumer class action suit, and a potential settlement with certain states' attorneys general, compared with net income of $2.5 million for the fiscal year 2014, which included $20.0 million related to a potential settlement with the FTC which was partially offset by a $5.0 million legal settlement in our favor resulting from indemnification claims we previously made with respect to our Lemon acquisition. Net loss per diluted share was $0.55 for the fiscal year 2015 based on 94.9 million weighted-average shares outstanding, compared with net income per diluted share of $0.03 for the fiscal year 2014 based on 99.1 million weighted-average shares outstanding.

Adjusted Net Income*: Adjusted net income was $62.8 million for the fiscal year 2015, compared with adjusted net income of $47.1 million for the fiscal year 2014. Adjusted net income per diluted share was $0.63 for the fiscal year 2015 based on 100.2 million weighted-average shares outstanding, compared with adjusted net income per diluted share of $0.48 for the fiscal year 2014 based on 99.1 million weighted-average shares outstanding.

Adjusted EBITDA*: Adjusted EBITDA was $72.3 million for the fiscal year 2015, compared with $55.5 million for the fiscal year 2014.

Cash Flow: Net cash used in operations was $3.8 million for the fiscal year 2015, leading to free cash flow* of $89.5 million after taking into consideration the $100.0 million settlement payment made to resolve actions brought by the FTC and a nationwide consumer class action, $14.2 million of capital expenditures, and $7.5 million of payments for expenses incurred in connection with the litigation surrounding the actions mentioned above. This compares with cash flow from operations of $109.2 million and free cash flow of $89.6 million, after taking into consideration $14.6 million of capital expenditures and the $5.0 million received from the legal settlement resulting from indemnification claims we previously made with respect to our Lemon acquisition, for the fiscal year 2014.

Guidance:

As of February 10, 2016, we are initiating guidance for our first quarter of 2016 as well as the full year 2016.

First Quarter 2016 Guidance: Total revenue is expected to be in the range of $156 million to $158 million. Adjusted net loss per share is expected to be in the range of $0.08 to $0.07 based on approximately 95 million basic weighted-average shares outstanding. Adjusted EBITDA is expected to be in the range of $(4) million to $(3) million.

Full Year 2016 Guidance: Total revenue is expected to be in the range of $660 million to $670 million. Adjusted net income per diluted share is expected to be in the range of $0.71 to $0.76 based on approximately 100 million fully diluted weighted-average shares outstanding and a cash tax rate of 3%. Adjusted EBITDA is expected to be in the range of $83 million to $88 million. Free cash flow is expected to be in the range of $93 million to $98 million.

Conference Call Details:

What: LifeLock fourth quarter 2015 financial results.

When: Wednesday, February 10, 2016 at 2PM PT (5PM ET).

Dial in: To access the call in the United States, please dial (877) 407-3982, and for international callers dial (201) 493-6780. Callers may provide confirmation number 13627938 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.

Replay: A replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the telephone replay in the United States, please dial (877) 870-5176, and for international callers dial (858) 384-5517 and enter access code 13627938.

About LifeLock

LifeLock, Inc. (NYSE:LOCK) is a leading provider of proactive identity theft protection services for consumers and consumer risk management services for enterprises. LifeLock's threat detection, proactive identity alerts, and comprehensive remediation services help provide peace of mind for consumers amid the growing threat of identity theft. Leveraging unique data, science and patented technology from ID Analytics, LLC, a wholly owned subsidiary, LifeLock offers identity theft protection that goes significantly beyond credit monitoring. As part of its commitment to help fight identity theft, LifeLock works to train law enforcement and partners with a variety of non-profit organizations to help consumers establish positive habits to combat this threat.

Forward-Looking Statements

This press release contains "forward-looking" statements, as that term is defined under the federal securities laws, including statements regarding our expected total revenue, profitability, long-term growth prospects, business performance expectations, succession plan, adjusted net income per diluted share, adjusted EBITDA, free cash flow for the first quarter of 2016 and for fiscal year 2016, and the final resolution of the FTC and consumer class action matters, along with a potential settlement with certain states' attorneys general for related claims. These forward-looking statements are based on our current assumptions, expectations, and beliefs and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not limited to, risks associated with our ability to maintain profitability on an annual basis; our ability to protect our customers' confidential information; our ability to maintain and enhance our brand recognition and reputation; the competitive nature of the industries in which we conduct our business; our ability to retain our existing customers and attract new customers; our ability to improve our services and develop and introduce new services with broad appeal; our ability to maintain existing and secure new relationships with strategic partners; regulatory compliance; and other "Risk Factors" set forth in our most recent SEC filings.

Further information on these and other factors that could affect our financial results and the forward-looking statements in this press release is included in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2014, particularly under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Forms 10-Q. Copies of these documents are available on the SEC's website at www.sec.gov.

We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

Non-GAAP Financial Measures

Our reported results include certain non-GAAP financial measures, including adjusted net income, adjusted net income per diluted share, adjusted EBITDA, and free cash flow. We calculate adjusted net income as net income (loss) excluding amortization of acquired intangible assets, share-based compensation, income tax benefits and expenses resulting from changes in our deferred tax assets, and acquisition related expenses. We calculate adjusted net income per diluted share by dividing our adjusted net income by the weighted-average diluted shares outstanding. We calculate adjusted EBITDA as net income (loss) excluding depreciation and amortization, share-based compensation, interest expense, interest income, other income (expense), income tax (benefit) expense, and acquisition related expenses. For the fourth quarters and the years ended December 31, 2015, and 2014 we have also excluded from adjusted net income and adjusted EBITDA the impact of the legal reserve for the settlements with the FTC and a nationwide class of consumers, along with a possible settlement with certain states' attorneys general for related claims. We have also excluded expenses related to the FTC litigation. For the fourth quarter and full year 2014, we have also subtracted the $5 million positive legal settlement resulting from indemnification claims we previously made with respect to our Lemon acquisition. We define free cash flow as net cash provided by operating activities less net cash used in investing activities for acquisitions of property and equipment. For the fourth quarter and full year 2015, we have added back to net cash provided by (used in) operating activities the $100.0 million we paid in the settlement agreement with the FTC and cash paid for expenses related to the FTC litigation. For the fourth quarter and full year 2014, we have also subtracted from net cash provided by operating activities the $5.0 million received from the legal settlement resulting from indemnification claims we previously made with respect to our Lemon acquisition.

We have included adjusted net income, adjusted net income per diluted share, and adjusted EBITDA in this press release because they are key measures used by us to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted net income and adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, adjusted EBITDA is a key financial measure used in determining management's incentive compensation.

We have included free cash flow in this press release because we believe it typically presents a more conservative measure of cash flow as purchases of property and equipment are necessary components of ongoing operations. We believe that this non-GAAP financial measure is useful in evaluating our business because free cash flow reflects the cash surplus available to fund the expansion of our business after payment of capital expenditures relating to the necessary components of ongoing operations. We also believe that the use of free cash flow provides consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations, and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Although adjusted net income, adjusted EBITDA, and free cash flow are frequently used by investors in their evaluations of companies, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Because of these limitations, these non-GAAP financial measures should be considered alongside other financial performance measures.

We have not reconciled adjusted net income per diluted share guidance to net income (loss) per diluted share guidance or adjusted EBITDA guidance to net income (loss) guidance because we do not provide guidance for share-based compensation expense, provision for income taxes, interest income, interest expense, change in fair value of warrant liabilities, change in fair value of embedded derivatives, other income and expenses, depreciation expense, amortization of intangible assets, acquisition expenses, legal reserves and settlements, or income tax (benefit) expense, which are reconciling items between net income (loss) and adjusted net income and net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of our control and/or cannot be reasonably predicted, we are unable to provide such guidance. Accordingly, reconciliation to net income (loss) is not available without unreasonable effort. For a reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see the reconciliation tables included in this press release.