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LifeLock, Inc. (NYSE:LOCK)

Q2 2014 Earnings Conference Call

July 30 2014 5:00 PM ET

Executives

Greg Kleiner - Investor Relations

Todd Davis - Chairman and Chief Executive Officer

Hilary Schneider - President

Chris Power - Chief Financial Officer

Analysts

Nandan Amladi - Deutsche Bank

Scott Shiao -Bank of America Merrill Lynch

Matthew Niknam - Goldman Sachs

Dan Bergstrom - RBC Capital Markets LLC

Richard Davis - Canaccord

Scott Zeller - Needham & Co. LLC

Josh Beck - Pacific Crest Securities, Inc.

Operator

Greetings, ladies and gentlemen. And welcome to the LifeLock Second Quarter 2014 Earnings. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Mr. Greg Kleiner, Investor Relations for LifeLock. Please go ahead, sir.

Greg Kleiner

Thank you. Good afternoon and welcome to LifeLock second quarter 2014 earnings conference call. Joining me today are Todd Davis, LifeLock's Chairman and CEO; Hilary Schneider, LifeLock's President; and Chris Power, LifeLock's Chief Financial Officer. Our commentary today will include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our earnings press release, which we have posted to our website at www.lifelock.com.

At times, in responses to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or quarterly results. Please be advised that this additional detail may be one-time in nature and we may or may not provide an update in the future on these metrics. The primary purpose of today's call is to provide you with information regarding our second quarter 2014 performance, in addition to our financial outlook for our third quarter and full year 2014. Some of our discussion and responses to your questions may contain forward-looking statements. These statements are subject to risks, uncertainties and assumptions.

Discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission from time-to-time, including our Form 10-K for the year ended December 31, 2013. Should any of these risks or uncertainties materialize, or should our assumptions, as outlined in our earnings release and the documents referred to in that release, prove to be incorrect, actual company results could differ materially from these forward-looking statements. I encourage you to visit our Investor Relations website at www.investor.lifelock.com to access our second quarter 2014 earnings press release, periodic SEC reports, a webcast replay of today's call, or to learn more about LifeLock.

With that, let me turn the call over to Todd.

Todd Davis

Thank you. Good afternoon, everyone. And thank you for joining us today. Q2 was another strong quarter for LifeLock. As our business continuous to grow in size and the diversity of our member base continues to expand. In addition, we've recently launched an important evolution of our consumer product portfolio that we believe will further differentiate our offerings from our competitors and add additional value for our members as we try to protect them from the growing threat of identity theft.

I would like to start today's discussion by outlining our new consumer service strategy. As we mentioned in the past, we are always evaluating new approaches to expand the benefits we can deliver to members. Based on the insight that we have gained after our market research and consumer testing, we are very excited to announce a significant evolution of our consumer services with a launch of LifeLock Standard, LifeLock Advantage and LifeLock Ultimate Plus.

Let me walk through the details of the enhancement to each service tier. For all members enrolled in all three new services, the entrance policy that underwrites our service guarantee now include coverage for stolen purses or wallet, along with the cash contained in them. And connection with an identify theft event. LifeLock Standard is essential the same as LifeLock Basic other than the enhancement to the service guarantee. Or the LifeLock Advantage offering, we've added annual access or advantage members to one bureau credit score and report. For both LifeLock Advantage and Ultimate Plus members, we've added new components. First, data breach notification that will keep members up-to-date on significant breaches along with the recommended actions in the face of a breach. And second the ability to monitor their credit card, debit card and banking transactions for the first time to our service by sending personalized alert. LifeLock Ultimate Plus members will also get the same amount of trainability for their investment account across a broad spectrum of brokerage and retirement account type. Historically, the retail prices of the three tiers of our offerings consist of LifeLock Basic at $10 per month, Command Center at $15 per month and Ultimate at $25 per month. Today, our service lineup consists of LifeLock Standard at $9.99 per month, LifeLock Advantage at $19.99 per month and LifeLock Ultimate Plus at $29.99 per month. The data we received from the enterprise portion of our business already provide us with a unique view into the financial eco system that our competitors cannot match. With our LifeLock Ultimate Plus offering, LifeLock is now the only identify theft protection company that monitors for credit card transactions, bank account takeover fraud and investment account withdrawal as well. We are now able to provide our members with the ability to set personalized monitoring and alerting thresholds for things like cash withdrawal, balance transfer and purchase amount across a broad, cross section of their financial lives. We believe that this new functionality set us even further apart from our competitors, utilizing legacy credit monitoring services and add significant value for our members. We will be launching new advertising campaigns in conjunction with this release, and are excited to bring these new compelling services to consumers.

So let me transition back to some highlights from the second quarter. Our total revenue grew by 29% in the quarter with consumer revenue up 32% year-over-year. We continue to see strong results from our targeted marketing, adding over 300,000 gross new members in the quarter. In addition, our efforts to broaden our demographic profile are paying off. As gross new member additions trended both younger and more gender neutral in the quarter. We saw a broad based contribution from our partner channel once again. With success in the co-marketing employee benefit and brief segment of highlights. We signed an agreement with First Financial Bank, a 150 year old growth oriented bank headquartered in Cincinnati. And our largest co-marketing channel partner to date in the financial vertical. An employee benefit channel, we saw continued momentum in the quarter including two new employer pay deal, one with another Top 50 energy company. The breach business was also strong as we continue to find enterprises, their desire to purchase a more comprehensive solution for their customers affected by data breaches. Enterprise revenue was down slightly on sequential basis as we continue to work through to wind-down some legacy competitor contracts. In terms of new business, we expanded our presence in auto by adding another national automotive lender during the quarter. In addition, we signed a partnership with a Top 5 consumer bank to provide an account takeover solution for their banking customers. Overall, we continue to be encouraged by our pipeline activity. And feel confident that the business will be up sequentially in Q3. We also furthered our efforts to educate both law enforcement and consumers in recent month. Our FBI -Law Enforcement Executive Development Association or FBI-LEEDA program complete a both the training of our 10,000 law enforcement agent as well as training program in the 50th state of Wyoming. In addition, we published a book written by an independent journalist called Stolen Identity with anyone with a name, birth date and social security number needs to know now. In an effort to keep or to help threat awareness of the issue of identity theft in the consumer market. On the FTC front we continue to cooperate as the FTC works through its pending inquire. We are in a process of completing our response to their request for information regarding our information security program and alert notification processing. We are unable to predict when the FTC's inquiry might be completed.

Finally, I wanted to provide an update on our mobile application and our plans to re-launch our efforts in this channel. We currently anticipate that we will have a wallet application PCI certified and back in the market before the end of this year. We hold ourselves to a high standard. A too high standard and I can assure that the product will be fully audited and secured before we launch it into the market place. We remain committed to this channel and continue to believe that it is an important part of our future growth plan.

Let me reiterate that we take security very seriously at LifeLock. With that in mind, the mobile wallet application was temporarily suspended and now we are working to modify certain component of the application in order to achieve PCI compliance. As previously stated, we did not suspend the mobile wallet application due to any indication that the data on those servers was compromised. But rather out of an abundance of caution in order to protect our users and maintain our high standards for security. Also the mobile wallet application storage processes are separate and independent from LifeLock's core identity theft protection services businesses. Including the related enrollment and credit card storage processes.

So to wrap up, our business continues to perform well. We've taken important steps to further our competitive advantage in the identity theft protection market place by launching the next evolution of our service offering. We just completed our 37th consecutive quarter of sequential growth in both revenue and cumulative members and believe that we are well positioned to continue this trend.

Let me now turn the call over to Chris to walk you through the financials.

Chris Power

Thanks, Todd. Total revenue for Q2 came at $115.7 million, up 29% compared to Q2 of last year and above our guidance of $113 million to $114 million. Our consumer business continues to post strong growth. Increasing 32% year-over-year to $109.3 million. We added 304,000 gross new members in the quarter, up 32% from Q2 of last year and ended the period with 3.39 million members, up 23% from the prior year's period. LifeLock Ultimate subscribers made up more than 40% of our gross new members in the period once again. Our monthly average revenue per member grew 8% in the quarter, coming at $10.99. Our retention rate remained above 87% for the seventh straight quarter. Though it was down slightly on both a sequential and year-over-year basis, coming in at 87.2%. This is largely due to the impact of some breach business signed in earlier period along with the ongoing disruption in credit card numbers caused by the large breaches that occurred during the holiday season. Similar to last year, similar to last quarter, our breach channel was a strong contributor to gross new member addition in Q2, contributing approximately 11% of the total. While this channel continues to produce positive LTV, it will likely impact our retention rate in 2015. Similar to the effect we've seen in the past two quarters of this year. Enterprise revenue was $6.4 million, down both sequentially and year-over-year. The roll up of legacy contracts from some of our consumer competitors continue to provide a headwind for this business but the effect should abate in Q3 as the contribution from these contracts has become insignificant as it was less than $200,000 in Q2 and down approximately $1 million year-over-year. We expect the enterprise segment to grow sequentially in the upcoming quarter. The transaction count from the enterprise segment was 54.54 million in the quarter, up 3% sequentially and 13% year-over-year. Before I move further down the income statement, I want to practice my comments by stating that my commentary will be focused on adjusted results. Which for the quarter exclude a total of $7 million of share based compensation expense and $2.2 million of amortization of acquired intangible assets. Adjusted gross margin was 75% in the quarter, up from 72% in both the second quarter of last year and sequentially from the first quarter of this year. We continue to see a scale benefit to our gross margin line in both our member services organization and third party data cost. Adjusted sales and marketing expense was $57.5 million in the period, compared to $42.9 million in Q2 of 2013. This was driven by our continued investment in branding and customer acquisition across several fronts along with the testing and research associated with the evolution of our service offerings. This along with some mobile marketing expenditures prior to our pulling to wallet app drove a COA of $183 in the quarter, up from $175 last year. As we've mentioned in the past, this metric will vary from quarter-to-quarter based on the timing of particular marketing programs we have in place and the channel mix of new customers. As our retention rate remains strong and our average revenue per member continues to grow, the LTB produced by these expenditures continues to be attractive. Adjusted technology and development expenses were $11.6 million in the quarter, up from $9.5 million in the year ago period. This growth was driven by our continued product development investments particularly focused on the recent evolution of our consumer service offering and our wallet application. Adjusted G&A expenses were $13 million in the quarter, compared to $8.8 million in the year-ago period. The increase largely reflects increased legal and compliance costs.

Adjusted net income was $4.6 million in the quarter compared to $3.2 million in the second quarter of 2013. Adjusted net income per share in the second quarter was $0.05 based on 97.9 million shares compared to adjusted net income per share of $0.03 based on 94.9 million in the year ago period. This was above our guidance of adjusted net income per share of $0.03 to $0.04. Adjusted EBITDA was $6.7 million in the second quarter compared to $4.6 million in the year ago period. This was also above our guidance of $5 million to $6 million. Cash flow from operations for the quarter was $27.7 million, up from $20.8 million in Q2 of last year. After taking into consideration $3.7 million of capital expenditures, this drove free cash flow of $24 million. These results compared to $2.4 million of CapEx and free cash flow of $18.4 million in the second quarter of 2013. We generated $75.4 million of free cash flow in the trailing 12 months, resulting in a free cash flow margin of 18%. We ended the quarter with $216 million in cash and marketable securities, compared with $191.2 million at the end of Q1.

Now moving on to guidance. For the September quarter, we are initiating guidance as follows. Total revenue is expected to be in the range of $119 million to $121 million. Adjusted net income per share is expected to be in the range of $0.14 to $0.15 based on approximately $100 million fully diluted weighted average shares outstanding. Adjusted EBITDA is expected to be in the range of $16 million to $17 million.

For the full-year 2014, we are updating our guidance as follows. Total revenue is expected to be in the range of $466 million to $471 million, an increase compared to our prior guidance of $460 million to $468 million. Adjusted net income per share is expected to be in the range of $0.44 to $0.48 based on approximately $99 million fully diluted weighted average shares outstanding. Please recall that this guidance assumes a 5% cash tax rate.

Adjusted EBITDA is expected to be in the range of $52 million to $56 million. As you consider our adjusted EBITDA and adjusted net income per share guidance for the balance of the year, please realize that the addition of legal and compliance cost we are currently experiencing are restraining our margin expansion compared to our earlier expectations. Despite these factors, our guidance on both adjusted EBITDA and adjusted net income per share for the full year is unchanged from last quarter.

Finally, free cash flow is expected to be in the range of $80 million to $84 million, an increase compared with our prior guidance of $77 million to $82 million.

In summary, we were pleased with our results in the quarter. We are also proud to have released a significant evolution of our product offering which we believe will drive continued benefit for both our members and shareholders.

And with that, we would like to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions)

Our first question comes from the line of Nandan Amladi with Deutsche Bank. Please proceed with your question.

Nandan Amladi - Deutsche Bank

Thank you. Hi, good afternoon, thanks for taking my question. At the Analyst Day, you talked about redirecting some of our sales and marketing effort online channel and younger demographic, in your script you talk about some younger member joining. Was that predicated on the wallet application being actively marketed also or was it a separate decision?

Hilary Schneider

Hi, this is Hilary Schneider. It was a separate decision. So we -- as you know when we talk about we do a lot of research in understanding our target market then deciding what medium is most effective to reaching that target market. We think about marketing for core service, we do that independent, on mobile strategy and the wallet is part of our broader plan and but the core decision on cost acquisition, target market and ability to grow audience was made independently.

Nandan Amladi - Deutsche Bank

Thanks for that. A quick follow up on the same theme. Typically in the second half of the year, your sales marketing dollar spend tapers off a little bit sort of front loaded, are you taking the same approach this year?

Chris Power

Yes. I think if you -- we won't give specific guideline item guidance but if you look at the overall profitability, you can see that we are going to follow a typical pattern where we will spend a little bit less in the back half relative to what we spend in the first half of the year.

Operator

Thank you. Our next question comes from the line of Kash Rangan with Bank of America Merrill Lynch. Please proceed with your question.

Scott Shiao -Bank of America Merrill Lynch

Hi, this is Scott Shiao [ph] for Kash Rangan. I had -- for the advantage in the Ultimate Plus product, what happens with the old customers, will they transitioned into new products or do they naturally roll off?

Hilary Schneider

So on the new service portfolio which internally we call Ultimate Plus and new members will be directed to the new offerings. And we do have another member partnership that will be still enrolling members in old services for the time being while like we transition fully, they are and marketing for our partners to this new solution set. But current members are free to stay on their existing product as long as they like. While we will be of course pointing out to them opportunities and benefits from the new packages.

Scott Shiao -Bank of America Merrill Lynch

Okay, got it. And so the channels still all the kind of the other-- the channels still need to be updated for the new product offerings.

Hilary Schneider

So way to think of it is, direct to consumers affected now is offering the LifeLock plus and service portfolio. And will be migrating because these are partner channels, it's going to be a lot over time as we work with partners till we got their marketing materials and then go to market.

Operator

Thank you. Our next question comes from the line of Matthew Niknam with Goldman Sachs. Please proceed with your question.

Matthew Niknam - Goldman Sachs

Hey, guys. Thanks for taking my question. Just on pricing, wonder if you can give us some more color on the decision to raise pricing for the two higher tiers especially at a time when the addressable market opportunity for customer growth appears so attractive. And then just as follow on to that, any expectations for how this may impact some of your volume growth at the higher end of the market. Thanks.

Hilary Schneider

Sure. Great question. As you can imagine we approach these decision with a lot of consumer testing to make sure we understand how to deliver enhanced values that are perceived by the customers. As such I can tell you that the result that each team in our testing, lead us to firmly believe that there is an opportunity to produce a higher overall lifetime value or average revenue per unit. Now, we would -- as we look at this, just to give some caveat on this, we know that we will optimize over time. And to just give you sense of this, as we look at our last update which was ultimate, were still in the 20 percentage-ish in terms of total mix of the overall base even though we are -- north of 40% for gross new number additions for some time. So while we certainly hope that there will be strong percentage of members that adopt the higher end. There shouldn't be no price increase on the lower end product.

Operator

Thank you. Our next question comes from the line of Dan Bergstrom with RBC Capital Markets. Please proceed with your question.

Dan Bergstrom - RBC Capital Markets LLC

Yes. Could you talk about the first financial partnership you announced on Monday, economics, what the sales cycle look like? Are there similar opportunities in the pipeline?

Todd Davis

Yes, sure. We are extremely excited about this one. As I noted in the prepared comments, so this will be the largest partnership in this financial institution sector for us. So we spent an extensive amount of time with them, to allow them to really understand the difference between kind of a legacy credit monitoring type services that were out there and the limitations provided by those and the incremental value tha the LifeLock product offering has. We looked at how we would go to market with that. And so it's just couple of days now into market, and we feel very confident that it aligned well with the values that they have about giving to their customers a world class experience. And the best-of-breed products and service offerings. So the idea that they can go out, heard from their customer base and they were concerned about identify theft, that they wanted the best solution that were available. We really see this is a great opportunity, excited it is very early, we just launched into the market but we are very excited about what that future look like. We also then from their -- as you asked about what are the future opportunities. Well, I certainly I can't predict how the financial institution will decide to go to market with what. We are very proud and want people to know and pay attention to why this evolution, why such a respected financial institution chose a LifeLock to go to market with our brand. And so we see that again as opportunity as we have relationships with other folks who are considering getting in that market space. We are optimistic that we have a very strong value proposition to make to them. And their end user consumers.

Dan Bergstrom - RBC Capital Markets LLC

And then Todd, just a follow up. At a recent investor conference you highlight how your technology theoretically can be used by the higher IRS in dealing with fraudulent tax returns. I thought there was an interesting case study; could you just walk us through what a potential use case here could look like?

Todd Davis

Well, certainly and while I want to be clear, we don't have any deal with the IRS today. What we've been able to explain is take the same concept that our unique visibility delivers to over 250 large enterprises today. Where we utilize the fact that we have this personal topology on almost the entire U.S. adult population. So that if you need to answer two fundamental questions, is this person who they say they are, what is a risk of doing business. We are able to deliver a sub second response to that question, saying given the behaviors that we've seen, given the habits, the velocity, the transaction, here is a risk score. Well, certainly our thesis is that we could apply that for the IRS if they wanted to score things like tax return and say what is the probability, this is really Dan, spending his tax return in early this year. And we could score that. Therefore allowing them to decide how do I handle. Which one, those are who score green, great, process those. Those who come back more of yellow or red, there are steps you could take try to mitigate the chance for fraud before is actually done, instead of the traditional after the fact becoming notified then taking steps to try to clean up the mess afterward. So we are clear that we have a technology that could be applied, that we believe would be a material benefit to an organization like IRS, but we certainly in the private sector everyday with these large enterprises need to make those kind of informed decision and want real time data based on activities we may have seen just minutes earlier somewhere else and that person lie and that's why we believe we have this unique solution.

Operator

Thank you. Our next question comes from the line of Richard Davis with Canaccord. Please proceed with your question.

Richard Davis - Canaccord

Hey, just a quick question on the pricing. If everyone instantaneously switched. Or is there a way to do that, what would the pricing do, what would it be? Would it be up 3%, 5% on average or some? Do you see what I mean like if everyone kind of jumped up, does that make sense? I am just trying to triangulate around it, so that would be helpful, thanks.

Chris Power

Well, I don't know that we have a plan to have everyone jump up instantaneously but as you kind of look at the overall portfolio kind of going from $10, $15, $25 to $10, $19.99 and $29.99, I think the research that we have done certainly suggest that there is a definite lifetime value opportunity here, with the potential for improving conversion rate as well as improving ARPU. That's really based on new members coming in a door. There is definitely an opportunity as some of those folks, particularly some of the folks that have opted for the highest end of the market in terms of wanting the best solution available. I think that is an opportunity for us to show them the benefits and the opportunities of moving up that scale. But again we do not have a plan to kind of continually hammer our members, going to be very respectful in terms of how we offer these to them and I think it is something similar to what you saw with the ultimate product that is something that will kind of gradually build works its way into the base over time.

Hilary Schneider

Yes. And one thing just to add as we think about the enhanced feature and functionalities here, that was really predicated on understanding the desires of the target market and their unmet needs and really understanding that on a prioritize basis. So that if we put together the bundles that are now the mid tier and the Ultimate Plus is doing that with clear understanding of what the consumer demand was against that added functionality.

Richard Davis - Canaccord

And then on the Financial Institution partnership, will those always be -- will they add your sub brand in there? In other words, will it say supported by LifeLock or is it white labeled?

Chris Power

So historically today no one wanted to elaborate a white label relationship. Richard, they wanted to take advantage of our kind of industry leading brand recognition, our 4 to 5x purchase consideration of our next closest competitor. So all relationships historically have wanted to leverage the brand, doesn't mean that we wouldn't go into a discussion for a white label product. But no ones ask us to do that as a partner today.

Operator

Thank you. Our next question is from the line of Scott Zeller with Needham & Co. Please proceed with your question.

Scott Zeller - Needham & Co. LLC

Hi, good afternoon. I wanted to ask about your thoughts around Ultimate going forward and the attach rate as we all follow it, hovering around 40% plus. With the introduction of Ultimate Plus, are you able to comment on what you think that may do to the attach rate going forward?

Chris Power

I think at a high level, we are confident that the LTV and the new members we are bringing on board are going to be higher. And so without specifically going into some of the results of our initial testing, we are confident that the overall mix is going to be a benefit for both our shareholders and our members on a go forward basis. So we are not really going to share kind of our projections on that at this point.

Hilary Schneider

And then just add on, just remember early innings, we have done significant testing but as you have seen from us we will -- we are wanting -- we will continue to test and iterate in terms of really understanding to go market the messaging and the best message for best audience so as time goes by we expect to see increase benefit.

Scott Zeller - Needham & Co. LLC

And for those people who are on the existing offerings, will their pricing be frozen until renewal?

Todd Davis

It will actually be -- it will stay as long as they want to stay on that product that they were on. They will stay at that price point. Again we will note for them what the incremental benefits are available to them if they like to upgrade to the new offerings. But they will be able to stay on those pricing program within those products as long as they would like to.

Hilary Schneider

There is no forced conversion

Todd Davis

Correct

Scott Zeller - Needham & Co. LLC

And the last question, Todd, in the past you have talked about the high low kind of consumer behavior in the offerings. Do you anticipate any change going forward with the new array? Do you think we will still see high low buying behavior or might that change?

Todd Davis

Well, I certainly think consumer behavior doesn't dramatically change. I think as people look at how the crime is changing as our market research demonstrated to us. We certainly want to have that entry level product to make sure that people have some level of proactive protection. But we are seeing that they are interested in this incremental level of protection. So to Hilary's point, this will play out over time. We will see what the optimized; I don't expect material change in consumer behaviors. But as we optimize the product and offering as we are listening directly to the consumers and want they want to see. I think that could have a certainly a positive impact for the organization and for the consumer over time.

Operator

Thank you. Our next question comes from the line of Josh Beck with Pacific Crest. Please proceed with your question.

Josh Beck - Pacific Crest Securities, Inc.

Hey there. I wanted to ask on the acquisition costs. They obviously ticked up a little bit, which looking at previous seasonality I don't think is abnormal. But the other thing that seems a little bit different this quarter as you did have a pretty high mix of growth adds from the breach channel. So if you strip away that, which I think other things equivalent would probably lower the acquisition costs. Just help us to understand some of the moving parts there that are driving that up?

Chris Power

Sure, Josh. So I think as I mentioned in the prepared remarks, we did see a few unique items in the quarter. So we did have some expenditure related to our new product line up both for the testing and some of the market research that we did associated with that launch. And we also had some marketing expenditures in the mobile channel that obviously didn't produce in terms of gross new members after we pull the mobile app in that space. On top of that, we did spend a little bit higher relatively from -- on the brand side of the marketing spend also sort of something to kind of prep us for the launch of the new mix overall. Now as you mentioned, obviously offsetting that the breach business is certainly going to help the COA. And is always going to be some variation from quarter-to-quarter, based a lot on which channels performed well in the quarter, which one have active ongoing programs. And just reiterate that all of the spending that we did was certainly well within our lifetime value constructs. And if you look at the overall COA being up essentially 4% on the year-over-year basis where you got ARPU up 8% on the year-over-year basis, certainly from an LTV perspective it was a good quarter.

Josh Beck - Pacific Crest Securities, Inc.

Okay. And I wanted to shift gears to the mobile app. I think the commentary was, this is something you would like to have back in the market before the end of the year. I believe it was middle of May -- so I think we are talking up to a 7.5 month window, when it potentially would be out of the market. So just help us understand what is going on in the background, what are you working on to get that back into the market? And is there any wiggle room in that kind of target that you have or is that something more you think it will be probably closer to the end of the year? Or maybe something -- the target moves forward and it happens before then? Just a little color there would be helpful.

Todd Davis

So the key Josh on this is the number one priority is going to be from a security standpoint, right. So we are going to make sure as I stated, that it is completely compliant, that's number one priority. So there is no discussion, there is no wiggle room about that. That's the priority that will dictate when it comes back in the market because it will be a part of our long-term strategy as much as we like it to have end market quickly; we are not going to make any decision that could have negative impact from that regard. So obviously as we look at any opportunity like this, we look for opportunities for little bit of wiggle room or ways to go optimize, but it will not be at the sacrifice of any security or compliance matters. That will be what dictates it. We will have it back in the market; we do expect it to be back in market before the end of this year. But that's about as much color as I can give to it today.

Hilary Schneider

Just something to remember on the mobile channel which is -- this overall piece of our acquisition of new members, it is a very small part of that overall marketing mix.

Operator

Thank you. Ladies and gentlemen, at this time, I would like to turn it back to Todd Davis for any closing comments.

Todd Davis

Thanks again to everyone for joining us on today's call. I encourage anyone to visit our Investor Relations website, www.investor.lifelock.com to get any further details. Thank you for joining us on the call today.

Operator

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation.

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Source: LifeLock's (LOCK) CEO Todd Davis on Q2 2014 Results - Earnings Call Transcript

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