LifeLock 2012 Annual Report Download

Download and view the complete annual report

Please find the complete 2012 LifeLock annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

Table of Contents




x



¨





 










 
 


 ¨x
 ¨x


x¨


x¨


 ¨


 ¨  ¨
 x   ¨
¨x








Table of contents

  • Page 1
    ...) 56-2508977 (I.R.S. Employer Identification No.) 60 East Rio Salado Parkway, Suite 400 Tempe, Trizona 85281 (Tddress of principal executive offices and zip code) (480) 682-5100 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Tct: Title...

  • Page 2
    Table of Contents TTBLE OF CONTENTS Page PTRT I Itemo1.oBusiness Itemo1A.oRiskoFactors o 1oo o 15oo o 40oo o 40oo o 41oo o 41oo Itemo1B.oUnresolvedoStaffoComments Itemo2.oProperties Itemo3.oLegaloProceedings Itemo4.oMineoSafetyoDisclosures PTRT II Itemoo5.oMarketoforoRegistrant'...

  • Page 3
    ... on uorm 10-K. These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us. Unless the context otherwise requires, references in this Annual Report on uorm 10-K to the "company," "LifeLock," "we," "us," and "our" refer to...

  • Page 4
    ... Item 1. Overview BUSINESS Weoareoaoleadingoprovideroofoproactiveoidentityotheftoprotectionoservicesoforoconsumersoandoidentityoriskoassessmentoandofraudoprotectionoservicesofor enterprises....5omillionopayingomembers.oDuring 2012,oourocumulativeoendingomemberobaseogrewo20%...

  • Page 5
    ...,oincludingotheofollowing: • Increasing number of data breaches .oEnterprisesothatoactoasocustodiansoofopersonallyoidentifiableoinformationoareoincreasinglyosubjectoto hacking,odataobreaches,oandolossoofomobileodevicesowithostoredopersonaloinformation...

  • Page 6
    Table of Contents theirofocusoprimarilyoonocreditoandooftenosellopersonaloconsumeroinformationotoothirdoparties.oAdditionally,osomeoenterprisesohaveoattemptedotoodevelopotheiroown identityoriskoassessmentocapabilities,obutotheseointernallyodevelopedosystemsoareooftenobasedosolelyoonotheoenterprise'...

  • Page 7
    Table of Contents LifeLockoecosystemothatocombinesolargeoandoconstantlyoexpandingodataorepositoriesoofopersonallyoidentifiableoinformationoandoconsumerotransactionsothatowe collectofromoouroenterpriseocustomers,omembers,oandothird-partyofulfillmentopartners;oproprietaryopredictiveoanalytics;...

  • Page 8
    ...riskoassessmentoofotheirocustomers. • Leadership position .oWeobelieveothatoweohaveotheoleadingobrandoinotheoidentityotheftoprotectionoservicesoindustry...ocomprehensiveoserviceoofferings,omarketingostrategy,oandoemphasisoonocustomer service.oWeobelieveothatoourobrandoawareness,otechnology,...

  • Page 9
    ...• Extend our leadership position through continued enhancement of our services .oTheoidentityotheftoprotectionoservicesoindustryoisolargeoand expandingoandoprovidesoaosignificantogrowthoopportunity..... The LifeLock Ecosystem TheocoreoofoourosolutionoisotheoLifeLockoecosystem...

  • Page 10
    ...,oweocan protectobothotheomemberoandotheoenterpriseocustomerofromobecomingovictimsotooaofraudulentotransaction. Our Services Weoareoaoleadingoprovideroofoproactiveoidentityotheftoprotectionoservicesoforoconsumersoandoidentityoriskoassessmentoandofraudoprotectionoservicesofor enterprises. 7

  • Page 11
    ...Contents Consumer Services WeocurrentlyoofferoouroidentityotheftoprotectionoservicesotooconsumerosubscribersounderoourobasicoLifeLock,...Feature Notificationoofocredit andonon-creditothreats Monitoringoofoknownocriminalowebsitesoforoillegal LifeLock LifeLock Command Center LifeLock...

  • Page 12
    ...creditorelatedoreportsoandocertainocreditoreportsoandoscores,oidentityotheft reports,omonitoringoservices,...renewal. Enterprise Services Ouroidentityoriskoservicesoprovideoreal-timeovisibilityointooconsumerobehaviorothatoenablesoouroenterpriseocustomersotoobetteroassessotheoriskoofoidentity...

  • Page 13
    ...Sales and Marketing Consumer Services Weopursueoaomulti-channelomemberoacquisitionoandobrandomarketingoprogram.oThisoprogramoisodesignedotoogrowoouromemberobaseobyoincreasingobrand awareness... Services ...

  • Page 14
    Table of Contents Customer Service Weofocusoonoretentionoofoourocurrentomembersoandobelieveoouroabilityotooestablishoandomaintainolong-termorelationshipsowithoouromembersodepend,oin part,oonotheostrengthoofoouromemberoservicesoorganization....

  • Page 15
    ...oandodomainonamesoinotheoUnitedoStatesoandoinocertainolocationsoabroad.oOuroregisteredotrademarks inotheoUnitedoStatesoincludeo"LifeLock,"o"LifeLockoIdentityoAlert,"oourologo,o"...,oandoweocannotopredictotheoimpactoofosuchochangesoonoour business.oFurther,...

  • Page 16
    Table of Contents OnoDecembero26,o2012,oIDoAnalytics,oalongowithoeightootherocompanies,oreceivedoanoinformationorequestofromotheoFTCoinoconjunctionowithotheoFTC's policyostudyoofotheooperationoofotheodataobrokeroindustry....

  • Page 17
    ...(480)o682-5100.oOurowebsiteoaddressoiso www.lifelock.com.oTheoinformationoonoourowebsiteoisonotoincorporatedoby referenceointoothisoAnnualoReportoonoFormo10-KooroinoanyootheroreportoorodocumentoweofileowithotheoSecuritiesoandoExchangeoCommissiono("SEC"). Weoareoano"emergingogrowthocompany...

  • Page 18
    ... SEC. ITEM 1T. RISK FTCTORS Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report...

  • Page 19
    ...ocost,oandoourodecisionsowithorespectotooriskoretention. Our business is highly dependent...effect on our business. Ourobrandorecognitionoandoreputationoareocriticaloaspectsoofoourobusiness.oWeobelieveothatomaintainingoandofurtheroenhancingoouroLifeLockoandoID ...

  • Page 20
    Table of Contents existingocustomersoandoattractingonewocustomers.oWeoalsoobelieveothatotheoimportanceoofoourobrandorecognitionoandoreputationowillocontinueotooincreaseoas competitionoinoouromarketsocontinuesotoodevelop.oOurosuccessoinothisoareaowillobeodependentoonoaowideorangeoofofactors,...

  • Page 21
    ...not be able to compete effectively, which could reduce demand for our services and adversely affect our business, growth, reputation, revenue, and market share. Weooperateoinoaohighlyocompetitiveobusinessoenvironment.oOuroprimaryocompetitorsoareotheocreditobureausothatoincludeoExperian,oEquifax,oand...

  • Page 22
    ...may lose customers and significant revenue and fail to attract new customers if our existing services become less desirable or obsolete, or if we fail to develop and introduce new services with broad appeal or fail to do so in a timely or... services,...

  • Page 23
    ... nototoorenewotheiroagreementsowithous,owhichoweocallo"churn,"oourocustomerobaseowillodecrease,oandoourobusiness,.... We depend on strategic partners in our consumer business, and our inability to maintain our existing and...

  • Page 24
    ...number of enterprise customers provide a significant portion of our enterprise revenue, and our inability to retain these customers or attract new customers could harm our revenue and operating results and the efficacy and attractiveness of the LifeLock...availability of our services, our revenue could...

  • Page 25
    ...,olossooforevenue,oorodamageotooouroreputation. Patural or man-made disasters and other similar events may significantly disrupt our and our strategic partners' or service providers' businesses, and negatively impact our results of operations and financial...

  • Page 26
    ...make evaluating our business and future prospects difficult and may increase the risk of an investment in our company. Ourobusiness,oprospects,...and maintain effective internal control over financial reporting in the future, the accuracy and ...

  • Page 27
    ...may damage our brand recognition and reputation and harm our business and operating results. Weohaveoexperiencedorapidogrowthoinoaorelativelyoshortoperiodoofotime.oOurorevenueogrewofromo$18.9omillionoino2007otoo$276.4omillionoino2012,...; satisfyoexistingoandoattractonewocustomers; hire,otrain,oretain...

  • Page 28
    ...,oandoprospects. Any future acquisitions that we undertake could disrupt our business, harm our operating results, and dilute stockholder value. Fromotimeotootime,oweomayoreviewoopportunitiesotooacquireootherobusinessesoorootheroassetsothatowouldoexpandotheobreadthoofoservicesothatoweooffer...

  • Page 29
    ... and harm our business. Inoorderotoopursueoaosuccessfuloacquisitionostrategy,oweowilloneedotoointegrateotheooperationsoofoanyoacquiredobusinessesointooourooperations,oincluding centralizingocertainofunctionsoandopursuingoprogramsoandoprocessesoaimedoatoleveragingoourorevenueoandogrowthoopportunities...

  • Page 30
    ...our ability to market and provide our services and have a material adverse effect on our business. Ourobusinessoandotheoinformationoweouseoinoourobusiness,oaugmentedobyoouroacquisitionoofoIDoAnalytics,oisosubjectotooaowideovarietyoofofederal,ostate, andolocalolawsoandoregulations,oincludingotheoFCRA...

  • Page 31
    ... Financial Protection to adopt rules and take actions that could have a material adverse effect on our business. Ino2010,otheoDodd-FrankoWalloStreetoReformoandoConsumeroProtectionoActo(theo"Dodd-FrankoAct")owasoenactedotooreformotheopracticesoinotheofinancial servicesoindustry.oTitleoXoofotheoDodd...

  • Page 32
    ... free issuance of credit reports by credit reporting agencies, and other services that must be provided by credit reporting agencies, could impede our... ability to obtain new members or retain existing members and could have a material adverse effect on our business...

  • Page 33
    ...depend on key personnel, and if we fail to retain and attract skilled management and other key personnel, our business may be harmed. Ourosuccessodependsotooaosignificantoextentouponotheocontinuedoservicesoofoourocurrentomanagementoteam,oincludingoToddoDavis,oouroChairmanoand ChiefoExecutiveoOfficer...

  • Page 34
    ...services, or refusal by those insurance companies to provide the expected insurance, could harm our business... at a large organikation that compromise a significant number of our members' personally identifiable information could result in a large number of identity-related events that in turn could ...

  • Page 35
    ... property, including our LifeLock brand, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected...oInoaddition,oweomayobeounableotooobtainoaofavorableooutcomeoinoanyosuchointellectualopropertyolitigation. Our services may infringe the ...

  • Page 36
    ... could negatively affect our ability to sell our services and subject us to possible litigation. Softwareocodeothatoisofreelyosharedoinotheosoftwareodevelopmentocommunityoisoreferredotooasoopenosourceocode,oandosoftwareoapplicationsobuiltofromoopen sourceocodeoareoreferredotooasoopenosourceosoftware...

  • Page 37
    ... that taxes must be collected based on sales and use of our services in various states, which could expose us to liability and cause material harm to our business, financial condition, and results of operations. Whetherosalesoofoouroservicesoareosubjectotoostateosalesoandouseotaxesoisouncertain...

  • Page 38
    .... Our indebtedness could adversely affect our business and limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy our debt service obligations. AsoofoDecembero31,o2012,oweohadonoooutstandingodebt.oOnoJanuaryo9,o2013...

  • Page 39
    ...our business and ability to operate our business. ...will incur increased costs as a result of being a public company, and our management will be required to devote substantial time...

  • Page 40
    Table of Contents Our ability to use our net operating loss carry-forwards and certain other tax attributes may be limited, which could potentially result in increased tax liabilities to us in the future. AsoofoDecembero31,o2012,oweohadoapproximatelyo$160omillionoofofederaloandoapproximatelyo$...

  • Page 41
    ... stock in the public market by our... rights to purchase common stock by us, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and ...governance requirements applicable to emerging growth companies, our common stock may be...

  • Page 42
    ... company....oweowillobeosubjectotootheosameonewoororevisedoaccountingostandardsoasootheropublicocompaniesothatoareonotoemergingogrowthocompanies. Our directors, executive officers, and principal stockholders have substantial...

  • Page 43
    ... or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they adversely change their recommendations .... None. UNRESOLVEDSTTFF COMMENTS ITEM 2. PROPERTIES OuroexecutiveoofficesoandoconsumerobusinessoheadquartersoareolocatedoinoTempe...

  • Page 44
    Table of Contents 2,100osquareofeetoinoSunnyvale,oCalifornia,owhereoweomaintainoanoofficeoforoemployeesolocatedoinoCaliforniaounderoaoleaseothatoexpiresoino2014.oWeoalsoohave dataocentersoforoouroconsumerobusinessoinoScottsdale,oArizonaoandoRanchooCordova,oCalifornia. ...

  • Page 45
    ... noopublicomarketoforoourocommonostock. High Low Year Ended December 31, 2012 FourthoQuartero(beginningoOctobero3,o2012) $ 9.04oo $6.80oo OnoFebruaryo22... Equity Compensation Plan Information ForoequityocompensationoplanoinformationoreferotooItemo12oinoPartoIIIoofothisoAnnualoReportoonoFormo10...

  • Page 46
    ...$9.00operoshare.oTheoperformanceoshownoonothe graphobelowoisobasedoonohistoricaloresultsoandoisonotointendedotoosuggestofutureoperformance. 10/3/12 LifeLock NASDAQoCompositeoIndex NASDAQoComputeroIndex DowoJonesoUSoTechnology $100.00oo...

  • Page 47
    Table of Contents aggregateopurchaseopriceoofo$12,500,000.oTheseosharesowereoissuedoasopartialoconsiderationoinoconnectionowithoouroacquisitionoofoIDoAnalytics. Options, Restricted Stock Units, and Common Stock Issuances • FromoJanuaryo1,o2012otooOctobero10,o2012o(...

  • Page 48
    Table of Contents fromoouroIPOohaveobeenoinvestedoinoshort-term,oinvestment-grade,ointerest-bearingosecuritiesoandousedoforoworkingocapital.oThereohasobeenonoomaterialochange inotheoplannedouseoofoproceedsofromoouroIPOofromothatodescribedoinotheofinaloprospectusofiledowithotheoSECoonoOctobero3,...

  • Page 49
    ... December 31, 2012 Consolidated Statements of...)o 8 oo (15,376)o (16,145)o -oo -oo (31,521)o Netoincomeoavailableo(lossoattributable)operoshareoto commonostockholders: Basic Diluted Weighted-averageocommonosharesooutstanding: Basic oo$ oo$ o o 0.18oo 0.09oo 35,082oo 62,191oo oo$ oo$ o o (1.24)o...

  • Page 50
    Table of Contents Year Ended December 31, 2012 Consolidated Statements of Cash Flows Data: ... 31, oo$(23,396)o oo$ (5,094)o oo$ 22,636oo oo$(25,488)o oo$ (3,443)o oo$ 34,249oo 2012 2011 2010 2009 (in thousands, except percentages and per member data) (Unaudited) o 1,748oo o 517oo o 79.1%oo oo...

  • Page 51
    ...o 1,053oo o 1,711oo o 3,346oo $oooo6,758oo $ oooo262oo o 690oo o 845oo o 1,454oo $oooo3,251oo Ts of December 31, 2012 Consolidated Balance Sheet Data: 2011 2010 (in thousands) 2009 2008 Cashoandocashoequivalents Propertyoandoequipment,onet Workingocapitalo(deficit),oexcludingodeferredorevenue...

  • Page 52
    Table of Contents ofoourobusinessocurrently,oweobelieveoitoisohelpfulotooalsooconsiderotheobusinessowithoutotakingointooaccountocostsoorobenefitsoaccruingofromohistoricalodecisions onomergeroandoacquisitionoactivities....

  • Page 53
    ...,onetoincomeo(loss),oandoourootheroGAAPoresults.oTheofollowingotableopresentsoaoreconciliationoofoadjustedonetoincomeo(loss)otoonetoincomeo(loss)ofor eachoofotheoperiodsoindicated: Year Ended December 31, 2012 Reconciliation of Net Income (Loss) to Tdjusted Net Income (Loss): Netoincomeo(loss...

  • Page 54
    Table of Contents Weobelieveothatoitoisousefulotooexcludeochangeoinofairovalueoofowarrantoliabilitiesoandoembeddedoderivativeoassociatedowithotheorevaluationoofowarrantsoand embeddedoderivativeofromoEBITDA....

  • Page 55
    ... metrics,onetoincomeo(loss),oandoourootheroGAAPoresults.oTheofollowingotableopresentsoaoreconciliationoofoadjustedoEBITDAotoonetoincomeo(loss)oforoeachoofothe periodsoindicated: Year Ended December 31, 2012 Reconciliation of Net Income (Loss) to Tdjusted EBITDT: Netoincomeo(loss...

  • Page 56
    ... Ended December 31, 2012 Reconciliation of Net Cash...differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk uactors," "uorward-Looking Statements," and elsewhere in this Annual Report on uorm 10-K. Overview...

  • Page 57
    ...approximatelyo60%oofoouromembersosubscribedotooouroconsumeroservicesoonoanoannualobasis.oWeocurrentlyoofferoouroconsumeroservicesounderoourobasic LifeLock,oLifeLockoCommandoCenter,oandopremiumoLifeLockoUltimateoservices,owithoretailolistopricesoofo... Our Business Model Inoouroconsumerobusiness,...

  • Page 58
    ...,oandoassessooperationaloefficiencies. Key Operating Metrics TheofollowingotableosummarizesoourokeyooperatingometricsoforotheoyearsoendedoDecembero31,o2012,o2011oando2010: Year Ended December 31, 2012 2011 (in thousands, except percentages and per member data) (Unaudited) o 2,075oo...

  • Page 59
    Table of Contents byoembeddingoouroserviceowithinoaobroaderothird-opartyooffering.oWeomonitorocumulativeoendingomembersobecauseoitoprovidesoanoindicationoofotheorevenueoand expensesothatoweoexpectotoorecognizeoinotheofuture. AsoofoDecembero31,o2012,oweohadoapproximatelyo2....

  • Page 60
    Table of Contents becauseoitoprovidesoaomeasureoofomemberosatisfactionoandotheorevenueothatoweoexpectotoorecognizeoinotheofuture. AsoofoDecembero31,o2012,oouromemberoretentionorateowaso87.1%,oanoincreaseoofo4.4%opointsofromoDecembero31,o2011.oThisocontinuedoimprovement ...

  • Page 61
    ...of Contents monitoromonthlyoaverageorevenueoperomemberobecauseoitoisoaostrongoindicatorooforevenueoinoouroconsumerobusinessoandoofotheoperformanceoofoouropremium services.oTheoincreaseoinoouromonthlyoaverageorevenueoperomemberoresultedoprimarilyofromotheopenetrationoofoouroLifeLockoUltimateoservice...

  • Page 62
    ... Key Financial Metrics TheofollowingotableosummarizesoourokeyofinancialometricsoforotheoyearsoendedoDecembero31,o2012,o2011,oando2010: Year Ended December 31, 2012 Consumerorevenue Enterpriseorevenue Totalorevenue Adjustedonetoincome AdjustedoEBITDA Freeocashoflow 2011 (in thousands) 2010 oo...

  • Page 63
    ...recognizeovalueooverotheolifetimeoofoouromemberorelationships. Mix of members by services, billing cycle, and distribution ... to grow our business. Weowillocontinueotooinvestotoogrowoourobusiness.oInvestmentsoinotheodevelopmentoandomarketingoofonewoservices, ...

  • Page 64
    ... whichoweoareoengagedotoodeliveroaoreportoatotheoendoofotheoanalysis,owhichoweorecordouponodeliveryoandoacceptanceoofotheoreport. Cost of Services Costoofoservicesoinoouroconsumerosegmentoconsistsoprimarilyoofocostsoassociatedowithoouromemberoservicesoorganizationoandofulfillmentopartners.oOur...

  • Page 65
    Table of Contents Gross Margin Grossoprofitoasoaopercentageoofototalorevenue,oorogrossomargin,ohasobeenoandowillocontinueotoobeoaffectedobyoaovarietyoofofactors.oIncreasesoinopersonnel andofacilityocostsodirectlyoassociatedowithotheoprovisionoofoouroservicesocanonegativelyoaffectoourogrossomargin,...

  • Page 66
    Table of Contents Decembero31,o2012,oweohado$51.2omillionoinointangibleoassets,onetoofoamortization,oasoaoresultoofoouroacquisitionoofoIDoAnalytics.oTheointangibleoassetsohave usefulolivesoofobetweenofiveoandotenoyearsoandoweoexpectotoorecognizeoapproximatelyo$7....

  • Page 67
    Table of Contents Results of Operations Theofollowingotablesosetoforthoouroresultsoofooperationsoforotheoperiodsopresentedoandoasoaopercentageoofoourototalorevenueoforothoseoperiods. Year Ended December 31, 2012 Consolidated Statements of Operations Data: 2011 (in thousands) 2010 Revenue: ...

  • Page 68
    ...0.0%oo -1.7%oo -9.4%oo 0.0%oo -9.4%oo Comparison of the Years Ended December 31, 2012, 2011, and 2010 Total Revenue Year Ended December 31, 2011 to 2012 % 2010 Change 2010 to 2011 % Change 2012 2011 (in thousands) Consumerorevenue Enterpriseorevenue Totalorevenue oo$oo254,678oo o 21,750oo oo...

  • Page 69
    ...%otoo$8.54oforotheoyearoendedoDecembero31,o2011ofromo$7.94oforotheoyearoendedoDecembero31,o2010. Cost of Services and Gross Profit Year Ended December 31, 2011 to 2012 2010 % Change 2010 to 2011 % Change 2012 2011 (in thousands) Costoofoservices Percentageooforevenue Grossoprofit...

  • Page 70
    ...$0.8omillionoforoeachoofotheoyearsoendedoDecembero31,o2011oando2010. General and Administrative Year Ended December 31, 2011 to 2012 2010 % Change 2010 to 2011 % Change 2012 2011 (in thousands) Generaloandoadministrative Percentageooforevenue oo$24,629oo o 8.9%oo oo$17...

  • Page 71
    ...yearsoendedoDecembero31,o2011oando2010. Amortikation of Acquired Intangible Assets Year Ended December 31, 2011 to 2012 2010 % Change 2010 to 2011 % Change 2012 2011 ( in thousands) Amortizationoofoacquiredointangibleoassets Percentageooforevenue oo$6,258oo o 2.3%oo oo$ -oo o 0.0%oo oo$ -oo...

  • Page 72
    Table of Contents Income Tax (Benefit) Expense Year Ended December 31, 2011 to 2012 2010 to % 2012 2011 % Change 2011 (in thousands) 2010 Change Incomeotaxo(benefit)oexpense Effectiveotaxorate oo$ (13,730)o o -140.5%oo oo$ 214oo o -5.3%oo oo$ 8oo o -0.1%oo o NMoo o NMoo Incomeotaxo(...

  • Page 73
    ...30, Jun 30, 2012 2012 2012 Mar 31, 2012 Dec 31, Sep 30... 2oo o $ (3,207)o $ $ $ (2,803)o 60oo (2,863)o (0.43)o (0.43)o Netoincomeoavailableo(lossoattributable)operoshareotoocommonostockholders Basic 0.01oo 0.01oo 0.06oo (0.16)o Diluted 0.34oo 0.22oo (0.03)o (0.03)o (0.46)o $ (0.46)o $...

  • Page 74
    ... %o 11%o 0%o 11%o 8 %o 0%o 0%o 8 %o 8 %o -25%o 0%o 0%o -9%o 5 %o 0%o 4%o 0%o 0%o -9%o -7%o 0%o -7%o 32%o Three Months Ended Dec 31, Sep 30, Jun 30, 2012 2012 2012 Mar 31, 2012 Dec 31, Sep 30, Jun 30, 2011 2011 2011 Mar 31, 2011 (in thousands except percentages and per member data...

  • Page 75
    ... -oo 788oo 1,705oo o $oooo(2,863 )o o -oo o -oo o -oo o -oo o 792oo o $oooo(2,071)o Three Months Ended Dec 31, Sep 30, Jun 30, 2012 2012 2012 Mar 31, 2012 Dec 31, Sep 30, Jun 30, 2011 2011 2011 Mar 31, 2011 (in thousands) (Unaudited) Reconciliation of Net Income (Loss) to Tdjusted...

  • Page 76
    ...Capital Resources Theofollowingotableosetsoforthotheomajorosourcesoandousesoofocashoforoeachoofotheoperiodsosetoforthobelow: Year Ended December 31, 2012 Cashoandocashoequivalents Netocashoprovidedobyo(usedoin)ooperatingoactivities Netocashousedoinoinvestingoactivities Netocashoprovidedobyo(usedoin...

  • Page 77
    Table of Contents ForotheoyearoendedoDecembero31,o2010,oweousedo$1.5omillionoofocash,oprimarilyoforotheopurchaseoofobusinessosoftwareoandocomputeroequipmentoto supportoaonewobillingosystemoweoimplementedoinoDecembero2010. Financing Activities OurofinancingoactivitiesoforotheoyearoendedoDecembero31...

  • Page 78
    Table of Contents Weoalsoopaidoaoletteroofocreditofeeotootheoadministrativeoagentoforotheoaccountoofoeacholenderoinoaccordanceowithoitsoapplicableopercentageoofoaoletteroofocredit foroeacholetteroofocredit,owhichofeeowasoequalotootheoapplicableorateothenoinoeffect,...

  • Page 79
    Table of Contents outstandingoamountoofoletteroofocreditoobligations.oTheoinitialoapplicableorateoiso0.25%,osubjectotooadjustmentofromotimeotootimeobasedouponoouroachievementoofoa specifiedoconsolidatedoleverageoratio. ...

  • Page 80
    Table of Contents Decembero31,o2011,o2010,oando2009,orespectively.oTheorateowaso3.25%oasoofoDecembero31,o2011.oAocommitmentofeeopayableoquarterlyoatotheorateoofo0.125% accruedoonoanyounusedoamountoofotheoLOC. TheoLOCocontainedocertainocovenants.oTheocovenantsoincluded,oamongoothers,...

  • Page 81
    Table of Contents valuesoofoouroassetsoandoliabilities,owhichoareonotoreadilyoapparentofromootherosources.oWeobaseoouroestimatesoandojudgmentsoonohistoricaloexperienceoandoon variousootheroassumptionsothatoweobelieveoareoreasonableounderotheocircumstances.oOnoanoongoingobasis,...

  • Page 82
    Table of Contents straight-lineobasisooverotheorequisiteoserviceoperiodoofotheoawardotootheoextentosuchoawardoisoprobableoofobeingoearned.oTheorequisiteoserviceoperiodoisogenerally theovestingoperiodoofotheoaward. Expenseoforoshare-basedoawardsotoonon-...

  • Page 83
    ...,owithotheochangeoinotheofairovalueobeingorecordedoasoaocomponentoofootheroincomeo(expense).oUponotheocompletionoofoouroIPOoinoOctober 2012,otheowarrantsotoopurchaseoouroconvertibleoredeemableopreferredostockowereoconvertedotoowarrantsotoopurchaseocommonostockoand,oatothatotime,owere...

  • Page 84
    Table of Contents ITEM 7T. QUTNTITTTIVE TND QUTLITTTIVE DISCLOSURES TBOUT MTRKET RISK Interest Rate Sensitivity Weohadounrestrictedocashoandocashoequivalentsototalingo$134.2omillionoasoofoDecembero31,o2012.oOurocashoandocashoequivalentsoincludeocashoonohand, cashoheldowithobanks,oandoshort-term,...

  • Page 85
    Table of Contents ITEM 8. FINTNCITL STTTEMENTS TND SUPPLEMENTTRY DTTT LifeLock, Inc. Consolidated Financial Statements Ts of December 31, 2012 and 2011 and for the Years Ended December 31, 2012, 2011, and 2010 Table of Contents ReportoofoIndependentoRegisteredoPublicoAccountingoFirm ...

  • Page 86
    ...Company...o2012oando2011,oandotheoconsolidatedoresultsoofoitsooperationsoandoitsocashoflowsoforoeachoofotheothreeoyearsoinotheoperiodoendedoDecembero31, 2012,oinoconformityowithoU.S.ogenerallyoacceptedoaccountingoprinciples.... /s/oErnsto&oYoungoLLP Phoenix,oArizona Februaryo26,o2013 ...

  • Page 87
    Table of Contents LIFELOCK, INC. CONSOLIDTTED BTLTNCE SHEETS (in thousands, except share and per share amounts) December 31, 2012 Tssets 2011 oo$ 28,850oo o 398oo o 1,446oo o 5,637oo o o o o o 36,331oo 4,049oo -o -o 1,680oo Currentoassets: Cashoandocashoequivalents Restrictedocash ...

  • Page 88
    ...LIFELOCK, INC. CONSOLIDTTED STTTEMENTS OF OPERTTIONS (in thousands, except per share amounts) 2012...74)o (1.74)o Netoincomeoavailableo(lossoattributable)operoshareotoocommonostockholders: Basic Diluted Weightedoaverageonumberoofocommonosharesooutstanding: Basic Diluted 35,082oo 62,191oo 18,725oo ...

  • Page 89
    Table of Contents LIFELOCK, INC. CONSOLIDTTED STTTEMENTS OF CONVERTIBLE ...oo o -oo o -oo o -oo o 2,452oo o (9,378)o o (9,378)o feature Accumulated accretionoof beneficial conversion o -oo o (2,045)o o (407)o -oo o 2,452oo feature Conversionoof o -oo o -oo o -oo o -oo o -oo o -oo ...

  • Page 90
    Table of Contents LIFELOCK, INC. CONSOLIDTTED STTTEMENTS OF CTSH FLOWS (in thousands) Year Ended December 31, 2012 2011 2010 Operating activities Netoincomeo(loss) Adjustmentotooreconcileonetoincomeo(loss)otoonetocashoprovidedobyo(usedoin)ooperatingoactivities: Depreciationoandoamortization ...

  • Page 91
    Table of Contents Year Ended December 31, 2012 2011 2010 Supplemental cash flow information: Cashopaidoduringotheoperiodofor: Interest Incomeotaxes oo$ 1,836oo o 518oo o 127oo oo$316oo o 94oo o -ooo oo$1,285oo o 74oo o 991oo Supplemental information for non-...

  • Page 92
    Table of Contents LIFELOCK, INC. NOTES TO CONSOLIDTTED FINTNCITL STTTEMENTS (in thousands, except share and per share data)...$4,072.oUponotheoclosingoofoour IPO,oalloofoourooutstandingoconvertibleoredeemableopreferredostockoautomaticallyoconvertedointooanoaggregateoofo51,320,...

  • Page 93
    Table of Contents theoallowanceoforodoubtfuloaccounts;otheocarryingovalueoofolong-livedoassets;otheoamortizationoperiodoofolong-livedoassets;otheocarryingovalue,ocapitalization,oand amortizationoofosoftwareoandowebsiteodevelopmentocosts;otheocarryingovalueoofogoodwilloandootherointangibleoassets;...

  • Page 94
    ...,oandoweorecognizeorevenueobasedoonotheonegotiatedomonthlyominimumotransactionofees billed. Weorecordorevenueofromoprojectsowhereoweoareoengagedotoodeliveroaoreportoatotheoendoofotheoanalysisouponodeliveryoandoacceptanceoofotheoreport. Business Combinations...

  • Page 95
    Table of Contents Ifotheocarryingovalueoassignedotooaoreportingounitoexceedsoitsoestimatedofairovalueoinotheofirstostep,othenoweoperformotheosecondostepoofotheoimpairmentotest. Inothisostep,...

  • Page 96
    ....oWeochargeounamortizedodebtoissuanceocostsotoointerestoexpenseowhenotheorelatedodebtois extinguished. Cost of Services Costoofoservicesoconsistsoprimarilyoofotheodirectoandocontractolaborocosts,ofulfillmentocosts,oprintingoandopostageofees,oandoremediationocostsotoofulfilloour serviceoagreements...

  • Page 97
    ... byoutilizingotheohistoricalovolatilityoofocomparableocompaniesowithopubliclyoavailableoshareoprices.oWeoincludeoshare-basedocompensationoexpenseoinocostoof services,osalesoandomarketing,otechnologyoandodevelopment,oandogeneraloandoadministrativeoexpensesoconsistentowithotheorespectiveoemployees...

  • Page 98
    Table of Contents likelyothanonotothatotheopositionowillobeosustainedoonoaudit,oincludingoresolutionooforelatedoappealsoorolitigationoprocesses.oTheosecondostepoisotoomeasureotheotax benefitoasotheolargestoamountothatoisomoreothano50%olikelyoofobeingorealizedouponoultimateosettlement....

  • Page 99
    Table of Contents 3. Tcquisition of ID Tnalytics OnoMarcho14,o2012,oweoacquiredoIDoAnalytics,oaoprovideroofoenterpriseoidentityoriskoassessmentoandofraudoprotectionoservicesoandoaostrategicotechnology partneroofooursosinceo2009....

  • Page 100
    Table of Contents Theototaloweighted-averageoamortizationoperiodoforotheoidentifiableointangibleoassetsoacquiredofromoIDoAnalyticsoiso7.6oyears.oWeoexpectotoorecognize amortizationoexpenseoofoapproximatelyo$7,864operoyearooverotheonextofouroyearsoando$7,228oinotheofifthoyear. ...

  • Page 101
    ...Other Receivables TradeoandootheroreceivablesoconsistedoofotheofollowingoasoofoDecembero31: 2012 2011 Tradeoreceivables Otheroreceivable ..., Net PropertyoandoequipmentoconsistedoofotheofollowingoasoofoDecembero31: 2012 2011 Computerosoftware Telecommunications,onetworkoandocomputingoequipment...

  • Page 102
    ... o 7,228oo o 12,558oo $oo51,242oo 7. Tccrued Expenses and Other Liabilities AccruedoexpensesoandootheroliabilitiesoconsistedoofotheofollowingoasoofoDecembero31: 2012 2011 Marketing,ocommissionsoandootheroservices Employeeosalaries,owagesoandobenefits Sales,opropertyoandoincomeotaxes Consulting...

  • Page 103
    Table of Contents forousotooincreaseotheoLOCotoo$17,000oando$20,000.oTheoLOCohadoanooriginalomaturityodateoofoSeptembero23,o2010,owhichowasosubsequentlyoextendedoto Marcho21,o2011.oInoconjunctionowithoenteringointootheoLOCoino2008,oweoissuedoaowarrantotoopurchaseo56,...

  • Page 104
    Table of Contents TheofollowingosummarizesotheofutureominimumoleaseopaymentsoforooutstandingooperatingoleaseoagreementsoasoofoDecembero31,o2012: 2013 2014 2015 2016 2017 Thereafter $ 3,272oo o 1,597oo o 1,137oo o 1,052oo o 1,080oo o 1,299oo $oo9,437oo 10. Stockholders' Equity (Deficit) ...

  • Page 105
    Table of Contents featureoagainstotheoentireoconvertibleoredeemableopreferredostockoinstrumentothatoincludesothatofeature.oOuroanalysisowasobasedoonoaoconsiderationoofothe economicocharacteristicsoandorisksoofotheoconvertibleoredeemableopreferredostockoand,omoreospecifically,...

  • Page 106
    ...,orestrictedostockounits,oandorestrictedostock.oWeoalsoohaveoanoemployeeostock purchaseoplan. 11. Share-Based Compensation Stock Plans InoNovembero2006,oweoadoptedotheoLifeLock,oInc.o2006oIncentiveoCompensationoPlano(theo"2006oPlan").oWeoreservedo18,426,332osharesoofocommon...

  • Page 107
    ... Employee Stock Purchase Plan InoOctobero2012,oweoadoptedoanoemployeeostockopurchaseoplano(theo"ESPP...,oincludingoperformance-basedooptions,ounderotheo2006oando2012oPlansofor theoyearsoendedoDecembero31: 2012 Weighted- 2011 Weighted- 2010...

  • Page 108
    ...Scholesooptionopricingomodelowithotheofollowingoweighted-averageoassumptionsoat Decembero31: 2012 2011 2010 Expectedovolatility ...,oando$1,996,orespectively.oAsoofoDecembero31, 2012,otheototalointrinsicovalueoofooutstandingoandoexercisableostockooptionsowaso$48,630oando$32,899...

  • Page 109
    ...,o2012oandoDecembero31,o2011,otheofairovalueoofoourofinancialoassetsoandoliabilitiesowasoasofollows: Level 1 Level 2 Level 3 Total December 31, 2012 Assets Cashoequivalents Commercialopaper Totaloassets December 31, 2011 Liabilities: Preferredostockowarrantoliabilities Totaloliabilities...

  • Page 110
    Table of Contents Theofollowingotableopresentsoaoreconciliationoofotheoliabilitiesomeasuredoatofairovalueousingosignificantounobservableoinputsoforotheoyearoended Decembero31,o2012: Warrant Liability Embedded Derivative FairovalueoasoofoDecembero31,o2011 Issuanceoofowarrants ...

  • Page 111
    ...Theofollowingotableosetsoforthotheocomputationoofobasicoandodilutedonetoincomeo(loss)operoshareoattributableotoocommonostockholdersoforotheoyearsoended Decembero31: 2012 Numerator: Netoincomeo(loss) ...otoocommonostockholders Denominatoro(basic): Weightedoaverageocommonosharesooutstanding Denominatoro...

  • Page 112
    ...: 2012 2011...14,185odeferredotaxobenefitofromotheoacquisition. TheocomponentsoofoincomeotaxoprovisionowereoasofollowsoatoDecembero31: 2012 Current: U.S.ofederal U.S.ostateoandolocalotaxes...

  • Page 113
    ...-oo o (0.7)o o -oo o -oo o (1.4)o o 1.4oo o -oo o(30.3)o o (0.1)%o TheofollowingoisoaosummaryoofotheocomponentsoofoourodeferredotaxoassetsoandoliabilitiesoatoDecembero31: 2012 2011 Deferredotaxoassets: Netooperatingolosso(NOL)oandocreditocarry-forwards Stockooptions Deferredorent Deferredorevenue...

  • Page 114
    ...o2012,othereowasonooaccruedointerestooropenaltiesorecordedoinotheoconsolidatedofinancialostatements. 16. Segment Reporting FollowingoouroacquisitionoofoIDoAnalyticsoonoMarcho14,o2012,oweobeganooperatingoourobusinessoandoreviewingoandoassessingoourooperatingoperformance usingotwooreportableosegments...

  • Page 115
    Table of Contents consolidatedointoooneomulti-districtolitigationoinotheoUnitedoStatesoDistrictoCourtoofoArizona,ostyledoInore:oLifeLock,oInc.oMarketingoandoSalesoPractice Litigation,oMDLoNo.o1977.oAfterodiscoveryoandoaoseriesoofosettlementodiscussions,...

  • Page 116
    Table of Contents ERISAoplans,ofailureotoopayoovertimeoinoviolationoofotheoFLSA,obreachoofoemploymentocontract,ounjustoenrichment,ofraudoandopunitiveodamages,oand intentionaloinflictionoofoemotionalodistress.oInotheocomplaint,oMs.oRichardsonoallegesoentitlementotooequitableorelief,...

  • Page 117
    Table of Contents revolvingocommitmentsoexceedotheosumoofo(1)otheooutstandingoamountooforevolvingoborrowings,oando(2)otheooutstandingoamountoofoletteroofocreditoobligations. Theoinitialoapplicableorateoiso0.25%,...

  • Page 118
    ...oourodisclosureocontrols andoproceduresowereoeffective. Management's Tnnual Report on Internal Control Over ...Control Over Financial Reporting DuringotheoperiodocoveredobyothisoAnnualoReportoonoFormo10-K,oweoidentifiedoaomaterialoweaknessorelatingotootheocalculationoofoouroearningsoperoshare ...

  • Page 119
    ...2012....oTheoCodeoofoBusinessoConductoandoEthicsoisopostedoonoourowebsiteoatohttp://investor.lifelock.com/phoenix.zhtml? c=234808...OWNERSHIP OF CERTTIN BENEFICITL OWNERS TND STOCKHOLDER MTTTERS MTNTGEMENT ... SERVICES ...

  • Page 120
    Table of Contents PTRT IV ITEM 15. (a) EXHIBITS TND FINTNCITL STTTEMENT SCHEDULES Documentsofiledoasoaopartoofothisoreport: 1. FinancialoStatements:oTheoinformationoconcerningoourofinancialostatementsoandoReportoofoIndependentoRegisteredoPublicoAccountingoFirmorequired ...

  • Page 121
    Table of Contents SCHEDULEoIIo-oVALUATIONoANDoQUALIFYINGoACCOUNTS Additions (recoveries) YearoendedoDecembero31, Allowanceoforodoubtfuloaccountso (1) 2012 Beginning Balance -ocharged toocosts and expenses Deductions Ending Balance 2011 2010 $oooooooooo88oo o 115oo o 203oo o 61,564oo o 62,...

  • Page 122
    ...LIFELOCK, INC. Date:oFebruaryo26 ,o2013 By: /s/ Todd Davis ToddoDavis ChairmanoandoChiefoExecutiveoOfficer LIFELOCK, INC. Date:oFebruaryo26 ,o2013 By: /s/ Chris Power ChrisoPower ChiefoFinancialoOfficer POWER...Todd Davis ToddoDavis /s/ Chris Power ChrisoPower Februaryo26 ,o2013 ...

  • Page 123
    ...(16) 10.9B 10.10* IdentityoProtectionoServiceoProvideroAgreement,odatedoasoofoJulyo29,o2011,obyoandobetweenoLifeLock,oInc.oandoEarlyoWarning Services,oLLCo(17) AmendedoandoRestatedoReselleroAgreement,odatedoasoofoNovembero12,o2008,obyoandobetweenoLifeLock,oInc.oandoCSIdentity Corporation...

  • Page 124
    Table of Contents Exhibit No. Description of Exhibit 2012oIncentiveoCompensationoPlano(22) FormoofoStockoOptionoAgreementoandoRestrictedoStockoUnitoAgreementoundero2012oIncentiveoCompensationoPlano(23) oo10.16†oo10.17†oo10.18†2012oEmployeeoStockoPurchaseoPlano(24) oo10.19†oo21.1 ...

  • Page 125
    ... (15) (16) (17) (18) FiledoasoExhibito10.9BotootheoRegistrant'soRegistrationoStatementoonoFormoS-1ofiledowithotheoSecuritiesoandoExchangeoCommissionoonoAugusto28, 2012,oandoincorporatedohereinobyoreference. FiledoasoExhibito10.10otooAmendmentoNo.o3otheoRegistrant'soRegistrationoStatementoonoFormoS...

  • Page 126
    Exhibit 21.1 SUBSIDIARIES OF LIFELOCK, INC. Name ID Analytics, Inc. IDA, Inc. State of Incorporation Delaware Delaware

  • Page 127
    ... htatement (Form h-8 No. 333-184360) of our report dated February 26, 2013, with respect to the consolidated financial statements and schedule of LifeLock, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2012. /s/ Ernst & Young LLP Phoenix, Arizona February 26, 2013

  • Page 128
    ... Annual Rdport on Form 10-K of LifdLock, Inc.; Basdd on my knowlddgd, this rdport dods not contain any untrud statdmdnt of a matdrial fact or omit to statd a matdrial fact ...of intdrnal control ovdr financial rdporting, to thd rdgistrant's auditors and thd audit committdd of thd rdgistrant's board of...

  • Page 129
    ...Chris Power, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of LifeLock, Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact... in this report; The registrant's other certifying officer(s) and I...

  • Page 130
    ... OF 2002 In connection with the Annual Report on Form 10-K of LifeLock, Inc. (the "Company") for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Todd Davis, Chief Executive Officer of the Company, certify, to the best of my...

  • Page 131
    ... OF 2002 In connection with the Annual Report on Form 10-K of LifeLock, Inc. (the "Company") for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Chris Power, Chief Financial Officer of the Company, certify, to the best of my...

  • Page 132