Gen Digital Inc. (GEN) Earnings

Management highlights

- Overall Q1 Performance - Total bookings grew 11% YoY to $1.28 billion; total revenue grew 11% YoY to $1.34 billion, the fastest growth rate since GEN's formation - Non-GAAP diluted EPS grew 19% YoY to 71 cents, beating the guided range of 68-70 cents - Paid customers reached 81 million, marking the 11th consecutive quarter of sequential paid customer growth - Blended company operating margin remained stable sequentially at 50%; operating income grew 9% YoY to $668 million - Free cash flow was $430 million, with net leverage reduced to 2.95x, below the 3x target - AI is driving operational efficiency: AI-enabled creative workflows have delivered a 25% efficiency improvement in marketing, allowing twice as many assets to be produced - Product and Strategic Progress - Growing consumer anxiety around AI-enabled scams and data misuse is a strong demand tailwind: 60% of consumers report AI-driven scams make them more likely to purchase protection, with concern rising double-digits YoY - In Q1, GEN's proprietary scam protection engine blocked over 500 million scam attacks, including deepfakes and voice clones - Higher-tier all-in-one Norton 360 memberships have scaled to nearly $500 million in annualized bookings, with Norton cross-sell penetration rising to 27% - Norton Financial Scan, built on MoneyLion AI, exited beta and is rolling out to Norton 360 in core markets, expanding cyber safety beyond device protection to financial account monitoring - Connected financial accounts across the platform passed 110 million, up from 75 million at the time of the MoneyLion acquisition, with 35% of the paid base now engaging with financial wellness tools - AI native trust products are ramping: Norton Neo secure browser doubled its daily active users, and open source Sage agent security engine now serves 25 million customers; the Norton Family Assistant beta launched in partnership with XAI - Enjin added over 30 new partners in Q1, rapidly integrated the Trellis insurance infrastructure in under one quarter, and grew annual network inquiries to over 425 million - Post-restructuring, profit per employee is up double-digits, allowing continued growth investment while maintaining segment margins - Capital Allocation - GEN returned $181 million to shareholders in Q1: $100 million in share repurchases and $81 million in dividends - The capital allocation strategy remains unchanged: balance flexibility to fund organic and inorganic growth, strengthen the balance sheet, and return meaningful capital to shareholders

Guidance

- Q2 FY27 guidance: Revenue is expected to be $1.325 billion to $1.35 billion, representing 9% to 11% YoY growth; non-GAAP EPS is expected to be $0.71 to $0.73, representing 15% to 18% YoY growth - Full year FY27 guidance was raised upward from the prior 8% to 10% revenue growth target: revenue is now expected to be $5.375 billion to $5.475 billion, representing 9% to 11% YoY growth - Full year FY27 non-GAAP EPS guidance was also raised upward from the prior mid-teens target: non-GAAP EPS is now expected to be $2.87 to $2.97, representing 14% to 18% YoY growth - The guidance increase reflects growing confidence in embedded financial wellness synergies and sustained momentum across both segments, with management noting GEN remains on track to hit the $100 million annual synergy target from platform integration

Segment performance

GEN has two reportable product segments: Cyber Safety and Trust-Based Solutions. For Q1 FY27: 1. **Cyber Safety**: Bookings and revenue both grew 4% year-over-year (adjusted). The segment delivered consistent mid-single-digit growth, driven by double-digit growth in higher-tier Norton 360 memberships and strong cross-sell/upsell performance. Operating margin remained stable at 61%, contributing 61% of total company operating profit from this high-margin core business. This segment accounts for approximately 76% of total Q1 revenue. 2. **Trust-Based Solutions**: Bookings grew 25% year-over-year, while revenue grew 24% year-over-year (adjusted). This segment includes LifeLock identity protection, MoneyLion personal financial management (PFM), and the Enjin embedded marketplace. LifeLock retention hit a record 90% following its product rebuild, MoneyLion PFM delivered record Instacash originations with improving loss ratios, and Enjin passed a $500 million annual revenue run rate. Operating margin remained stable at 30% despite ongoing growth investment. This segment accounts for approximately 24% of total Q1 revenue.

Risks & headwinds

- All forward-looking statements regarding demand for AI safety products, growth of embedded financial wellness, and new vertical expansion involve inherent risks and uncertainties that could cause actual results to differ materially from current expectations - Growing AI adoption and AI-accelerated threat cycles increase near-term product development requirements, requiring continued investment that could pressure short-term margins if demand does not meet expectations - The mix shift toward faster-growing lower gross margin segments like Enjin will put continued moderate downward pressure on overall company gross margin over time - International expansion of financial wellness is a multi-year long-term opportunity with uncertain near-term returns - New product launches such as MoneyLion One are still in early stages, and customer adoption and monetization outcomes are not yet certain

Analyst Q&A

• Q: How is international growth tracking, and how does gross margin mix evolve as Enjin scales?

  A: Cyber safety international growth is balanced at mid-single-digit when adjusted for currency, with expansion from core device security into privacy and identity features across markets. Financial wellness remains concentrated in the U.S. for now, with international expansion planned as the business proves out domestically. While Enjin has a slightly lower gross margin due to revenue share arrangements and varying partner contract terms, GEN maintains disciplined operating margin targets for each segment, and long-term relationship building improves margin over time as trust is deepened with customers.

• Q: Where does the incremental full-year revenue upside come from, and why did EPS guidance not rise proportionally with revenue?

  A: Most incremental upside comes from trust-based solutions, specifically embedded financial wellness and Enjin marketplace growth, with solid sustained momentum in cyber safety. The incremental revenue is partially offset by increased planned investment: GEN is investing in new AI capabilities, new product verticals like insurance, platform integration, and go-to-market for new offerings, while still maintaining its commitment to delivering mid-teens EPS growth. The guidance increase reflects growing confidence in platform synergy momentum that was already outlined previously.

• Q: How will investment in trust-based solutions flow through the income statement, and how has the Norton 360 tiering playbook informed MoneyLion One strategy?

  A: The successful playbook of building trust, gradually moving customers from entry-level to higher-value all-in-one memberships that GEN used for Norton 360 is being applied to MoneyLion One. Early adoption feedback is positive, though it is still too early to project specific upside. Investment will be spread across gross margin, R&D for new AI and product development, and sales and marketing for new go-to-market launches, all while maintaining a disciplined approach to balance growth investment and profitability.

• Q: How quickly can Enjin add new verticals beyond insurance, and what is the strategy for Avast One?

  A: The Enjin embedded AI matching marketplace architecture allows for rapid integration of new verticals, demonstrated by the under-one-quarter integration of the Trellis insurance capability. GEN will continue to add new verticals organically and inorganically aligned with its core mission of protecting digital and financial lives. The same all-in-one membership playbook used for Norton 360 is being applied to Avast One, which uses a freemium a la carte model: users get an all-in-one free base experience, then pay for the specific advanced features they want. It is being ramped methodically across markets after a successful initial launch in Western Europe.

• Q: What is the strategy for MoneyLion One monetization, and how is GEN preparing for the worsening AI-driven threat environment?

  A: MoneyLion One follows the same trust-based membership playbook, focusing on maximizing long-term customer lifetime value rather than one-off transaction monetization. It integrates basic identity and scam protection with financial management tools to deepen relationships, and will gradually add more features as customers grow along their financial journey; cybersecurity cross-sell to MoneyLion customers is currently delivered indirectly through membership features and directly through the Enjin marketplace. Rising consumer anxiety around AI-enabled breaches and scams is the top purchase driver for cyber safety, and GEN is well positioned to respond by using AI to counter AI-driven threats and staying ahead of evolving threat profiles.