Gen Digital Inc. Contingent Value Rights Q3 FY2025 earnings call

• Solid execution with Q3 revenue above guidance midpoint and EPS at high end, 22nd consecutive quarter of growth.
• Cyber Safety bookings up 4% constant currency, reported bookings over $1B, up 3% USD and constant currency.
• Innovation in Cyber Safety portfolio: Genie product with 2M downloads, AI engine detecting threats; partnership with Qualcomm on AI-powered scam detection for smartphones.
• Avast Security Identity rolled out in 15 new countries, embedded financial monitoring features. Digital Vault with ID Advisor Plus pilot in Japan.
• Built on new Gen Stack, enabling unified data set, better AI solutions, and reimagined user experience.
• Pending acquisition of MoneyLion to strengthen financial wellness offerings, targeting customers in earlier financial life stages and expanding addressable market.

Q3 was a quarter of solid execution. Cyber Safety bookings (excluding legacy) were up 4% in constant currency, with reported bookings exceeding $1 billion, up 3% in USD and constant currency. Q3 revenue was $986 million, up 4% in USD and constant currency. Direct revenue was $869 million, up 4%. Partner revenue was $105 million, up 6% in USD and constant currency. Legacy business lines contributed $12 million, down from $15 million prior quarter and expected to decline double-digits y/y. Operating income was $577 million, up 4% year-over-year with an operating margin of 58.5%. Net income was $350 million, up 11%, and diluted EPS was $0.56, up 15% for the fifth consecutive quarter of double-digit growth.

Full year revenue expected in range of $3.915 billion to $3.93 billion (4% Cyber Safety growth midpoint). Non-GAAP EPS expected in range of $2.20 to $2.22 per share (14%-15% growth). Q4 non-GAAP revenue expected in range of $990 million to $1,005 million, and Q4 non-GAAP EPS in range of $0.57 to $0.59.

Q: Roger Boyd asked about retention rates and reconciling with improving ARPU numbers, and expectations for overall retention moving forward.

A: Natalie Derse responded that retention rate is a top KPI, cohorts are stable to up, and KPIs are performing to expectation, driving revenue acceleration.

Q: Andrew Nowinski inquired about Cyber Safety bookings deceleration and the MoneyLion acquisition.

A: Natalie Derse mentioned the onetime bump from the National Public Data Breach last quarter affected bookings, and Vincent Pilette discussed synergies of MoneyLion acquisition in providing PFM features and embedded marketplace for customers.

Q: Saket Kalia asked about FX impact on full year guide and Norton 360 adoption percentage.

A: Natalie Derse said FX impact was relatively immaterial, and Vincent Pilette stated around 50% of base uses Norton 360 now with progress towards majority on membership structure.

Q: Dan Bergstrom asked about mobile adoption of Norton 360 and personalization efforts.

A: Vincent Pilette talked about mobile adoption driven by membership and IPM in-product messaging, and ongoing work on hyper personalization via Gen Stack.

Q: Hamza Fodderwala asked about capital allocation balance post-MoneyLion acquisition.

A: Natalie Derse said capital allocation tenants remain consistent, and activity will resume post-deal close.

Q: Tomer Zilberman asked about ARPU improvement and specific drivers.

A: Natalie Derse explained ARPU improvement from cross-sell, upsell, mobile acquisition, and flywheel effect of customer acquisition, cross-sell, and retention efforts.