Gen Digital Inc. Common Stock 2027 Q1 Earnings Call

Thank you, Jen, and good afternoon, everyone. Welcome to Gen's first quarter fiscal year 2027 earnings call. Joining me today are Vincent Pilette, CEO, and Natalie Derse, CFO. As a reminder, there will be a replay of this call posted on the investor relations website, along with our slides and press release. I'd like to remind everyone that during the call, all references to the financial metrics are non-GAAP, and all growth rates are year-over-year and adjusted to exclude the extra fiscal week in Q1 fiscal 2026, and to include MoneyLion's stub financials in the prior year comparison. A reconciliation of non-GAAP to GAAP measures is included in our press release and earnings presentation, both of which are available on our IR website at investor.gendigital.com. We encourage investors to monitor this website as we routinely post investor-oriented information, such as news and events and financial filings.

Today's call contains statements regarding our business, financial performance, and operations, including the impact on our business and industry that may be considered forward-looking statements, and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those expectations and statements are based on current beliefs, assumptions as of today's date, August 6th, 2026. We undertake no obligation to update these statements as a result of new information or future events. For more information, please refer to the cautionary statement in our press release and the risk factors in our filings with the SEC, and in particular, our most recent reports on Form 10-K and Form 10-Q. Now, I will turn the call over to Vincent.

Thank you, Ben, and good afternoon, everyone. Three months ago, we guided fiscal 2027 with a structural step-up, 8%-10% revenue growth and mid-teens EPS growth. Q1 shows why we had the conviction to do it. We delivered another better-than-expected quarter and entered the rest of FY 2027 with strategy delivering double-digit growth. Let's start with the headline. Bookings and revenue grew 11%, and non-GAAP EPS grew 19%, both above guidance. Paid customers crossed 80 million, an 11th straight quarter of sequential growth. Two segments, one platform, one mission, helping people live fearlessly in an increasingly complex and ever-expanding digital world. Our job is to be the trusted partner who reduces their risks and keep them safe, confident, and empowered online and in an AI world.

Cyber Safety and Trust-Based Solutions are both growing revenue with growth plus margin profile above 50%, and are powered by a single platform of shared proprietary data and models, modular technology, and AI-driven personalization that scale across our brands. Our customer relationships are deepening. Membership is expanding. Cross-sell is at an all-time high, and we are beginning to unlock the opportunities from embedded financial wellness and Engine partnerships. Cyber Safety, our foundation, remains competitively strong. Bookings and revenue grew mid-single digits, sustaining last year's momentum. Customers keep telling us about their AI anxiety. For Gen, that growing need for trust and safety represents a tailwind. AI is capable of taking actions on your behalf behind the scenes, which is amazing on one hand, but on the other hand, you relinquish control and transparency. On top of that, AI is turbocharging the threat cycles.

Threats are faster, more complex, and increasingly personalized. Threat cycles, once measured in months, are now compressed to minutes, and consumers feel it. We see it in external search, our own funnel, and consumer research. AI adoption has passed 40% of U.S. consumers, yet nearly two-thirds are highly concerned about AI misusing their data, and that number is still rising. This is exactly the environment our portfolio was built for. And we meet this growing need by staying ahead, leveraging the intelligence of Gen Threat Labs, applying AI to detect and defeat emerging threats, and putting AI-native products directly in our customers' hands. This quarter, our proprietary scam protection engine blocked over half a billion scam attacks, more than 100 every second, including deepfakes and voice clones. Demand is increasingly measurable, too.

In our own consumer research, over 60% of consumers say AI-driven scams make them more likely to pay for protection, our strongest measured purchase driver, and concerns about AI scams are climbing double digits year-over-year in the U.S., rising even faster internationally. With nearly 500 million users across 150 countries, we are positioned to capture that demand globally. We are not only seeing new demand, but also very clearly that our existing customers are choosing more protection, not less. Norton 360's higher tier memberships, combining scam detection, identity restoration, financial protection, and insurance, have scaled to nearly half a billion dollars in annualized bookings. Those deepening customer relationships are a strong reflection of these growing consumer needs. Norton cross-sell penetration rose another point to 27%. We sealed up double digits year-over-year.

ARPU is 8%-10% higher than two years ago, and membership adoption across Norton, Avast, Avira passed 60% with retention near record highs. The conviction is clear. The future of Cyber Safety is all-in-one membership that matches the need of your digital and financial life, not point product. And we are doubling down by making the experience simpler and more personal so customers stay on top of a complex world with less effort. Our strengths are also being validated externally. Independent labs and leading reviewers continue to recognize Norton and Avast as category leaders. Best comprehensive protection, flexibility, ease of use, and performance. Recognitions such as Tom's Guide naming our Norton VPN the best for streaming or PCMag choosing Avast One as the editor's choice reinforce the competitiveness of our portfolio and the strength of our brands and offerings.

Let me highlight one product that makes our platform strategy tangible. Norton's Financial Scan, built on MoneyLion AI, is out of beta and now rolling out into Norton 360 across our largest markets. The concept is simple. It does for customers' financial accounts what antivirus does for their devices, watching continuously and flagging the moment something is wrong. Cyber Safety is no longer only about blocking threats. It has evolved to become the front door to a deeper, more trusted customer relationship, and every financial account a customer connects is one more opportunity to add value. In Trust-Based Solutions, the same strategy is driving growth. Bookings grew 25% with identity, personal financial management, and our Engine Marketplace all contributing. LifeLock is in motion. We rebuilt the experience for a mobile-first, scam-aware consumer, and the simpler tiered experience is moving customers to higher value plans and deeper engagement.

Retention remains at record levels, touching 90% with NPS above 70, thanks to the same playbook we have run before. Deepen the customer relationship with expanding their protection from basic credit monitoring to financial accounts to all the assets that matter in your life. MoneyLion, in its second year within Gen, is now driving the same playbook as well. Personal financial management grew faster than we expected, led by Instacash and Credit Builder Plus. With record origination and continued margin expansion is growth with discipline. Two-thirds of our PFM revenue comes from repeat customers, underscoring the customer satisfaction, loyalty, and durability and how we help manage and smooth consumers' ever-changing cash flow needs.

Our recently launched MoneyLion One Premium membership now put Gen scam and identity protection directly in members' hands because true financial wellness is not only about improving your access to money, it is also about protecting it. More fundamentally, MoneyLion is evolving from managing today's financial moment to helping customers stay ahead of the next one, anticipating income and bills, identifying potential shortfalls early, and guiding them towards the right action. Engine, the embedded marketplace, connects consumers to the right financial offer and powers the next step in their journey. Engine had its strongest quarter yet, passing half a billion dollars in annual revenue run rate, led by a new insurance vertical built on Trellis infrastructure that we quickly integrated in just under one quarter, a core Gen capability.

We added more than 30 new partnerships across multiple categories, drove total network inquiries to over 425 million annually, and delivered record revenue. We will continue to leverage that strength and add new verticals that address consumers' diverse financial needs. Stepping back, two proof points tie the portfolio together. Connected financial accounts passed 110 million, up from 75 million when we acquired MoneyLion, and 35% of our paid base now engages with financial wellness. Every connection is a chance to deepen the relationship over time, and as we enrich our data and broaden the catalog, their engagement turns into monetization. We are already seeing it with Engine-enabled cross-sell into our install base, on track to double by the end of fiscal 2027, giving us the confidence that the model is working and including it in our guidance race. Our AI trust layer is moving from concept to product.

A year ago, we said trust would be the bottleneck for agentic AI as agents begin to act for consumers, from making purchases to scheduling events. That thesis is now being validated in production. Norton Neo, the world's first secure and private AI-native browser, doubled its daily active users, driven by its contextual agentic VPN. Our open source agent security engine, Sage, is now in Norton 360 and Avast One, providing multi-layer agent security to 25 million customers. We recently launched the beta of Norton Family Assistant, co-architected with xAI and supported by multiple models, handling family and financial actions inside a Gen controlled trusted envelope built on ATH, our Agent Trust Hub. This is a long game. Agentic revenue will be modest in fiscal year 2027, but Gen holds what is hard to replicate.

Trusted brands, consumer reach, a unified data and identity platform, and customer-focused technical capability to be the consumer's trust layer for AI. The moat widens with every new model partner, agent, and connected account we deploy in our environment. Our goal is simple, make the AI economy safe and simple for our customers. AI is also making us better operators. Following our restructuring, we move faster in smaller, more accountable teams. Profit per employee, already amongst the highest at our scale, is up double digits. That leverage keeps our segments margins durable while we invest in growth. Cyber Safety operating margin remains above 60%, while Trust-Based Solutions remains at 30%, even as our fastest-growing businesses scale. Our blended margin reflects this mix, not pressure. We are reinvesting AI productivity into growth while delivering on our mid-teen's EPS growth commitments.