Gen Digital Inc. Common Stock 2027 Q2 Earnings Call

Thank you, Jen, and good afternoon, everyone. Welcome to Gen's second 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 would like to remind everyone that during this call, all references to the financial metrics are non-GAAP, and all growth rates are year-over-year. 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 post investor-oriented information such as news, events, and financial filings.

Today's call contains statements regarding our business, financial performance, and operations, including 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 statements are based on current beliefs, assumptions, and expectations as of today's date, October 28, 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 statements in our press release and the risk factors in our filing with the SEC, and in particular, our most recent reports, our Form 10-K and Form 10-Q. Now, I will turn the call over to Vincent.

Thanks, Ben, and good afternoon, everyone. Q2 was another beat and raise quarter for Gen. Our revenue and bookings grew double digits, and non-GAAP EPS increased 19% year-over-year. Our cyber safety foundation continues to be strong, while Trust-Based Solutions is fueling our next phase of profitable growth. We ended the quarter with 83 million paid customers, up 2 million sequentially and 6 million from a year ago. With this momentum, we are raising, again, our full-year guidance. Cyber safety revenue grew 5%, led by the adoption of comprehensive memberships and continued customer upsells and upgrades. Norton 360, our flagship product, provides the broadest, most advanced protection for consumers in the market and has scaled to over $1.7 billion run rate, growing consistently at or above mid-single digit. We also continue to deploy our customer lifecycle playbook, delivering the highest renewal lift in several quarters.

Trust-based solutions grew 26%, driven by financial wellness adoption and Engine diversified partner and vertical strategy. Partner channels grew double digits in both segments as carriers and employers increasingly embed our full suite protection into their solutions, and our marketplace continues to expand its partnership and distribution. These results advance our mission to protect digital lives and help people manage financial needs online. The team at Gen has long prided itself on driving our business with discipline and creating lasting value. That means we manage for durable growth and profitability. We invest where customers' demand and returns are the strongest. We constantly improve efficiency and apply shared capabilities across the entire portfolio. This operating model delivers best-in-class margins in our segments, 62% in cyber safety and 30% in trust-based solutions for a 50% blended margin this quarter.

In financial wellness, we are focused on margin quality as we scale, simplifying pricing, adding more advances to our own spend accounts, and shifting Engine mix towards higher margin first-party demand. The different profiles of our two segments fund continued investments and support our mid to high teens EPS growth outlook for fiscal year 2027. We see plenty of opportunities to apply our model. Looking ahead to the second half, we are prioritizing our efforts where customer demand and flywheel economics are strongest. We are redesigning Norton 360 with next-gen VPN, scam protection, and Safe AI. We are building new LifeLock experiences that connect breach alerts with on-demand AI-driven resolution. We are expanding MoneyLion customer acquisition with a focus on monthly active users, higher income cohorts, and a deeper product relationship. Early results are encouraging. Norton 360 beta user engagement increased double digits, and LifeLock's redesigned site lifted mobile conversion also by double digits.

We are relentlessly enhancing our portfolio because people increasingly need help. AI makes sophisticated attacks easier to launch and harder to distinguish. The recent PHP vulnerabilities show how advanced AI is accelerating vulnerability exploitation from discovering flaws to turning longstanding weaknesses into practical exploits across digital services consumers rely on every day. Our latest threat report found scams made up more than half of everything we blocked. Attacks grew more personal and local, from family impersonation texts to AI-generated scam videos in local language. Our real-time telemetry shows email, text, and calls scam protection up 30% sequentially. Now as consumers adopt AI and give agents their credentials, each interaction creates risks that consumers feel, even if many don't understand or know how to control them. Identity faces the same trend.

Breach notices to our members rose more than sixfold in the first half, and U.S. notices in the first 6 months of 2026 exceeded all of 2025. People increasingly assume their data is already exposed, feel helpless, and basically tune out alerts. So we are connecting breach alerts to on-demand AI-driven resolution, giving them a clear and actionable next step. AI also raises a question of trust. Can I trust the person, the message, the action, the agent? Gen combines threats, identity, and financial intelligence with trusted permission customer relationships, delivering more relevant protection. As threats grow more complex and more personal, the breadth of our signals and intelligence becomes an even greater advantage, giving us the unique ability to power consumers' trusted moments. Leveraging that intelligence, our product strategy follows clear customer needs. Let's take financial wellness, for example.

Even in a resilient economy, nearly one in four American households spend almost all of its income on necessities. These families do not need another lender. What they need is an easier way to understand, manage their cash flow, and a safe way to bridge a gap. Unreached access is where MoneyLion delivers that value. Building upon that trusted entry door, we offer a cash flow assistant that shows member what is safe to spend before the next paycheck. MoneyLion Safe, our first interest-bearing premium deposit product, now gives them a place to grow their money. As they build their financial strength, credit builder and identity protection offer core benefits as part of our MoneyLion One membership. Together, these features evolve MoneyLion into a daily financial relationship, where each interaction is improving the next recommendation with a full feature set of secure personal financial management solutions.

This is why the vast majority of MoneyLion revenues come from repeat customers, making our PFM solution a durable and valuable part of consumers' financial lives. Our roadmap is bringing technologies and capabilities together in valuable memberships, and now our distribution is helping us meet demand where it is. With more than half of workers saying financial stress is hurting their productivity, most employers are looking to add benefits to help. Norton Money Workplace brings financial wellness to the employee benefit channel already used by Norton and LifeLock. Recently launched, its qualified pipeline already exceeds $30 million ahead of the enrollment season. Serving more needs, reaching people where they are, and connecting protection with financial empowerment make our products easier to find, more useful, and more connected than ever before. That is the flywheel that we are building. Better products and experiences deepen engagement and trust.

With customers' permission, relevant context across the platform makes protection and financial tools more useful and personal. Deeper relationships lets us serve more of our customers' digital life, and we continue to see proof of this in our business. The embedded financial wellness synergies remain on track. Engine is active across many Gen partnerships. AI-driven remarketing is scaling cross-sell, and demand for new products like Norton Money Workplace are all contributing to our confidence as we ramp through second half and fiscal year 2028. Our momentum across the business and the proof points of our platform-driven synergies give us the confidence that we can deliver long-term sustainable growth. Our mission is to power digital freedom, which means powering trusted moments in our customers' digital life, helping them protect what matters and moving forward online with confidence.

Digital life now touches every aspect of how people live, work, and manage their finances. AI is accelerating that shift, making decisions, and acting on people's behalves. As life online grows more complex, trust matters more. Our strategy is to expand from protecting digital life to empowering it for prosperity. Three connected roles, protect, empower, and prosper. We protect people's device, data, identity, privacy, and financial accounts. We empower them with greater control over their identity, reputation, and financial wellness, and we help them prosper with better opportunities, smarter recommendations, and easier transactions. Each trusted moment earns us the permission to support more aspects of their digital lives. That strategy runs on one Gen platform. Across our brands and services, we reach 500 million users and endpoints, connect nearly 120 million financial accounts, and work with more than 1,300 partners across 25 verticals.

Our shared intelligence uses permission context to improve protection, personalization, and recommendation. We are seeing that in our customer outcomes. Our Norton cross-sell penetration is near 30%, and our AI recommender lifts revenue from new Norton cross-sells by mid-single digits. Our AI decisioning agent that re-engages abandoned applicants now has its own bookings target, and we are in the early stages. The platform potential is significant. Our AI strategy has grown from one assistant to three connected layers. First, AI built into our product. Second, protections for people using AI and their agents. Third, a trusted infrastructure so those agents can transact safely. One platform powers all three with protection and customer control at its core. Genie, our first AI-native product, started with a simple focus, protecting against scams. Today, Genie uses context from across Gen to guide people on safety, identity, and financial wellness.

The same foundation now powers other AI-native products such as Norton Neo with Agentic VPN and Norton Family Assistant. The second layer became urgent this quarter. Agentic AI for consumers moved from prediction to reality. Personal agents from major platforms reach millions within weeks with access to emails, passwords, and money. Soon after, researchers showed how that access could be turned against users, where an agent becomes an inside threat if left unprotected. We pioneered Agent Trust Hub to address these risks. It screens skills before use, monitors agents, and adds protection to a sandbox safe zone with legal scans across LLM answers. Skills that have been scanned and marked safe by our technology in the leading agent marketplace have been installed over 100 million times by users and their agents.