Gen Digital Inc (GEN) — Q2 2026 Earnings Call Transcript

Thank you, Lauren, and good afternoon, everyone. Welcome to Gen's Second Quarter Fiscal Year 2026 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 this call, all references to the financial metrics are non-GAAP, and all growth rates are year-over-year unless otherwise stated. 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 of our business 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, November 6, 2025. 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. And now I'll turn the call over to Vincent.

Thanks, Jason. Hello, everyone, and thank you for joining us today to discuss Gen's results for the second quarter of fiscal year 2026. This was another quarter of outstanding execution, exceeding our expectations as we capitalize on our global user base and compounding data advantage. We delivered record revenue and earnings, continued to drive strong customer and bookings growth, and are making clear progress with our portfolio transformation. This performance demonstrates the strength and resilience of our business, underpinned by a high-margin subscription model now expanding into faster-growing adjacencies in secure financial wellness. It also reflects our strategic position as the most trusted partner in protecting digital lives, bringing confidence in a complex and increasingly AI-driven world. Before diving into the numbers, it is important to recognize the environment in which we operate. Consumers today face a rapidly evolving threat landscape. They face a new generation of cyber threats like AI-powered phishing, deepfakes, inner circle impersonation, and identity theft driven by large-scale data breaches. These threats are increasingly personalized, sophisticated and harder to detect. The financial impact is real and rising. Cybercrimes against consumers are projected to exceed $15 billion annually in the U.S. alone, growing at double-digit rates. Meanwhile, financial wellness is a very real and prevalent consumer need. Two-thirds of Americans live paycheck to paycheck, often stitching together their financial lives across multiple digital platforms beyond traditional banks. In this environment, risk and financial wellness are deeply interconnected. When people live with little financial buffer, an incident of identity theft, a fraudulent charge, or even a scam can quickly upend their finances. The stakes go beyond security and protection; they are also about trust and well-being. People are not just searching for another financial product; they're seeking a trusted and reliable partner, one that can secure their identity, protect their data, safeguard their privacy, and empower their financial well-being through trusted decision-making along their journey. And that is exactly the role Gen is built to play, and we are uniquely positioned to be the global consumer cyber safety and fintech leader now and in the future agentic world that is emerging around us. Let me review some of the highlights of the current quarter. We generated just over $1.2 billion in revenue, up 25% year-over-year. Our consumer fintech business, MoneyLion, delivered another exceptional quarter, growing 50%. When including MoneyLion's results from the prior year, Gen grew revenue 10%, matching our strong Q1 performance. We continue to operate with financial discipline, maintaining a non-GAAP operating margin above 50% and driving a non-GAAP EPS result of $0.62, up 15% year-over-year even as we continue to make disciplined growth investments throughout our technology stack in AI, data, and platform architecture. These disciplined investments will continue to fortify our global leadership and over time, further compound, allowing us to offer even more offers, services, and value to our customers to help them lead secure and safe financial and digital lives. Similar to Q1, our performance was broad-based. We generated growth across our Norton, Avast, LifeLock, and MoneyLion brands. Our bookings for the Cyber Safety segment grew 5% year-over-year coupled with a robust operating margin of 61% and healthy and stable customer retention. During the quarter, we expanded our scam and deepfake protection powered by Norton Genie Pro and Avast Scam Guardian to help users combat the rapid rise in AI-based scams. Early adoption is strong and accelerating. We support in over 40 languages and more countries coming on later this year. We are driving rapid development with our cyber safety assistant, delivering actionable insights to Norton 360 users. As more innovation is integrated into our cyber safety suite, we are seeing higher engagement, which we believe is helping drive strong Norton 360 and Avast One membership growth. Our refreshed privacy portfolio is also gaining momentum. Following the Norton VPN improvements, which we released earlier this year and several positive reviews in leading tech publications that have boosted market awareness, identity and privacy have accelerated to double-digit growth. We also enriched our non-small business solution, combining security and financial protection features for entrepreneurs and teams. These efforts align with Gen's strategic direction to penetrate new customer cohorts combining technology leadership and improved user experience. Independent testing continues to validate our leadership as Norton and Avast remain the top 2 brands in consumer protection and will continue to drive additional innovation in the portfolio through new features such as our AI-driven customer renewal model. Overall, cyber safety provides an important needed value proposition to consumers as we continue to operate this business with discipline, driving stable and profitable growth. Our Trust-Based Solutions segment delivered another standout quarter with revenue up over 25% on a pro forma basis, while operating margin came in at our 30% target. Our trusted brand LifeLock remains the leader in identity protection, allowing consumers to support their financial journey with the best credit reputation, consuming financial products at those moments of truth when identity, reputation, and financial well-being intersect. MoneyLion's exceptional results across our first-party personal finance products and our Engine marketplace demonstrate our disciplined execution, unrivaled portfolio, and the strong cyclical demand for our secure financial wellness services. The integration of MoneyLion has been one of our smoothest yet. With cost synergies delivered ahead of plan, we are now unlocking revenue synergies by unifying best-in-class data systems and solutions across our Cyber Safety and Trust-Based Solutions. We have embraced MoneyLion's experimentation and innovation DNA and are focused on building new features in a category that is still transforming. Incorporating best practices from all of our businesses will ensure cutting-edge product performance, but also multiple opportunities to cross-promote our features to consumers across channels such as the planned launch of the Earned Wage Access feature in our employee benefit channel. We have begun rolling out early access financial wellness features across selected Gen brands, including LifeLock and Norton, marking a key step in expanding our ecosystem. This includes the early launch of Norton Money, a unified platform that combines credit monitoring, identity protection, financial insight, and a curated marketplace. We have also embedded a robust credit card marketplace for LifeLock customers, a natural extension of the credit monitoring features they are increasingly engaging with. Continued excellence in embedding AI-powered financial recommendations and insights is a natural use of our data advantage to help consumers make even better financial decisions. The LifeLock and Norton consumers will no longer need to leave the ecosystem for customized, precise recommendations that can improve their financial lives. These initiatives reflect our broader ambition to build the leading decisioning platform for consumers' secure financial empowerment. Gen now serves hundreds of millions of active and freemium customers across our ecosystem, creating a substantial base for future financial product and subscription cross-sell monetization. This strategy drives lifetime value expansion and sets up a strong growth trajectory. This is exactly what we outlined in our strategic vision for secure financial wellness, to enrich Gen's ecosystem by leveraging our trusted data platform where every decision and transaction feels secure, permitted, and contextual and embedding financial wellness like digital banking, insights, precision marketplace, and payments into our cyber safety and identity protection entry door. AI is now the connective tissue of everything we do across innovation, products, marketing, and customer experience. In cyber safety, AI powers behavioral-based threat detection and real-time scam identification, protecting users from phishing, deepfakes, and other emerging forms of attacks. In financial wellness, the MoneyLion Engine leverages AI through Spark, our proprietary underwriting platform that matches customers with the best and most relevant financial products, personalizing and accelerating their decision-making. Our AI-native Norton Neo browser pioneers personalized browsing by introducing safe and private memory support, transforming each browser instance into a unique personal assistant that users can trust. Within our customer success organization, we improved retention through tailored offers and enhanced user satisfaction and drove sustainable long-term revenue growth. As we unify our customers' data securely, we are developing personalized and permissioned AI-powered outcomes, redefining the trusted value we bring to consumers. Operationally, AI is already delivering tangible productivity gains. Our customer support automation and agentic framework continue to mature, now handling 55% of text-based chat and 40% of voice-based interactions, driving over 20% cost efficiency in this function to reallocate towards our platform investment. In R&D, we have applied agentic AI across the entire product development lifecycle, enabling us to shift over time, resources for maintenance towards innovation and ultimately boost product velocity. And finally, in marketing, we have built an AI-enabled ecosystem that accelerates creative production and enhances productivity across every team, from upper to lower funnel. This shift is creating a more agile data-informed marketing organization that is operating at the pace of our ambitious innovation. We're very excited about the scale and growth we can deliver through this strategy through our global data advantage and the consumer trust. With strong first half results and increased visibility in the second half of the year, we are raising our annual guidance of $95 million at the midpoint of our prior revenue range, representing over 25% growth on a reported basis. This underscores the momentum we see in our business as we transform into a customer-centric platform, leveraging our skilled customer base and using our data modes to drive personalization and trust at the core of our business. In summary, we delivered another very strong quarter and are raising our annual guidance again, demonstrating our strategy is working. We are ahead of plan with MoneyLion and setting our sights on capturing further growth synergies and leading with innovation grounded in trust. We are building the first AI-powered platform with a trust layer that unites security, privacy, identity, and financial wellness solutions into a market advantage that no one else holds at scale. Our ecosystem brings together a portfolio of competitive first-party products in cyber safety and trust-based solutions and an expanding partner network that underpins our Engine marketplace to also provide leading third-party products and solutions for our customers. And all of it is supported by a customer-driven platform that delivers personalization and contextualization at key moments of truth. To our investors and partners, I want to thank you for your confidence. To our employees, I want to thank you for your relentless commitment to our customers and to fulfilling our mission of powering digital freedom. Gen is executing with momentum, discipline, and purpose, and our opportunity has never been greater. And now I will turn it over to Natalie to discuss our financial results and financial guidance in more detail.

Thank you, Vincent, and hello, everyone. For today's call, I will walk through our Q2 results and also provide some additional color on our performance metrics. I'll then conclude by providing our outlook for Q3 and fiscal year 2026. I will focus on non-GAAP financials and year-over-year growth rates unless otherwise stated. I will also include commentary on our pro forma growth, which includes MoneyLion's results from the prior year for comparative purposes. Now on to our results. Q2 was another strong quarter for Gen with better-than-expected results. On a reported basis, Q2 bookings and revenue were over $1.2 billion, up 27% and 25% year-over-year, respectively. On a pro forma basis, Q2 revenue grew 10%, consistent with last quarter. Excluding MoneyLion, Q2 revenue grew 5%, which is consistent quarter-over-quarter performance and in line with our commitments. In our Cyber Safety segment, bookings were up 5% and revenue was up over 3% with broad-based growth across channels. With our expanded scam protection features and cyber safety AI assistant helping consumers outpace emerging threats, this has translated into strong sales of our leading Norton 360 comprehensive membership offerings and reflected in our accelerated bookings growth this quarter. More partners are also adopting our highest tier all-in-one cyber safety memberships and promoting our bundled solutions through their channels. As just one example, our employee benefits partners already see the expanded value we provide through Norton 360, and this channel continues to grow double digits with a robust pipeline ahead of the annual enrollment period. More and more consumers understand the need to have a full suite with identity protection, and we see it in our results. Additionally, across our go-to-market channels, we are leveraging our data and AI capabilities to drive more effective targeted campaigns through our in-product messaging platform, upselling more customers to higher-tier memberships with additional identity and privacy protection or cross-selling them additional add-on products that fit their immediate needs based on select moments of exposure. These post-sale levers continue to drive more growth, higher engagement, and in turn, higher retention. Our cyber safety platform remains our foundational bedrock and the growth playbook we deploy continues to provide an accelerating flywheel rooted in innovation and serving customer needs. In our Trust-Based Solutions segment, on a pro forma basis, bookings and revenue grew 26% and 27%, respectively, and more than doubled on a reported basis. In our LifeLock business, growth remained stable with highly retaining customers and strong customer NPS. Additionally, MoneyLion's personal financial management solutions are scaling significantly with strong gains in new active users and increasing product consumption. Our Engine financial marketplace delivered another strong quarter, the fourth consecutive quarter of growth over 50%. The accelerating adoption of third-party financial products available on Engine reinforces our marketplace strategy and our mission to help consumers make better financial decisions through embedded experiences across financial and nonfinancial platforms and apps. This momentous business is powerful in and of itself. And as we innovate across our Trust-Based Solutions segment, we believe it provides us with such a unique opportunity to cross-pollinate. Although we're just getting started, we are very excited about the green shoots in our early test results, driving offers, and in turn, demand with our LifeLock cohorts. We expect this momentum to continue as we expand the marketplace catalog to include new third-party product categories, such as prime credit cards that are personalized for our diverse customer base. Overall, our direct channels continue to demonstrate strong fundamentals, growing revenue 17% as reported and 6% pro forma. Partners are scaling considerably, growing revenue 88% as reported, and 24% pro forma, demonstrating healthy diversification, underpinned by strong innovation across our product portfolio. Turning to customers, we continue to expand our customer base, now reaching over 77 million customers, up approximately 1 million sequentially with expansion across our segments and net adds across our key channels. As we navigate forward with a more integrated business model, we will take a customer-centric approach, and that requires us to refine how we target personalized offerings to best serve their needs. We will continue to focus on subscribers, which are customers who pay for our products on a recurring monthly or annual basis, such as our vast Norton 360 membership customers or MoneyLion subscriptions, which are refining. In addition to subscribers, we will also focus on product users generating revenue, which are customers whom we monetize through transactions and complementary engagement models such as our MoneyLion's personal financial wellness and marketplace customers. While we are at the early stages of development, we wanted to introduce our expanded approach designed to capture the growing demand in a more focused manner as we continue to innovate and scale. We are no longer just a direct-to-consumer business, and there is no one-size-fits-all approach with such a diverse customer base. More to come on this as we drive further expansion across these vectors. Now turning to profitability. Q2 operating income was $623 million, translating to 51% operating margin, in line with our expectations. The operating margin for the Cyber Safety Platform was 61% and Trust-Based Solutions was 30%, each in line with our plan. Our margins remain robust as we continue to drive growth with a disciplined approach to resource allocation, scaling efficiency with AI, and measured investment in our long-term strategic initiatives. Q2 net income was $387 million, and diluted EPS was $0.62, up 15% year-over-year as reported. This represents our eighth consecutive quarter of achieving or exceeding our 12% to 15% EPS growth target. Interest expense was $139 million in Q2. Our non-GAAP tax rate remains steady at 22%, and our ending share count was 624 million, up 2 million year-over-year. Turning to our balance sheet and cash flow, Q2 ending cash balance was $701 million, representing over $2.2 billion of liquidity when including our $1.5 billion revolver. Year-to-date operating cash flow was $525 million and free cash flow was $512 million, demonstrating the capital efficiency of our business model. As we shared, Q2 is seasonally high, our highest use of cash given the concentration of tax payments that are due within the quarter, including a $139 million transition tax payment, our last payment related to the 2017 Tax Cuts and Jobs Act. Also worth noting, due to how specific calendar dates fall in this fiscal year, we have both of our semiannual interest payments in our first half of fiscal 2026, whereas typically, we have the first payment in the first half and the second payment in the second half of the fiscal year. Given this higher use of cash in Q2, we did not have any additional capacity for share buyback during the open period. We paid down $160 million of debt and ended the quarter with our net leverage at 3.2x EBITDA. We paid $77 million to shareholders in the form of a regular quarterly dividend of $0.125 per common share. For Q3 fiscal 2026, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on December 10, 2025, for all shareholders of record as of the close of business on November 17, 2025. Our free cash flow generation remains very strong, and we stay committed to a balanced capital allocation as we enter into the second half of our fiscal year. Now let me share our Q3 and fiscal 2026 outlook. We are raising our revenue and EPS guidance again for fiscal 2026 based on our strong results and the momentum we're seeing. Our business remains resilient, bolstered by a highly recurring revenue base, further supported by solid customer retention and substantial free cash flow generation. For fiscal year 2026, we now expect full year revenue in the range of $4.92 billion to $4.97 billion, up from our prior expectation of $4.8 billion to $4.9 billion, and reflects reported revenue growth of 25% to 26% year-over-year. We expect non-GAAP EPS to be in the range of $2.51 to $2.56, representing our continued commitment to achieving our 12% to 15% annual EPS growth. For Q3, we expect non-GAAP revenue in the range of $1.22 billion to $1.24 billion. We expect Q3 non-GAAP EPS to be in the range of $0.62 to $0.64 or 12% to 15% growth year-over-year. Our Q3 and full year guidance assumes high single-digit pro forma growth, combined with disciplined cost management while funding targeted long-term growth investments in the Gen platform and additional AI capabilities. This guidance range also assumes current FX rates to Q2, although significant fluctuations remain possible given the volatility in currency markets that has taken place over the past few years. In summary, we are well-positioned after a strong first half. We're accelerating growth while maintaining the same operating discipline that has long defined our strategy. We are driving healthy growth in both of our segments, and we've made tremendous progress with the integration of MoneyLion. Operating margins remained strong, and we're continuing to invest in scalable innovation without compromising returns. Our free cash flow generation is robust, creating capacity for ongoing opportunistic share repurchases and further deleveraging to drive strong returns for our shareholders. We continue to hit the mile markers we've laid out as we navigate towards our long-term growth objectives. I want to thank the entire team for staying focused and delivering great value to our customers and shareholders. We look forward to sharing more progress in the coming quarters. As always, thank you for your time today, and I will now turn the call back to the operator to take your questions.

Congratulations on the strong results. Just wondering, first of all, if you could maybe give us your view of the macro environment and the health of the consumer right now. And if we were to see a more significant downturn, how you'd expect that to play across the two segments of the business. And then also I wanted to ask on the transition. Sure. Please go ahead. Sorry.

Okay. You asked a question after that. Sorry about that to jump. This is Vincent. Thanks for the congratulation. We definitely had an outstanding quarter, and I would add another one. So let's talk about the macro environment. We have two segments, right, security and privacy, and then trust-based solutions really anchored around secure financial wellness. I'll start with the security and privacy. Obviously, you’ve seen in our Q2 Threat Report that we just published last week, continued increase in complexity of the threat landscape, targeting consumers in various forms, increased use of AI. Just last quarter, we blocked 140,000 websites, all designed by AI but with a very high level of credibility and precision. So all of that, if you want, will continue. We believe the consumers for a very small membership fee, I would say, can protect against thousands of dollars lost through cyber criminals. When you look back at historical during downturns or upturns, we have not seen too much correlation to our subscription or security revenue streams. On the secured financial wellness, we now have millions of our customers connecting their bank account for monitoring, alerts. We do offer, as you know, first-party financial products from liquidity offering to credit building to high-yield savings accounts. We've seen a very strong growth again this quarter under personal financial management offerings here, slightly under 50%, but very strong. We have not seen a change in patterns in consumption over the last few months, and we do not see it here as we speak so far. Generally speaking, when interest rates continue to trend down, normally, there's actually renewed activities and refinancing and other activities that support that demand. On the second aspect of our secure financial wellness, it's our marketplace. Here, we've really seen the benefit of coming together with Gen, millions of consumers board onto the marketplace. We're just at the Money20/20 conference and a lot of very strong interest from financial partners to join the Engine marketplace by Gen. I think we'll continue to have that opportunity to offer for consumers, whether the economy goes up or down, I think the need for the best financial decisions will remain and be strong.

Thank you for the detailed insights on the LifeLock integration and its connection to financial wellness. As you continue on this cross-sell journey, could you discuss the frequency with which members engage with LifeLock products, especially regarding identity unlock while shopping for financial products? Additionally, I would appreciate it if you could elaborate on the mechanics of the cross-sell and any unique opportunities that may arise.

Absolutely. So obviously, revenue synergies is a long process, MoneyLion fully integrated from a back-end integrated from an R&D perspective. We're finalizing the integration of the data to offer an enriched experience. And now we're really unlocking the revenue synergies. There are two immediate components we're focusing on. One is Norton Money with EWA features going into employee benefits, but also Norton Money as a PFM tool for our Norton installed base. That's one. And the second one is the embedded, I would call it curated marketplaces focusing on the needs of the consumer. LifeLock is the first immediate case. Since we brought MoneyLion on, we've really enriched the marketplace with a credit card catalog or offerings, if you want, for prime customers, and we're embedding that into LifeLock. As you know, LifeLock, it’s not only monitoring your credit, it’s really monitoring and managing your financial life at moments of truth; you check your credit, you check your financials, when you're going to go for a purchase and/or if you want to improve your credit level in order to do a purchase that you intend to do today. So at that point in time, if you want in an embedded experience, we now have that marketplace embedded into the LifeLock applications. It's actually very positive results, although it's on a small base. We have a long transformation to drive, as we've already discussed in the prior quarter and making progress on it is really moving an application that was essentially passively giving you peace of mind to a more engaged application in which you come and validate and try to improve your journey, and we see good progress overall in that trend as we bring new tools such as the Credit Builder tool or now this curated marketplace.

Great. And congrats also on the strong results. I wanted to touch on partner revenue, which was, again, very strong and I think maybe accelerated organically, but you did note 50% growth in MoneyLion Engine and double-digit growth in employee benefits. Just any thoughts on how we should think about the trajectory of partner revenue over the back half of the year, anything to be mindful of from a seasonality perspective, particularly with MoneyLion Engine, and then the employee benefits channel into open enrollment? And I have a follow-up.

I'll address that question as it relates more to structure than finances. Two years ago during our Analyst Day, we recognized a significant opportunity with our partner organizations, which were then comprised of 90% direct business and 10% from partners. As we broaden our portfolio, we expect this to shift to an 80-20 split, with partner revenue growing at a faster pace than direct revenue. This change is logical since many of our services are integrated into partner offerings. We envisioned creating a marketplace that adds value for our consumers. Now, two years later, this strategy is beginning to take hold consistently. While the gap between partner and direct revenue may fluctuate, I anticipate that partner revenue will continue to surpass direct revenue as we explore bringing additional value to our consumers, even in areas we don't directly offer services, like banking or legal support, all contributing to overall financial wellness. I don't foresee specific seasonal patterns in our revenue changes, though growth rates may vary from quarter to quarter. Overall, I believe similar trends will persist moving forward.

Awesome. That's helpful, Vincent. And then Natalie, just on free cash flow. It looked like it was actually pretty robust after backing out the tax payment. I know you don't guide to it, but any color you can give just on how you think about free cash flow trajectory and as that continues to improve? I know you touched upon it in the remarks, but any update on how you think about capital allocation between debt paydown and share repurchase?

Our free cash flow generation will remain strong, particularly with seasonal highs in the second quarter. We experienced some timing issues that impacted us slightly more in Q2 than usual. As we grow and integrate more efficiently, we will continue to operate in a disciplined manner. We've established long-term margin expectations for each segment. We plan to allocate our capital judiciously, focusing on both accelerating debt repayment and share repurchases. Due to the timing of the MoneyLion deal over the last few quarters and the ability to engage in share repurchases, we haven’t been able to make as many share repurchases as we would have liked. However, as we progress through the latter half of the year, we aim to achieve a more balanced approach between debt repayment and share repurchases.

It's Dan Bergstrom for Matt Hedberg. So you highlighted higher engagement on Norton 360 in your prepared remarks. You also talked to some scams as providing some tailwinds there. Beyond that, maybe what are some keys to the momentum in upselling customers into those higher-tier Norton 360 memberships?

Thank you for joining, Dan. To remind everyone, Norton 360 is our comprehensive set of plans from the Norton brand, similar to Avast One from Avast's perspective. Our aim has been to increase membership. By paying a fee, customers gain access to new features and enjoy peace of mind in a rapidly changing cyber threat landscape. Depending on the plan, including the all-in-one option that incorporates LifeLock identity protection, customers can be fully secure. Currently, most of our customers are on the lower and mid-tier Norton 360 plans, excluding identity protection. Earlier this year, we integrated Norton Genie, our anti-scam tool, into the known 360 platform and transformed it from a purely AI-driven anti-scam tool into a comprehensive AI cyber safety assistant. We recently launched this feature in 40 new countries and in 40 different languages. This feature is essential for making our platform's applications more interactive, allowing users to ask questions and effectively connect various privacy and security features when needed. We've noticed positive momentum with the higher tier plan, Norton 360 with Norton Genie Pro, which enhances the experience by offering not just security and an AI assistant but also insurance, voice blocking, text blocking, and overall a more enriched experience ensuring complete privacy and protection. We're also launching Norton Money, which serves as an alternative for customers looking to upgrade to a higher plan with credit monitoring, financial insights, and a curated marketplace. As I mentioned earlier, I'm pleased to see strong progress in both membership growth and platform engagement.

That's great. I understand that paid customers is the new metric, but the previous KPI regarding direct to cyber safety customers was noted in the slides, showing an increase of 400,000 quarter-over-quarter. I realize there may be some rounding, but that's impressive and at the higher end of our historical expectations. Again, I understand it's a seasonally strong quarter, but could you shed some light on what contributed to the strong customer addition numbers?

Yes. I would say now it has been many, many quarters. I don't remember how many, maybe 7 or 8, that we've been in the range of, I would call it like 250 to 400. So you're right, it's in the upper of the range, but we basically see it on the high side of the range, in line to our expectations as we've been driving increased engagement, more channel to acquire customers and improvement on the retention. I think it's more progress across all of the dimensions that have been reviewed. Our customer base is evolving. We see it in two categories. One is subscriber-generated revenue, as Natalie mentioned, and the other one is product usage-generated revenue. We see a very strong increase across all dimensions, and our goal will be to continue to increase the subscription. We did provide the old metric just for people to understand and assess the health of our core Gen the way we looked at it before we split into two segments, which I think will be useful for investors.

Congrats on another raised guide.

Yes, thank you, Saket.

Vincent, may be for you, absolutely. Vincent, maybe for you, just kind of picking up off that thread. You've talked about sort of the potential for new business models in the MoneyLion base. I mean it seems to be doing very well, right, just as it is. But I think that there's such a subscription DNA at Gen, you've kind of talked about that as a possibility. Without preannouncing anything, how do you sort of envision something like that looking, if that makes sense?

Yes, absolutely. To provide some context, not all investors may be familiar with our complete history. Since you know us well and have covered us for a long time, it's important to note that when we acquired MoneyLion, its revenue mainly came from what we refer to as product usage revenue, which is primarily transaction-based. Many customers appreciate that they can use the product for free, and we earn a small fee from their transactions. As they say, if it’s working, don’t change it. We are being very cautious to preserve what's working for the MoneyLion customer base, and the team understands how to innovate in that context. We will keep this approach. Additionally, for more premium customers, we are developing subscription options that allow them to pay for access to various features, whether they want to use our Personal Finance Management tool, access liquidity products, utilize Credit Builder, or engage with investment features on our platform. This aligns better with our customer base. The features are ready, and it’s all about balancing marketing strategies between membership and transaction-based revenue. Over time, you'll see this progression. We’ve always mentioned that transitioning fully from transaction to subscription might create a temporary gap but will yield greater long-term value. We hope to manage this shift towards more subscription revenue with minimal impact overall, focusing on maximizing long-term customer value.

Yes. Thanks, Saket. Good to hear from you. Yes, MoneyLion margin, that's where we started, approximately 20%. Keep in mind, as we blend MoneyLion with Trust-Based Solutions and even just integrate it with Gen overall, we have achieved the cost synergies that we have laid out for ourselves as we integrate them as an acquisition, just high level, especially the back office and some of the other fixed costs that we could strip out of the business. So that's done. We also have revenue synergies that we're going after. You heard them peppered through the messaging today and our slide where in our day that we did around MoneyLion back in September. There are so many revenue synergies to go after. It requires investment to drive that growth. So we'll continue to stay committed to that. That points to the current margin rate today driving that 50% growth rate. As we look forward, of course, yes, the mix is definitely there and is an opportunity for us to balance. We want all parts of the 30, 60. It's a healthy model. It’s a flywheel effect. But the quarter in, quarter out, what percentage of the business is going to come from different segments is going to be mixed. As we move forward, we're going to find that right balance for the business, all with the appetite for healthy, sustainable accelerating rates of growth as we integrate across Trust-Based Solutions with all of the different services that we’re innovating on.

Maybe going along the same track of the MoneyLion, right? You had two solid quarters of MoneyLion growth, 45% to 50%. You previously guided it to grow 30%. I think your guidance now calls for an exit rate of 30%. Just wanted to get more color why we wouldn't see these elevated growth levels sustain into the back half? Apologies if I missed in your prepared remarks, but can you pair that with commentary around the business model transition you're expecting in the second half? And I have a follow-up after that.

Absolutely, yes. I’ll take that one first. When we acquired and closed the deal in April of this year, it feels like a long time; it was only 6 months ago. They were growing at 25% to 30% at about 15% operating margin. Since the beginning of this year and as we integrated and started to work on various aspects, including marketing and leveraging our customer base, et cetera, we've seen that elevated performance level that you mentioned, 45% in the quarter before and 50% this quarter, while we improved the operating margin over 5 points, now over 20%. We are not forecasting moving forward 50%. We do believe there may be a little bit of a boost of coming together, and we feel it's more prudent to base maybe linking back to Saket's question at around a 30% growth rate, 20% margin. We’ve already defined another new rule and called you the Rule of 50, that's what it would be and managing the business along those lines. As we see room and acceleration, we’ll definitely capture it in the marketplace. Be assured of that. There are different ways of capturing it, including moving more transactional customers, maybe customers we can identify as not having a strong recurring pattern and moving them to a membership, or having a chance to offer different values in a bundled membership structure, which is really most of what we are planning to do over time, while we maintain that Rule of 50 growing at 30% at a 20% margin. Along the line, every quarter, we learn more; we’ll understand better the trends, and that's where we'll be. What is not implied into our current exit 30% growth rate is any significant macro-level effect because, as I mentioned in the prior answer, we do not see a change today in patterns or behaviors from the millions of customers that are plugging into our platform.

Got it. And maybe as a follow-up, if I move towards the core Cyber Safety business. I know someone addressed earlier that you grew your customers, 400,000 sequentially. But if we look at the growth trends, they diverged a little bit from last quarter. Last quarter, if I have it right, revenue and bookings grew 4%. This quarter, revenue was 3%. Bookings was 5%. What drove that slight delta? Do you think that the 400,000 adds this quarter and the better bookings growth can translate into better revenue growth over the next few quarters?

Yes. Tomer, it's Natalie. Revenue is going to reflect the trailing 12-month bookings. If you go back and look at the bookings as reported, that's where you would see the 3%. Also keep in mind, we're rounded at the whole numbers. When you get into the decimals, it's sub 2 points. So it's really not that different between bookings rate of growth and revenue like you see 2 points on the surface. And yes, as we look forward, it's not just the customer count acquisition. It's the balance across the segments, it's the innovation, it's the scale, it's AI coming through, it's more personalization. It's more customization through IPM, cross-sell, upsell are still alive and well. Partner mixing in, there's just so many factors even when you look at both on a pro forma basis but even excluding MoneyLion, the core business has so much opportunity. We are just driving all of the growth levers that we possibly can with all of the innovation that's coming to market. As you look forward, we're focused and just look at the full year guide pointing to on a pro forma basis at a high single-digit rate of growth, and that's what I would point you back to.

Great. Maybe as a first question, you noted the AI impact kind of bringing 20% efficiency on customer support. Just wanted to get a sense of other ways in which you guys are utilizing AI and which you're finding traction within the business? And then just as a follow-up question, just any impact on tax rate that we should be expecting?

Let me address the use of AI. Our AI initiatives are divided into two main areas. The first focuses on leveraging our data platform to create AI-native features for products like Norton Genie, Spark, and the Norton Browser. This is part of our broader goal to develop a truly AI-native portfolio. We are also exploring how to protect against AI-generated scams and what security will look like in a scenario where consumers interact through automated agents for financial transactions, emphasizing the importance of privacy and security in that context. The second area involves transforming Gen into an AI-first company, which means changing our workflows rather than immediately adopting AI tools. Our support and services sector is further along in this transformation, with nearly half of our contacts managed in an AI environment, leading to significant savings that we are reinvesting into our data platform. In marketing, we are aligning around value creation under a single leadership, integrating everything from branding to performance marketing, and using AI tools to develop frameworks for our vision. While we currently don't automate everything from ideation to performance material creation with AI bots, we are making progress in developing materials and creatives through AI, allowing us to shift savings toward performance marketing and accelerate growth. In R&D, we have been implementing automation and running pilots to manage everything from ideation to product development with the assistance of bots. While we have seen some success, we are continuously refining these experiences to enhance our product development processes. We recognize the potential here, although it may take time to fully realize and capitalize on it, but we are on the right track to becoming an AI-first company.

And then I think you had a follow-up question on the One Beautiful tax bill?

Yes. Just any impact on tax rate that we should be thinking of?

So our tax rate is long-term focused. The 22% that you see in our non-GAAP results is assumed in the guide as well. The Beautiful Bill just helps with cash flows in terms of cash taxes in the short term. In the long term, there's no material change, so we don't influence that or we don't include that change in the long-term tax rate expectations.

As you think through the cross-sell opportunities between the MoneyLion and the Gen Digital bases and vice versa, which ones seem to be gaining the most traction early on? Are there any more go-to-market efforts left to implement to accelerate?

Yes, we are in the early stages and there is significant potential for growth. The current results reflect the strength of our core business, each segment contributing independently, along with a foundational platform built on data and operations. However, we have yet to fully realize the benefits of integrating everything. A primary focus is enhancing financial insights and options within the LifeLock app, a project that began organically with our initial discussions on financial wellness back in September, which eventually led us to acquire MoneyLion. We are now integrating these features and believe they will gain traction. We are being careful and creative in our approach, avoiding aggressive marketing that might overwhelm our LifeLock customers. Our priority is to maintain customer peace of mind while responding to demand rather than pushing a forceful marketing initiative. The second aspect involves incorporating MoneyLion's features into Norton as an alternative to identity services. The employee benefits channel presents a significant opportunity to promote our entire portfolio effectively. We are preparing to launch in this channel, which will require time to onboard new employers before we see any results. While there may be delays in seeing the impact, early discussions are very encouraging. This is just the beginning, and we are optimistic about the revenue synergies ahead. Thank you for your confidence. To our employees, I want to thank you for your relentless commitment to our customers and to fulfilling our mission of powering digital freedom. Gen is executing with momentum, discipline, and purpose, and our opportunity has never been greater.