Gen Digital Q1 Earnings Call Highlights
Key Points
- Interested in Gen Digital Inc.? Here are five stocks we like better.
- Gen Digital exceeded first-quarter guidance, with bookings and revenue each rising 11% year over year to $1.28 billion and $1.34 billion, respectively, while non-GAAP EPS increased 19% to $0.71.
- The company raised its fiscal 2027 outlook, now expecting revenue of $5.375 billion to $5.475 billion and non-GAAP EPS of $2.87 to $2.97, citing continued Cyber Safety momentum and stronger-than-expected financial-wellness and marketplace growth.
- Trust-Based Solutions was the fastest-growing segment, with bookings up 25% and revenue up 24%, while Engine Marketplace surpassed a $500 million annual revenue run rate. Gen also generated $430 million in free cash flow and returned $181 million to shareholders.
Gen Digital (NASDAQ:GEN) reported first-quarter fiscal 2027 results that exceeded its guidance, with revenue, bookings and earnings rising at double-digit rates as growth in trust-based solutions complemented continued momentum in its core cyber-safety business.
Chief Executive Officer Vincent Pilette said the company delivered an 11% increase in both bookings and revenue, while non-GAAP earnings per share rose 19%. Paid customers reached 81 million, extending a run of sequential customer growth to 11 quarters. The company raised its full-year revenue and earnings outlook, citing momentum across its portfolio and increased confidence in financial-wellness and marketplace synergies.
Quarterly Results and Raised Outlook
For the first quarter, Gen reported bookings of $1.28 billion, up 11% year over year, and revenue of $1.34 billion, also up 11%. CFO Natalie Derse said the results represented the company’s fastest revenue growth rate since Gen was created. The company said its comparisons were adjusted to exclude an extra fiscal week in the prior-year quarter and include MoneyLion’s stub financials in the prior-year period.
Non-GAAP operating income rose 9% to $668 million, while the operating margin remained stable sequentially at 50%. Non-GAAP net income was $431 million and diluted non-GAAP EPS was $0.71, above the company’s guided range of $0.68 to $0.70.
Gen raised its fiscal 2027 revenue outlook to $5.375 billion to $5.475 billion, representing growth of 9% to 11%, from prior guidance for 8% to 10% growth. The company now expects full-year non-GAAP EPS of $2.87 to $2.97, up 14% to 18%.
For the second quarter, Gen forecast revenue of $1.325 billion to $1.35 billion, or growth of 9% to 11%, and non-GAAP EPS of $0.71 to $0.73.
Pilette said the higher full-year revenue outlook reflects continued momentum as well as confidence in financial-wellness synergies. He said the upside is expected to be driven more by financial wellness and marketplace initiatives, while Cyber Safety continues to show “solid, sustainable momentum.”
Cyber Safety Growth and Higher-Tier Memberships
Gen’s Cyber Safety segment posted 4% growth in both bookings and revenue, supported by performance across brands and memberships. The segment’s operating margin held at 61%.
Derse said higher-tier Norton 360 offerings grew at a double-digit rate during the quarter. Those products bundle security, identity protection, virtual private network services and other safety features. Norton cross-sell penetration increased to 27%, while membership adoption across Norton, Avast and Avira exceeded 60%, according to Pilette.
The CEO said annualized bookings for Norton 360’s higher-tier memberships, which include scam detection, identity restoration, financial protection and insurance, approached $500 million. He also said average revenue per user is 8% to 10% higher than it was two years ago, while retention is near record levels.
Gen cited growing consumer concern about AI-enabled scams and data misuse as a source of demand. Pilette said the company’s scam-protection engine blocked more than 500 million scam attacks during the quarter, including deepfakes and voice clones. He said more than 60% of consumers surveyed by the company indicated that AI-driven scams made them more likely to pay for protection.
The company is also expanding products intended to address privacy and identity needs. Norton’s Financial Scan, built on MoneyLion AI, has moved out of beta and is being rolled out to Norton 360 customers in the company’s largest markets. The tool is designed to monitor connected financial accounts and flag potential issues.
Trust-Based Solutions Drives Faster Growth
Trust-Based Solutions was Gen’s faster-growing segment, with bookings rising 25% and revenue increasing 24%. The segment includes identity, personal financial management and the Engine Marketplace. Its operating margin remained at 30% as the company invested in growth initiatives.
LifeLock retention was nearly 90%, according to Derse, following a redesigned mobile-first experience and simpler tiered plans. Pilette said the company is seeking to broaden customer relationships from credit monitoring into protection for financial accounts and other assets.
MoneyLion’s personal financial management business grew faster than Gen expected, led by record Instacash originations and Credit Builder Plus. More than two-thirds of personal financial management revenue came from repeat customers, Pilette said. Derse added that Instacash receivables are sold to Sound Point, limiting Gen’s balance-sheet exposure as that business expands.
The company recently launched MoneyLion One Premium, a membership offering that incorporates Gen’s scam and identity-protection features. Pilette said it is still early to project upside from the product, but described membership adoption across the company’s businesses as a central part of its strategy to build longer-term customer relationships.
Engine Marketplace surpassed a $500 million annual revenue run rate, Gen said. The marketplace added more than 30 partners during the quarter and expanded into insurance through Trellis infrastructure. Pilette said the insurance capability was integrated with more than 10 partners within one quarter. Total network inquiries exceeded an annualized 425 million.
Gen said connected financial accounts surpassed 110 million, up from 75 million when it acquired MoneyLion, and that 35% of its paid customer base now engages with financial-wellness offerings. The company expects Engine-enabled cross-selling into its installed base to double by the end of fiscal 2027.
Margins, Cash Flow and Capital Returns
Gross margin was 82%, down slightly because of product mix. Derse said certain fast-growing marketplace categories carry lower gross margins due to revenue-sharing arrangements but also have lower operating-expense requirements. She said Gen remains focused on maintaining strong segment-level operating margins as the marketplace grows.
Total operating expenses were $425 million, or 32% of revenue, down 60 basis points year over year. Research and development spending rose to $105 million, or 8% of sales, as Gen invested in its platform and cyber-safety and identity products. The company said AI-enabled marketing creative workflows produced a 25% efficiency improvement in selected media channels, allowing it to create twice as many assets.
Gen generated $434 million in operating cash flow and $430 million in free cash flow during the quarter. It ended the period with $564 million in cash and more than $2 billion in liquidity including its revolving credit facility. Net leverage declined to 2.95 times after the company paid down $45 million of debt.
The company returned $181 million to shareholders through $100 million in share repurchases and $81 million in dividends. Its board approved a quarterly cash dividend of $0.125 per share, payable Sept. 9 to shareholders of record as of Aug. 17.
About Gen Digital (NASDAQ:GEN)
Gen Digital (NASDAQ: GEN) is a global cybersecurity company specializing in consumer- and small-business-focused security, privacy, and identity protection solutions. The company offers a suite of products designed to safeguard devices, networks, and personal information against malware, ransomware, phishing attacks and other digital threats. With a focus on user-friendly interfaces and cross-platform compatibility, Gen Digital develops antivirus software, VPN services, parental controls, password management tools, and comprehensive identity-theft monitoring services.
Gen Digital traces its origins to the consumer software division of Symantec Corporation, which was spun off in late 2019 under the NortonLifeLock name.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
Source MarketBeat
