Earnings call transcript: GenOn Energy Q2 2025 sees growth in revenue and AI integration

GenOn Energy Inc. reported a strong performance for the second quarter of 2025, with significant growth in both revenue and earnings per share (EPS). The company highlighted its strategic focus on integrating AI into its operations, which has driven efficiency and innovation. The earnings call revealed a revenue of 1.2 billion dollars, marking a 25% increase year-over-year, while the non-GAAP EPS rose by 15% to 0.62 dollars. The company also raised its full-year revenue guidance to between 4.92 billion and 4.97 billion dollars, indicating a growth rate of 25-26%.

Key Takeaways

• GenOn Energy's Q2 revenue increased by 25% year-over-year.
• Non-GAAP EPS rose by 15% to 0.62 dollars.
• Full-year revenue guidance was raised to 4.92-4.97 billion dollars.
• AI integration has improved efficiency in customer support by 20%.
• The company launched new products, including Norton Genie Pro and Norton Money.

Company Performance

GenOn Energy's performance in Q2 2025 was marked by robust revenue growth and increased profitability. The company's focus on AI-driven solutions and product innovation has contributed to its competitive edge in the cybersafety and financial wellness sectors. With a customer base of 77 million, the company continues to expand its market presence, particularly in Europe where it has seen strong geographical performance.

Financial Highlights

• Revenue: 1.2 billion dollars, up 25% year-over-year
• Non-GAAP EPS: 0.62 dollars, up 15% year-over-year
• Operating margin: 51%
• Free cash flow: 512 million dollars year-to-date

Outlook & Guidance

The company has raised its full-year revenue guidance to 4.92-4.97 billion dollars, reflecting a growth rate of 25-26%. Looking ahead, GenOn Energy is targeting high single-digit pro forma growth and plans to continue investing in AI capabilities. The company is also exploring subscription models for its MoneyLion platform and aims to expand cross-sell opportunities between its segments.

Executive Commentary

Vincent Pilette, CEO, emphasized the company's strategic direction: "We are building the first AI-powered platform with a trust layer that unites security, privacy, identity, and financial wellness solutions." CFO Natalie Derse added, "Our free cash flow generation remains very strong, and we stay committed to a balanced capital allocation." These statements underscore the company's focus on innovation and financial stability.

Risks and Challenges

• The complexity of the cyber threat landscape continues to increase.
• Economic pressures, as two-thirds of Americans live paycheck to paycheck, may impact consumer spending.
• Transitioning the MoneyLion business model requires careful execution.
• Maintaining competitive advantage in a rapidly evolving market poses ongoing challenges.

GenOn Energy's Q2 2025 performance highlights its strategic focus on AI integration and product innovation, positioning the company for continued growth in the cybersafety and financial wellness markets.

Full transcript - GenOn Energy Inc (GEN) Q2 2026:

Lauren, Conference Operator: Good afternoon, everyone. Thank you for standing by. My name is Lauren, and I will be your conference operator today. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Jason Starr, Head of Investor Relations. Please go ahead.

Jason Starr, Head of Investor Relations, GEN Digital: Thank you, Lauren. 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 calls contain 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. Now I'll turn the call over to Vincent.

Vincent Pilette, CEO, GEN Digital: 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 capitalized 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 thefts 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's 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. To stay go beyond security and protection, they are also about trust and well-being. People aren't just searching for another financial product.

They're seeking for 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 decisioning along their journey. That is exactly the role Gen Digital is built to play, and we are uniquely positioned to be the global consumer cybersafety 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 in the prior year, Gen Digital 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 cybersafety 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 cybersafety assistant, delivering actionable insights to Norton 360 users. As more innovation is integrated into our cybersafety suites, 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. Innocent privacy has accelerated to double-digit growth. We also enrich our Norton 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 two brands in consumer protection, and we will continue to drive additional innovation in the portfolio through new features such as our AI-driven customer renewal model. Overall, cybersafety 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 solution 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 their best-credited 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 product and our Engine Marketplace demonstrate our disciplined execution, unrivaled portfolio, and the strong secular demand for our secure financial wellness services. The integration of MoneyLion has been one of our smoothest yet. With customer synergies delivered ahead of plan, we are now unlocking revenue synergies by unifying best-in-class data systems and solutions across our cybersafety 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 plant launch of EWA 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 insight 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 premium 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 outline 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, payments into our cybersafety and identity protection entry door. AI is now the connective tissue of everything we do across innovation, products, marketing, and customer experience. In cybersafety, 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 pioneered 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 customer 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 continues to mature, now handling 55% of text-based chat and 40% of voice-based interactions, driving over 20% cost efficiencies 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 to our global data advantage and the consumer trust. With a strong first-half result and increased visibility in the second half of the year, we are raising our annual guidance at $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 scaled customer base and using our data mode 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 cybersafety 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 commitments 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. And excluding MoneyLion, Q2 revenue grew 5%, which is consistent quarter-over-quarter performance and in line with our commitments. In our cybersafety segment, bookings were up 5%, and revenue was up over 3%, with broad-based growth across channels. With our expanded scam protection features and cybersafety 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 cybersafety 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 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 cybersafety 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 solution 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 remains 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. And our engine financial marketplace delivered another strong quarter, the fourth consecutive quarter of growth of 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 non-financial platforms and apps.

This momentous business is powerful in and of itself, and as we innovate across our trust-based solution 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. And 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. And partner is 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 personal financial wellness and marketplace customers.

And 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. Operating margin for cybersafety 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 62 cents, 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 remained 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 on this fiscal year, we have both of our semi-annual 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 at the end of the quarter with our net leverage at 3.2 times EBITDA. We paid $77 million to shareholders in the form of a regular quarterly dividend of 12.5 cents per common share.

For Q3 fiscal 2026, the board of directors approved a regular quarterly cash dividend of 12.5 cents per common share to be paid on December 10th, 2025, for all shareholders of record as of the close of business on November 17th, 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 to $4.97 billion.

Up from our prior expectation of $4.8 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 62% to 64 cents, 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 remain 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 delivering 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. Operator.

Jason Starr, Head of Investor Relations, GEN Digital: Thank you. We will now begin the Q&A session. If you would like to ask a question, then please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. Please also ensure that your phone is unmuted locally. As a reminder, that is star followed by one to ask a question. Our first question today comes from Rob Culbreth from Evercore ISI. Please go ahead.

Vincent Pilette, CEO, GEN Digital: Great. Thank you very much. And 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 do you expect that to play across the two segments of the business? And then also I have asked on the transition. Sure. Please go ahead. Sorry.

Okay. You asked a question after that. Sorry about that, Jim, but this is Vincent. Thanks for the congratulations. 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 solution really anchored around the 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 cybercriminals.

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 secure financial wellness. We now have millions of our customers connecting their bank accounts 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 on their 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 brought 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, and 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.

Great. And thank you for all the detail on the LifeLock integration, some of the experiences you're bringing to bear between LifeLock and. Secure financial wellness. Just if you could maybe talk a little bit as you go down this cross-sell journey, maybe about the frequency of member interaction with the LifeLock products, particularly around. As they do identity unlock as they're shopping for financial products. Maybe if you could just talk a little bit about the mechanics of the cross-sell and some of the unique opportunities there. Thank you.

Absolutely. So obviously, revenue synergies is a long process. MoneyLion, fully integrated from a backend, integrated from an R&D perspective. We're finalizing the integration of the data to offer even enriched experience. And now we're really unlocking the revenue synergies. There are two immediate components we're focusing on. One is Norton Money, whereas EWA features going into employee benefits, but also Norton Money as a PFM tool for our Norton install 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 credit card catalogs or offerings, if you want, for prime customers. And we're embedding that into LifeLock. And as you know, LifeLock, it's not only monitoring your credit.

It's really monitoring and managing your financial lives at moments of truth. You check your credits. 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. And so at that point in time, if you wanted an embedded experience, we now have that marketplace embedded into the LifeLock applications. It's actually very positive results, although it's still on a small base. And we have a long transformation to drive, as we've already discussed in prior quarters and we're 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. Thank you again.

Yep. Thanks, Rob.

Jason Starr, Head of Investor Relations, GEN Digital: Our next question comes from Roger Boyd from UBS. Please go ahead.

Natalie Derse, CFO, GEN Digital: Great. Thanks for taking the question 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 have a follow-up.

Vincent Pilette, CEO, GEN Digital: Yep. I'll take that one because I think it's less financial and more structural. So two years ago when we did an ISD, we said, "Hey, we have a big opportunity in our partner organizations." At the time, it was 90% direct, 10% partner. As we were expanding the portfolio, we said, "In the long run, we think it will be more of an 80/20, and you're going to see partner. Growing faster than direct." And it makes sense because many of our services are embedded into partner views. And then we had this long-term view of bringing this marketplace, adding more value to our consumer. And what you see now, two years later, eight quarters later, since we laid out that strategy, it's finally taking roots.

Quarter in, quarter out, you may have a little bit bigger gap or smaller gap, but I think you'll continue to see the partner revenue outgrow the direct revenue as we continue to contemplate bringing. To our consumers adjacent values that we may not even manufacture ourselves because we neither a bank or we may not be a legal firm, but that all fits together around supporting that financial wellness overall. And no, I would not predict specific. Seasonality quarter in and quarter out that you see every year. Now, obviously, you can always do growth rate change quarter in and quarter out, but similar trends will continue moving forward.

Natalie Derse, CFO, GEN Digital: 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 allocations between debt paydown and share repurchase? Thanks.

Speaker 4: Yeah. Thanks, Roger. Our free cash flow generation will continue to stay strong. It's, yeah, seasonally high in Q2. And then, of course, we have that timing element that hurt a little bit more in Q2 than norm as well. Yeah. As we accelerate rates of growth, as we integrate and we continue to scale, we're going to continue to operate in a disciplined fashion. We've laid out our margin expectations for each of the segments over the long term, and we'll continue to. Deploy our capital in a disciplined and balanced way across accelerated debt paydown, but also share repurchases. And then. We just haven't, with the timing of the MoneyLion deal over the last, I would say, three to four quarters, and when we were able to get out in the open period, we just didn't have the opportunity to do much share repurchase.

But as we look to the back half, we'll get back to being much, much more balanced across accelerated debt paydown and share repurchase.

Natalie Derse, CFO, GEN Digital: Really helpful. Thanks again.

Speaker 4: Thanks.

Jason Starr, Head of Investor Relations, GEN Digital: Our next question comes from Dan Bergstrom from RBC. Please go ahead.

Dan Bergstrom/Matt Hedberg, Analyst, RBC: Hey, it's Dan Bergstrom from Matt Hedberg. Thanks for taking our questions. So you highlighted higher engagement on Norton 360 and their prepared remarks. You also talked to some scams as providing some tailwind there. Beyond that, maybe what are some keys to the momentum in upselling customers into those higher-tier Norton 360 memberships?

Vincent Pilette, CEO, GEN Digital: Yeah. Very good, Dan. Thanks for joining. To remind people, Norton 360 is our all-in-one suite set of plans, if you want, from the Norton brand. We have the same on Avast, one from the Avast view. Our goal has been to move more and more people to membership. You pay a fee, and with that, you'll get our new features and get peace of mind in this environment where cyber threat is pretty dynamic. Then depending on the plan, all the way to all-in-one, including the LifeLock identity protection, you're fully protected. We still have the majority of our customers on the Norton 360 lower and mid-level tier, not including the identity.

We have, at the beginning of the year, moved Norton Genie, our anti-scam, into that Norton 360 platform and have evolved Norton Genie from a pure AI-driven anti-scam to becoming really the AI cybersafety assistant. We have now just launched into 40 new countries in 40 languages that feature. That feature is at the core of getting our application, so our platform, more engaging, where you can ask your questions and can automatically also ultimately become your agent, connecting different privacy and security features at the moment it's needed. We have seen some traction on the upper level of the plan, Norton 360, with Norton Genie Pro, which is an upgraded feature that provides not only the security side, the AI assistant, but also the insurance, the voice block, the text block, and a much more enriched experience, full private and full protection. We have seen traction with that.

And then we now are just launching Norton Money, which will be the alternative to go and move to a higher plan with credit monitoring, financial insights, and a curated marketplace as an alternative path to the upper plan. So, as I mentioned in my remarks, continue to see very good progress towards, A, the membership and, B, the engagement with the platform.

Dan Bergstrom/Matt Hedberg, Analyst, RBC: That's great. And then I know paid customers is the new metric, but the old KPI around direct cybersafety customers was in the slides, up 400,000 quarter over quarter, understanding there's some rounding there, but that's impressive and at the upper end of what we'd expect historically. And again, no, it's easily a strong quarter here, but maybe what was behind some of the strengths on the customer addition number?

Vincent Pilette, CEO, GEN Digital: Yeah. I would say now it has been many, many, many quarters. I don't remember how many, maybe seven or eight, 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. And I think it's more progress across all of the dimensions that. Reviewed. Now, as you know, our customer base is evolving. We see it in two categories. One is. A subscriber-generated revenue, as Natalie mentioned, and the other one is a 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 all 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.

Dan Bergstrom/Matt Hedberg, Analyst, RBC: Thank you.

Jason Starr, Head of Investor Relations, GEN Digital: Thank you. Our next question comes from Sucket Tallyer from Barclays. Please go ahead.

Suket Tallyer, Analyst, Barclays: Okay. Great. Hey, Vincent. Hey, Natalie. Thanks for taking my questions here. And congrats on another raised guide.

Vincent Pilette, CEO, GEN Digital: Yeah. Thank you, Vincent.

Suket Tallyer, Analyst, Barclays: Vincent, maybe for you. Absolutely. Vincent, maybe for you, just kind of picking up off that thread. You have 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. I think that there is such a subscription DNA at Gen. You have kind of talked about that as a possibility. Without pre-announcing anything, how do you sort of envision something like that looking? If that makes sense.

Vincent Pilette, CEO, GEN Digital: Yeah, totally. So just to put it in context, maybe some investors don't have the full history that we've had since you know us very well and cover us for a long time. When we acquired MoneyLion. Most of the revenue, if not all of the revenue, was driven by what we call product usage revenue or product usage-derived revenue, which is essentially transaction-based. And many. Customers like that. They use the product for free. And when they transact, a very small portion of the transaction gets booked as a fee, and that's how they make the money. You know what they say, Sucker? They say, "Don't break what's working." So we're trying to make sure we manage very carefully because it's really working for the MoneyLion install base, and it's working for the MoneyLion customer, and the team knows how to bring innovation into that environment.

We will maintain that. In addition, and that's why it's complementary, we say that when you come to. A little bit more premium customers, they like to have a subscription. They pay, and then they have access to many different features. À la carte or as much as they want. And we're building those subscription views, which may include not only the ability to use the PFM tool or to consume some liquidity product or to do Credit Builder for their kids or. Having access to actually the investment features on the platform. And we know that's more prone to our type of customer base. And so the features are there. And now it's a question of balance on how we're going to drive from a marketing perspective and where we're going to drive membership versus transaction-based. Revenue. And over time, you're going to see that progression.

As you know, just to complete my answer, we always said that a shift, a full shift from transaction to subscription will lead to a shorter gap in the short term and a longer value over time. And we're hopeful to be able to manage that transition towards more subscription without too much impact on our overall, knowing that it's all about driving long-term customer value here for maximizing that CLV.

Suket Tallyer, Analyst, Barclays: Yep. Absolutely. Natalie, maybe for my follow-up for you. I'd love to maybe just touch on the profitability of the MoneyLion business. I think in the presentation, it showed about a 20% operating margin. That, of course, is fantastic if it's supporting 50%. Top-line growth. But maybe the question is, how do you think about the margin journey that we could see in MoneyLion and maybe remind us how that sort of 30/60 dynamic that we talked about at our session. A couple of months ago sort of plays into that journey?

Speaker 4: Yeah. Thanks, Sucket. Good to hear from you. Yeah. MoneyLion margin, that's where we started, approximately 20%. Keep in mind, as we blend MoneyLion with TrustBase Solutions and even just integrated 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 fixed costs that we could strip out of the business. That's done. We also have revenue synergies that we're going after. You heard them peppered through the messaging today in our slide and 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. We'll continue to stay committed to that. That points to the current margin rate today driving that 50% growth rate.

And then as we look forward, of course, yes, the mix is definitely there and is an opportunity for us to balance. But keep in mind, we want all parts of the 30/60/90. They provide us different layers and levels and types of value and access to different customers. So if you think about the 30% margin on the marketplace, that's going to fuel customer acquisition and really give us just a ton of access to different sites, lots of data that we can do deep data analysis and customization, personalization. And then the first-party products at 60% and then all the way up to the retargeting of the 90%. It's a very, very 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.

And as we move forward, we're going to find that right balance for the business, all with the appetite of healthy, sustainable, accelerating rates of growth as we integrate across. TrustBase Solutions with all of the different services that we're innovating on.

Suket Tallyer, Analyst, Barclays: Super helpful. Thanks, guys.

Speaker 4: Thanks.

Jason Starr, Head of Investor Relations, GEN Digital: Our next question comes from Toma Silberman from Bank of America. Please go ahead.

Dan Bergstrom/Matt Hedberg, Analyst, RBC: Hey, guys. Yeah. Maybe going along the same track of the MoneyLion, right? You had two solid quarters of MoneyLion growth, 45 to 50 percent. You previously guided it to grow 30%. I think your guidance now calls for an exit rate of 30%. And just wanted to get more color why we wouldn't see these elevated growth levels sustain into the back half. And 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.

Vincent Pilette, CEO, GEN Digital: Absolutely. Yeah. So I'll take that one first. So MoneyLion, when we acquired and closed the deal in April of this year, it's not too long ago. It feels like a long time ago, it's only six months ago. They were growing at 25 to 30 percent at about 15% operating margin. Since the beginning of this year and as we integrated and started to work on various different aspects, including marketing and leveraging our current customer base, etc., we've seen an elevated performance level, as you mentioned, 45% in the quarter before and 50% this quarter, while we improved their operating margin over five 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 Sucket's question, at around a 30% growth rate, 20% margin. If I redefine another new rule and call 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. So be assured of that. And 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 bundle 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, up to 20% margin.

And then along the line, every quarter, we learn more, we'll understand better the trends, and that's where we'll be. What it is not implied into our current exit 30% growth rate is any significant macro-level effect because, as I mentioned in a prior answer, we do not see a change today of patterns or behaviors from the millions of customers that are plugging into our platform.

Dan Bergstrom/Matt Hedberg, Analyst, RBC: Got it. And maybe as a follow-up, if I move towards the core cybersafety business, I know someone addressed earlier that you grew your customers 400K 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? And do you think that the 400K adds this quarter and the. Better bookings growth can translate into better revenue growth over the next few quarters?

Speaker 4: Yes, Tomer. Hey, it's Natalie. Keep in mind, 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 only rounded at the whole numbers. When you get into the decimals, it's sub two points. It's really not that different between bookings rate of growth and revenue, like you see two points on the surface. And yes, as we look forward, it's not just the customer 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. And we are just driving all of the growth levers that we possibly can with all of the innovation that's come into market. So I would say, as you look forward. We're focused and just look at the full-year guide pointing to, on a pro forma basis, a high single-digit rate of growth. And that's what I would that's what I would point you back to.

Dan Bergstrom/Matt Hedberg, Analyst, RBC: Great. Thank you.

Speaker 4: Thanks.

Jason Starr, Head of Investor Relations, GEN Digital: Our next question comes from Metta Marshall from Morgan Stanley. Please go ahead.

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

Okay. Let me take the one on the use of AI. So all of our AI initiatives are split into two buckets. One is to use our call it data platform to build AI-native features of products from Norton Genie to Spark to others, Norton browser that you see there. I'll leave that on the side because that's not your question, but it's our main effort in trying to bring a truly AI-native portfolio, even all the way thinking in our lab of not only how we protect against AI-generated scams or threats, but how will security look like in the world of agent-to-agent interactions where you, as a consumer, may ask your automated agent to do financial wellness transactions on your behalf and then interact in the world of agent. How does privacy and security work in that environment? So super, super important topic.

And then we have the second bucket, which we call transforming Gen into an AI-first company, which is really changing our workflows, not immediately jumping into AI. Platform or tools, but changing our workflows to then being able to automate and where it's needed using AI to generate things. Obviously, in support and services, we're further along. The tools and the processes in the market are more mature, which they have roughly half, a little bit less than half of all of our contacts fully contained into an AI environment whether it's one or multiple bots. And that has generated significant savings, which we have reused to really build our data approach or data platform to. Our business. I mentioned marketing. Marketing is probably the second to R&D. I'll talk about R&D in a minute, function that we're transforming.

Marketing, really, we combine everything from upper funnel or branding all the way down to performance marketing under one leader, combined organizations. And we've realigned around value creations around their brand. And they are using the tools, AI-first, to really develop the framework to our vision later on will be to enable our product leaders to do everything from ideations to first-level performance materials assisted by AI bots without human intervention. That's not the case today, but within the marketing function, they started to get really good traction on developing materials and even creatives all through AI. And that has enabled also to redirect the savings towards more performance marketing to then accelerate the growth. And then the last piece is around R&D. We've been at it for a little bit longer, which is starting with more automations. We're running some pilots. I'll give you the name.

We call it Inside Gen, the Genny Corn, and it's to see if we have from ideation to product development, everything managed by one person assisted by bots. We have some level of success, but we are running a lot of those experiences and bringing them back into our development environment to improve the way we develop products. There, the savings are really redirected since we had a large portfolio with years of. Experience, but also skew to maintain. We're trying to lower our maintenance costs to redirect into more innovation and, most importantly, higher velocity in our different prototypes and testing. I would say I see really great potential. They're slower to. Materialize and capture, but we are on a great path. That's how we are becoming an AI-first company.

Speaker 4: And then I think you had a follow-up question on the one beautiful tax bill?

Vincent Pilette, CEO, GEN Digital: Yeah. Just any impacted tax rate that we should be thinking of.

Speaker 4: So our tax rate is long-term focused. And so the 22% that you see in our non-GAAP results. Is assumed in the guide as well. So. 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 really influence that or we don't include that change in the long-term tax rate expectations.

Vincent Pilette, CEO, GEN Digital: Got it. Great. Thank you.

Speaker 4: Sure.

Jason Starr, Head of Investor Relations, GEN Digital: Our final question today comes from Joseph Gallow from Jefferies. Please go ahead.

Suket Tallyer, Analyst, Barclays: Hey, guys. Thanks for the question. As you think through the cross-sell opportunities between the MoneyLion and the Gen Digital bases and vice versa, which one seems to be gaining the most traction early on? And then are there any more go-to-market efforts left to implement to accelerate?

Vincent Pilette, CEO, GEN Digital: Yeah. Very good. So we are at the early stage. So I definitely would say yes, we have a lot of room to accelerate. The current results you see here are on the merits of the core. Business on their own, each one of them, and then maybe. A core platform of data and operations. But we haven't really delivered yet the value of bringing everything together. The most natural one and more immediate one is really the. Embeddment, if you want, of financial insights and financial options into the LifeLock app. That's where originally maybe we had discussed that in September, where the initial ask for financial wellness. Insights and advice were coming from. That's how we started that project organically and then led to the acquisition of MoneyLion. We now are embedding that, and I think it's going to take traction. We're very careful.

We're very creative, if I can say. We're not doing blasting marketing. We know that our customer in LifeLock will benefit from that insight and those new options, but we're following their demand. We're not trying to do a forceful. Marketing campaign or inside app that could be very annoying. So preserving their peace of mind is key, and we'll drive at that space. The second one, obviously, is bringing Norton money—sorry, money into Norton as an alternative to identity into Norton or in full combine, of course. And the most immediate one is. MoneyLion features into our employee benefit channel that represents probably the best channel on selling the entire portfolio and having traction on all dimensions. We are about to launch that. Of course, in employee benefit channel, you're going to have to have the time to onboard the new employers, then go for the.

Onboarding view, and then only you'll see the results. So the result will be delayed, but the traction and the early discussions are. Extremely positive. So it's only the beginning of the journey, I would say, on the revenue synergy side.

Suket Tallyer, Analyst, Barclays: Great to hear there is more to come. And then just I know you called out a consistent macro, but. America's has been pretty consistently strong. Is there anything to call out on the other GEOs?

Vincent Pilette, CEO, GEN Digital: Actually, you're right. We haven't talked too much about the other GEO. I was just discussing that with Natalie and my head of corporate SP&A yesterday, reviewing the results in Europe. They've been very strong, positively surprised by how broad-based our growth rates have been. US first. Then for a while, we had Latin America leading the way. Right now, for the last two quarters, we've seen a lot of strength coming out of Europe. And we haven't reintroduced financial wellness yet in Europe. So that's talk about more to come over the next few quarters and years. We really feel excited about all of the levers we have at our disposal, if I can say, to drive that long-term value for our customers.

Suket Tallyer, Analyst, Barclays: Thank you.

Jason Starr, Head of Investor Relations, GEN Digital: Thank you. That is the end of the Q&A session, and this concludes today's call. Thank you for joining, everyone. You may now disconnect your line.

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