Gen Digital Inc. (GEN) Q2 2027 Earnings Report, Transcript and Summary

Good afternoon, everyone. Thank you for standing by. My name is Jen, and I will be your conference operator today. Today's call is being recorded. [Operator Instructions] At this time, for opening remarks, I would like to pass the call over to Ben Lu, Head of Investor Relations.

Thank you, Jen, and good afternoon, everyone. Welcome to Gen's Second Quarter Fiscal Year 2027 Earnings Call. Joining me today are Vincent Pilette, CEO; and Natalie Derse, CFO. As a reminder, there will be a replay of this call posted on the Investor Relations website, along with our slides and press release. I'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. A reconciliation of non-GAAP to GAAP measures is included in our press release and earnings presentation, both of which are available on our IR website at investor.gendigital.com. We encourage investors to monitor this website as we post investor-oriented information such as news, events and financial filings. Today's call contains statements regarding our business, financial performance and operations, including impact on our business and industry that may be considered forward-looking statements, and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those statements are based on current beliefs, assumptions and expectations as of today's date, October 28, 2026. We undertake no obligation to update these statements as a result of new information or future events. For more information, please refer to the cautionary statements in our press release and the risk factors in our filings with the SEC and in particular, our most recent reports on Form 10-K and Form 10-Q. And now I will turn the call over to Vincent.

Thanks, Ben, and good afternoon, everyone. Q2 was another beat and raise quarter for Gen. Our revenue and bookings grew double digits and non-GAAP EPS increased 19% year-over-year. Our Cyber Safety Foundation continues to be strong, while Trust-Based Solutions is fueling our next phase of profitable growth. We ended the quarter with 83 million paid customers, up 2 million sequentially and 6 million from a year ago. And with this momentum, we are raising again our full year guidance. Cyber Safety revenue grew 5%, led by the adoption of comprehensive memberships and continued customer upsells and upgrades. Norton 360, our flagship product, provides the broadest, most advanced protection for consumers in the market and has scaled to over a $1.7 billion run rate, growing consistently at or above mid-single digit. We also continue to deploy our customer life cycle playbook, delivering the highest renewal lift in several quarters. Trust-Based Solutions grew 26%, driven by financial wellness adoption and Engine's diversified partner and vertical strategy. Partner channels grew double digits in both segments as carriers and employers increasingly embed our full suite protection into their solutions and our marketplace continues to expand its partnership and distribution. These results advance our mission to protect digital lives and help people manage financial needs online. The team at Gen has long prided itself on driving our business with discipline and creating lasting value. That means we manage for durable growth and profitability. We invest where customers' demand and returns are the strongest. We constantly improve efficiency and apply shared capabilities across the entire portfolio. This operating model delivers best-in-class margins in our segments, 62% in Cyber Safety and 30% in Trust-Based Solutions for a 50% blended margin this quarter. In Financial Wellness, we are focused on margin quality as we scale, simplifying pricing, [ bringing ] more advances to our own spend accounts and shifting Engine mix towards higher-margin first-party demand. The different profiles of our 2 segments fund continued investments and support our mid- to high teens EPS growth outlook for fiscal year '27. And we see plenty of opportunities to apply our model. Looking ahead to the second half, we are prioritizing our efforts where customer demand and flywheel economics are strongest. We are redesigning Norton 360 with Next-Gen VPN, scam protection and Safe AI. We're building new LifeLock experiences that connect breach alerts with on-demand AI-driven resolution. And we are expanding MoneyLion customer acquisition with a focus on monthly active users, higher income cohorts and a deeper product relationship. Early results are encouraging. Norton 360 beta user engagement increased double digits and LifeLock's redesigned site lifted mobile conversion also by double digits. We are relentlessly enhancing our portfolio because people increasingly need help. AI makes sophisticated attacks easier to launch and harder to distinguish. The recent PHP vulnerabilities show how advanced AI is accelerating vulnerability exploitation from discovering flaws to turning long-standing weaknesses into practical exploits across digital services consumers rely on every day. Our latest threat report found scams made up more than half of everything we blocked. Attacks grew more personal and local from family impersonation text to AI-generated scam videos in local language. Our real-time telemetry shows e-mail, text and call scam protection up 30% sequentially. And now as consumers adopt AI and give agents their credentials, each interaction creates risks that consumers feel even if many don't understand or know how to control them. Identity faces the same trend. Breach notices to our members rose more than sixfold in the first half and U.S. notices in the first 6 months of '26 exceeded all of '25. People increasingly assume the data is already exposed, feel helpless and basically tune out alerts. So we are connecting breach alerts to on-demand AI-driven resolution, giving them a clear and actionable next step. AI also raises a question of trust. Can I trust the person, the message, the action, the agent? Gen combines threats, identity and financial intelligence with trusted permission customer relationships, delivering more relevant protection. As threats grow more complex and more personal, the breadth of our signals and intelligence becomes an even greater advantage, giving us the unique ability to power consumers' trusted moments. Leveraging that intelligence, our product strategy follows clear customer needs. Let's take financial wellness, for example. Even in a resilient economy, nearly 1 in 4 American households spend almost all of its income on necessities. These families do not need another lender. What they need is an easier way to understand and manage their cash flow and a safe way to bridge a gap. Earned wage access is where MoneyLion delivers that value. Building upon that trusted entry door, we offer a cash flow assistance that shows members what it's safe to spend before the next paycheck. MoneyLion Save, our first interest-bearing premium deposit product, now gives them a place to grow their money. And as they build their financial strength, credit builder and identity protection offer core benefits as part of our MoneyLion One membership. Together, these features evolve MoneyLion into a daily financial relationship where each interaction is improving the next recommendation with a full feature set of secure personal financial management solutions. This is why the vast majority of MoneyLion revenues come from repeat customers, making our PFM solution a durable and valuable part of consumers' financial lives. Our road map is bringing technologies and capabilities together in valuable memberships. And our distribution is helping us meet demand where it is. With more than half of workers saying financial stress is hurting their productivity, most employers are looking to add benefits to help. Norton Money Workplace brings financial wellness to the employee benefit channel already used by Norton and LifeLock. Recently launched, its qualified pipeline already exceeds $30 million ahead of the enrollment season. So serving more needs, reaching people where they are and connecting protection with financial empowerment make our products easier to find, more useful and more connected than ever before. That is the flywheel that we are building. Better products and experiences deepen engagement and trust with customers' permission. Relevant context across the platform makes protection and financial tools more useful and personal. Deeper relationships lets us serve more of our customers' digital lives, and we continue to see proof of this in our business. The embedded financial wellness synergies remain on track. Engine is active across many Gen partnerships. AI-driven remarketing is scaling cross-sell and demand for new products like Norton Money Workplace are all contributing to our confidence as we ramp through the second half and fiscal year '28. Our momentum across the business and the proof points of our platform-driven synergies give us the confidence that we can deliver long-term sustainable growth. Our mission is to power digital freedom, which means powering trusted moments in our customers' digital lives, helping them protect what matters and moving forward online with confidence. Digital life now touches every aspect of how people live, work and manage their finances. AI is accelerating that shift, making decisions and acting on people's behalf. As life online grows more complex, trust matters more. Our strategy is to expand from protecting digital life to empowering it for prosperity, 3 connected roles: protect, empower and prosper. We protect people's device, data, identity, privacy and financial accounts. We empower them with greater control over their identity, reputation and financial wellness, and we help them prosper with better opportunities, smarter recommendations and easier transactions. Each trusted moment earns us the permission to support more aspects of their digital lives. That strategy runs on one Gen platform. Across our brands and services, we reached 500 million users and endpoints, connect nearly 120 million financial accounts and work with more than 1,300 partners across 25 verticals. Our shared intelligence uses permission context to improve protection, personalization and recommendation. We're seeing that in our customer outcomes. Our Norton cross-sell penetration is near 30%, and our AI recommender lifts revenue from new Norton cross-sells by mid-single digits. Our AI decisioning agent that reengage abandoned applicants now has its own bookings target, and we are in the early stages. The platform potential is significant. Our AI strategy has grown from 1 assistant to 3 connected layers. First, AI built into our products; second, protections for people using AI and their agents; and third, a trusted infrastructure so those agents can transact safely. One platform powers all 3 with protection and customer control at its core. Genie, our first AI native product, started with a simple focus, protecting against scams. Today, Genie uses context from across Gen to guide people on safety, identity and financial wellness. The same foundation now powers other AI native products such as Norton Neo with Agentic VPN and Norton Family Assistant. The second layer became urgent this quarter. Agentic AI for consumers moved from prediction to reality. Personal agents from major platforms reached millions within weeks with access to e-mails, passwords and money. Soon after, researchers showed how that access could be turned against users where an agent becomes an inside threat if left unprotected. We pioneered Agent Trust Hub to address these risks. It screens skills before use, monitors agents and adds protection through a sandbox safe zone with legal scans across LLM answers. Skills that have been scanned and marked safe by our technology in the leading agent marketplace have been installed over 100 million times by users and their agents. The latest Norton 360 release also brings this capability into Safe AI, addressing customer top questions: How do I keep my AI agents in check? The third layer is just beginning. This holiday season, agents will shop and pay for people, but the liability when they get it wrong remain unclear. Financial institutions face the same challenges. Some block outside agents, others are opening up. Both need infrastructure for consent, eligibility, compliance and fraud. Engine is building that infrastructure inside our marketplace modules. Engine launched the first insurance shopping experience built for AI agents in September, and MoneyLion already uses Engine to help people and their agents compare savings products. Our Gen Lab has more to come as the market evolves. Some of you have asked me whether personal agents reduce the need for what we do. Data points the other way. AI and agents create more ways for threats to reach consumers. And as people adopt these tools, the need for safety and trust grows with them. We don't expect agentic capabilities to contribute materially to revenue in this fiscal year, but this is about positioning Gen for the next decade of digital trust that will be decided. Before I close, I want to address capital allocation and M&A. Our first priority is investing organically where customer needs are and returns are strongest. We have built a durable business that generates nearly $2 billion in annual free cash flow, and we return excess cash through share buyback or debt repayment while maintaining a strong balance sheet. That framework has not changed. What also has not changed is that M&A remains part of our growth strategy and an accelerator to furthering our mission. We continuously assess consumer needs, engage with companies and explore opportunities to expand capabilities and reach. But our organic plan stands on its own, and our outlook for this year and the next does not depend on an acquisition. Whether we build, partner or acquire, each decision must stand on its merit and return on invested capital. In line with our track record, we stay disciplined and act in the long-term interest of our shareholders. We don't comment on specific targets or rumors out of respect for our strategic work and the business partners we engage with. But to avoid any misunderstanding, let me be clear, we are not working on a transformative acquisition today. The Gen team remains focused on serving customers, improving our products and building for the AI era. We have strengthened our growth model by focusing on customer needs, connecting our capabilities on one platform and investing with discipline. In the second half, we will demonstrate once again that we can keep doing all 3. I'm confident in our team, our plan and our ability to deliver. So thank you to the Gen team for bringing this mission to life every day. And with that, let me turn it over to Natalie to walk you through the financials.

Thank you, Vincent, and hello, everyone. For today's call, I will go through our Q2 fiscal 2027 results and our raised outlook for full year fiscal 2027. I will focus on non-GAAP financials and adjusted year-over-year growth rates unless otherwise stated. Now on to our results. We delivered another strong quarter with our key metrics all up double digits from revenues to operating income to EPS to free cash flow. Our Q2 revenue grew 12% to $1.37 billion, beating the high end of our guidance. Our bookings were up 10% to $1.35 billion and marked the sixth consecutive quarter of double-digit growth with consistent growth across both our Cyber Safety and Trust-Based Solutions segments. Not only did revenues come in better than expected, we delivered that upside with strong incremental operating drop-through with operating profit dollars up 10%. Operating margin for the quarter was consistent at 50%, even as we continue to invest in multiple initiatives across product and marketing. The continued strength in our business gives us confidence that our solutions and products are serving our customers' needs and pain points and sets up the momentum for us to lean into our investments in the second half. For the Cyber Safety segment, revenue grew 5%. Bookings were also up mid-single digits. The durability of our Cyber Safety growth continues to be supported by both new and existing customers migrating to an all-in-one membership suite and/or adopting multiple point products. As financial scams, AI threats, deep fakes and travel security threats proliferate, we are seeing strong adoption of our higher-tier Norton 360 memberships, which reached another record high as a percentage of our total membership. These memberships not only deliver best-in-class solutions such as identity, scam protection and VPN features, but all these products are integrated across a single platform that leverages the vast amount of trusted, unique and permissioned data to create a more holistic and unified experience for our members. This intelligence continues to power and enhance our AI Cyber Safety product recommender, turning the behavioral economics of different cohorts within our existing base into personalized offer decisioning and campaigns, directly impacting the performance of cross-sells and upsells in Norton this quarter, which were up double digits. As we move members up in membership tiers and on to multiproducts, both retention and ARPU for these cohorts are increasing by 5 to 10 points. That flywheel is strengthening, and we will continue feeding it with our future innovation. Additionally, our international expansion efforts are now translating to revenue with broad-based growth rates year-over-year across the geographic regions on the back of strong demand, cross-sells and retention. We will continue to push on each lever with our expanded portfolio, leveraging our scale distribution, our partners, our existing customer base and our CLV playbook to drive continued Cyber Safety growth. Cyber Safety margins reached a record high of 62% in the quarter, demonstrating the strength of our platform capabilities to drive incremental margins. Looking ahead, we will continue to manage Cyber Safety to mid-single-digit revenue growth and a 60% plus operating margin and continue our track record of rigorous operational discipline. In Q2, Trust-Based Solutions bookings and revenues increased 24% and 26%, respectively. Performance of our identity portfolio remained consistent. Last quarter, we talked about our reimagined LifeLock product experience, which has enabled us to drive adoption uplift to key features like financial monitoring through contextual and personalized prompts and convert more customers to higher-tier identity offerings. While we are still in the initial phase of the rollout, these early signs suggest that consumers are seeing and embracing the value of LifeLock's identity protection solutions and underwrite the trust that we have built with consumers. Personal financial management continued the growth momentum we have recently seen in the business. As the economic backdrop evolves, consumers face an increasing need to balance their cash flow needs with a more rigid timing of their paychecks. Our Instacash solution helps bridge those critical cash flow gaps and delivered another strong quarter of origination volume growth in Q2 with Instacash onboarding a record number of new users and increased usage measured as advances per user. This demonstrates the strong appeal and value of our solution and gives us the foundation to continue to innovate across our MoneyLion portfolio. While we only recently launched MoneyLion One membership, it is showing promising early signs of better engagement as members shift more of their savings and direct deposits to MoneyLion. In Q2, our Engine marketplace continued its strong momentum with growth across multiple categories, demonstrating the breadth and depth of our diverse product offerings to our partners and consumers. During the quarter, our top-of-funnel match product inquiries, which is a proxy for consumer interest in our marketplace and our diversified product offering, more than doubled versus last year. In the quarter, we added 18 new partners with an even larger sales pipe of new partners to be onboarded in the coming quarters. Trust-Based Solutions margin was stable at 30% in the quarter with operational gains supporting strong double-digit growth in financial wellness. Our data science team continues to drive efficiencies with various initiatives such as enhancing our AI decisioning agent flows and contextualized offers that improves our conversion yields. As we've stated in the past, our margin in this segment will be driven by product mix. But as you can see in our past few quarters, we've been able to achieve consistent margins even while we continue to invest behind our growth categories. Direct revenue of $1.074 billion was up 6%, in line with our prior quarterly trends. Our partner channel achieved accelerated revenue growth of 40% to $295 million with double-digit growth across multiple channels, including employee benefits, financial marketplace and our telco channel. Our omnichannel strategy in our partner business, which now represents over 20% of our total revenue, represents a multiplier on top of our direct-to-consumer product offerings in new markets, geographies and channels. Q2 paid customers increased to 83 million, up from 81 million last quarter and 77 million last year, with consistent performance from our cyber safety and identity subscriber base and expansion into new partners and verticals. Our Q2 OpEx was $415 million or 30% of sales, down 150 basis points sequentially and down 230 basis points from last year. AI-driven efficiencies are providing us leverage across many parts of our operations. Our AI creative studio produced 4x the ad assets of last year at a fraction of agency costs. And our latest LifeLock campaign was our first with 85% AI-generated scenes. In customer support, AI now resolves roughly half of contacts end-to-end at lower support costs and with higher service levels. In engineering, 75% of the code we shipped in the first half was AI written and productivity is up 20% since the beginning of our fiscal year. These gains are how we fund the growth agenda while protecting margins. Profitable growth remains the target with EPS growth as our guiding principle. We continue to invest in sales and marketing to drive both top of the funnel awareness and customer conversion and upsell while maintaining our discipline around CLV and CAC. We also continue to achieve efficiencies across our R&D efforts as we scale our top line with R&D spend of $96 million or 7% of sales. G&A discipline continued at less than 3% of sales. Our Q2 non-GAAP operating margin was stable at 50% sequentially, and our operating income rose 10% year-over-year to $686 million. While our reported margin is a function of product mix, we have delivered an expanding and efficient return on invested capital. If you look at our results over the past few years, as we scale the business, drive operating leverage, our ROIC has improved consistently. This is how we measure our business investments and capital deployment, ensuring a high return on capital as we further scale our business organically and inorganically. Q2 net income was $444 million, while non-GAAP diluted EPS was $0.74, up 19% year-over-year and exceeded our guided range of $0.71 to $0.73. Interest expense was $118 million in Q2, and our non-GAAP tax rate stayed at 22%. We spent nearly $250 million in the quarter on shareholder returns across dividends and share repurchases. Our commitment to shareholders and our operating principle is to deliver EPS growth faster than revenue growth. We have various levers to achieve this goal, ranging from expanding margin across our various product lines, debt repayment and share buybacks. Now let me talk about our balance sheet and cash flow. We ended Q2 with $589 million in cash, up from $564 million in Q1. We generated $326 million in operating cash flow and $323 million in free cash flow. Our net leverage is now below 2.9x as we paid down $45 million of our debt in the quarter. We also paid $76 million in dividends. For Q2 fiscal 2027, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on December 9, 2027, for all shareholders of record as of the close of business on November 16, 2026 -- excuse me, to be paid on December 9, 2026, for all shareholders of record as of the close of business on November 16, 2026. We repurchased $171 million of our shares outstanding. We have $1.8 billion remaining in our current program, and we will continue to repurchase shares as we believe that our current share price is not reflective of our actual performance and value. There are no changes in our guiding capital allocation principles. We will continue to deploy our capital in a disciplined and balanced fashion. In summary, we delivered first half results with strong momentum across our portfolio while maintaining our operating margin and achieved high teens EPS growth. With this position of strength and several new product introductions in the coming quarters, we are confident in our ability to capture the various growth opportunities in front of us in the second half. Now let me discuss our Q3 and raised fiscal 2027 guidance and some of the assumptions that underpin it. We expect Q3 to be another strong quarter with revenue of $1.365 billion to $1.39 billion, up 10% to 12%. We are raising and narrowing our fiscal 2027 revenue to $5.465 billion to $5.515 billion, reflecting growth of 10% to 11% versus prior guidance of 9% to 11%. We expect Q3 non-GAAP EPS to be in the range of $0.73 to $0.75, representing growth of 15% to 18%, and we are raising fiscal 2027 non-GAAP EPS to $2.93 to $2.98, up 16% to 18% year-over-year versus our prior guidance range of 14% to 18%. Our expanded strategic levers of growth, combined with strong profitability across each business line, enable us to deliver high teens earnings growth this year, outperforming our prior midterm target of 12% to 15% EPS growth. I want to thank all Gen employees around the world for their contribution to this success, and we look forward to delivering great value for our employees, customers and shareholders. As always, thank you for your time today, and I will now turn the call back to the operator to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Roger Boyd with UBS.

Vincent, congrats on the nice results. I wanted to see if you could maybe expand on customer interest you're seeing in some of the personal AI security products like Safe AI. Any metrics you can share around kind of demand adoption of these products? And to what extent are they driving some of the healthy uplifts you're seeing on Norton 360? And then I have a follow-up for Natalie.

Yes, that's obviously the question of the day everybody has in mind, right? And if you recall, Roger, we started to see some movement with OpenClaw at the beginning of the year. And then Muse and other agentic solutions now are kind of widespreading by the millions across consumers. It's a fun experience. We haven't really seen yet a full set of use cases that will be repeated. But I think the shopping season that's coming is going to be a great proof point. Those agentic solutions or those agents bring new risk surfaces for consumers. They connect the e-mail, they connect the credit card, they connect multiple things and -- even if you think that your password is protected because you have a password solution or your credit card is protected because you have a special wallet, the truth is your agent might go and find a scammed website thinking it's a real one and buy something for you that will never show up. So the risk is definitely pushing ahead. And as you know, we started with building the Agent Trust Hub to validate your agentic skills in an OpenClaw environment. We're now moving that into the consumer hands, making sure that they can stay in control of their agent or agentic solutions. We have other ambitions to move from a full security agent into a secure agent, meaning an agentic solution that is secure in nature to help you do some of those activities. NFA, Norton Family Assistant or even Norton Neo are built with that in mind. I would think it's early. I don't expect significant material revenue impact from that here now, but adoption will be an interesting one to go. Many investors ask me, do you see Muse trying to unsubscribe your services? The truth is we've seen the highest retention rate this quarter across our brands. And I think the overall angst, if you want, that these agent solutions bring is just increasing the need for protection. And if you ask me if I've already seen a Muse agent buying one of my Norton 360, the answer is no, but hopefully, it should not -- it should start very soon because I think in this environment, if I was a consumer, I would want to be protected.

That's great color. And then, Natalie, really strong partner growth in the quarter. Wondering if you could expand on the magnitude of growth you're seeing, particularly within the employee benefits channel. It sounds like there's a fair amount of excitement heading into open enrollment. You noted the pipeline for Norton Money into that channel. Just would love to hear your kind of thoughts on how you're thinking about both the Cyber Safety product as well as new products like Norton Money in that channel.

Yes. We're really excited about employee benefits. We've been building that quality of brokers, the sales effectiveness of that channel and just building that pipeline out for many quarters in a row. But to be quite honest, this quarter growth in employee benefits has been the highest it's been in 5-plus quarters. So really excited to see not only the Cyber Safety products continue to be a strong growth contributor for us. But now again, as we expand into delivering and bringing more of the financial wellness products into that pipeline, very excited about it. The pipeline has never been stronger. And now we've got a wider portfolio of products to sell.

Your next question comes from the line of Rob Coolbrith with Evercore ISI.

Congratulations on the strong results. Vincent, on Muse in particular, I think there was an initial wave of concern that has since died down, I think, a bit around the sort of subscription audits that Muse was offering to perform for consumers. Did you see any initial uptick in cancels or people turning off auto-renewal at all? And maybe you could just talk about generally these consumer agents as both maybe a potential threat, but also an opportunity for you. And just generally, I mean, I think you also talked about improvements in engagement across the services. We always think of engagement as sort of being the antidote to churn. But just anything you could tell us more about the levels of engagement that you drive with consumers consistently, how those have been trending and how you see that relating to renewal rates?

Absolutely. So let me decompose first the Muse or broader, the use of agents for or by consumers, applying different use cases and subscription was one of those use cases. The next one is shopping. And actually, I think shopping is ahead of that. So no, we have not seen any increase in subscription. I would point you to this quarter was actually in the last 4 quarters, the highest renewal rate, and we've seen solid demand for our product. So I would say that anxiety, if you want to be protected is maybe even more reinforced. We've seen agentic solution or agent, I'll call them agentic hackers, reviving old vulnerabilities. As you know, it has impacted more of the enterprise or enterprises. But I think indirectly, it floats that back to consumers with personal data and other information to leak and then create an increase in scams, which we also have seen this quarter. I think so the need to be protected from that perspective is only increasing. That's one side of the equation. For us, the other side, which is really where we spend our time on is making sure we can participate into that agentic new economy and provide our security agent and move that security agent into a secure agent applications where you can use PII data, but making sure that your agent doesn't fall on a scammed website or other impacts. I think those are all opportunities coming to fruition. I don't think it's the next quarter or the next 12 months that's going to materially impact it. But we will be right there with new solutions, stay tuned for innovation, and it's about really preparing for the next decade and making Gen relevant. So from that perspective, we're super excited. The topic of engagement, as you know, and you've been following us for a few years now, is a broad topic where we've been talking about that for 5, 6 years, right? We moved to be originally a data and device security agents and then move that into really protecting your digital life as a user. And then we want to move from protecting to empowering and now empowering to you to make better decisions to improve your wellness or your prosperity. That's a broad mission, multi-decade mission. And it starts at the core, making sure that you've moved from what was a decade ago, a passive, reliable software to still be a reliable but engaging application and use case. Genie and inside the applications, the redesign of Norton 360 when customers spend more time in the application to find or to set up the relevant -- setup, sorry, and to make sure that they are protected the way they are or they want from a personalization perspective, bringing them more around the identity, the privacy, the ability to manage your reputations, all of that goes into this line of people spending more time with the applications in a positive manner.

Great. If I could try one more quickly. Thank you for the clarification on transformative M&A. Just wondering though if you could maybe comment, do you have any ambition over the medium to long term to serve the SMB market or the solo entrepreneur market in a more significant way with either both cybersecurity and financial services products?

I think you've seen the proof points of our current portfolio, right? When we acquired Avast, people were wondering what did we do? We're really scaling up and redesigning the platform to be modular, to be underlying every app that's coming in. And when we acquired MoneyLion, people were wondering how that fits. And I think you've seen more and more of that proof point where financial wellness and security are part of an overall digital lives. And through the platform, we can deliver in an agentic way, modular white label through the different customer journeys, the value they require. We definitely have ambition to serve more of that digital life. But as I mentioned, it's earned one moment at a time. And every time we earn more and more of that trust, the next adjacent needs is an opportunity for us to go and help the consumer deliver it. When we talk about consumer, it's broadly defined. So it also includes your circle, your family, and it also includes, I would say, micro businesses or solopreneurs, people who are -- who have a personal digital life and a professional life and sometimes those 2 overlap, they have a behavior in terms of purchases and online behavior that's very equal to a consumer, but it's for their professional earnings. And as you know, with Norton Small Business, and you'll see more of our portfolio, we'll address some of those needs in a broadly defined way.

Your next question comes from the line of Joseph Gallo with Jefferies.

Can you talk a little bit more about the $100 million in revenue synergies, that target and the timing? Where do you expect that to materialize? Is that all financial wellness? Or are you seeing any other areas of unexpected benefit?

No, of course, yes, let me quickly do it. So just for other people on phone, if they do not know what we're talking about. We identified that financial wellness coming from the underlying technology of MoneyLion and Engine to be cross-sold or spread across the overall Gen portfolio and it's an acceleration on top of that normal business growth rate, if you want. There's a few areas, obviously, in my script. I've mentioned one obvious one. Norton Money Workplace is actually built on a white labeled MoneyLion technology that we then bring and sell with the Norton LifeLock into the employee benefit channel. We see a very good first reception on the overall funnel. We just introduced the product. They'll go to the onboarding season, as you know, in the employee benefit channels and revenue will unroll over the following 12 months. The marketplace, the marketplace to be included in our various properties into LifeLock into Norton Money is another set of views. And then selling the marketplace to Gen partnerships like Equifax are all part of that synergies. We feel well on track. We had indicated last quarter that it would ramp in the second half, which it is and would run its run rate or accelerate its run rate through fiscal year '28.

That's really helpful and great to hear. And just a follow-up. Operating margins were really impressive considering the mix shift in the business. What can the margin profile of Trust-Based Solutions be over time, especially as you move more into that high-margin first-party demand?

Yes. There's definitely a lot of puts and takes related to the mix of that segment, especially when you get into the financial wellness. In terms of the margin architecture, though, we've consistently said we're going to run that segment at approximately 30% as we navigate through that mix and we look at the different levels, different areas of growth because we want to make sure that we're preserving any of the volume upside that's coming through in a profitable way to reinvest for even more growth. So yes, as we're on a path in that -- through the lens of the synergies that Vincent just talked about to drive more and more and more adoption of our products, products on the marketplace that are transacting first party versus third party, there will be margin implications to all of those different products and segments that we've got within that business segment. And as they come together, we think we're going to be able to drive productivity, drive efficiencies and really drive that overall margin architecture relatively consistent to where we're at today.

Our next question comes from the line of Saket Kalia with Barclays.

Nice quarter. Vincent, I just want to put a bow on some of your prepared comments earlier, which were super helpful, by the way, on capital allocation. So just zooming out, can we just talk about your appetite for big deals? One of the questions I got around intra-quarter was why this headline was coming out, just given what seems like the healthiest organic growth that we've ever -- that we've seen in some time. So understanding what you said that we're not working on a transformative deal right now, maybe you could talk about what your appetite is for one of those deals in the future? And what do you look for in candidates?

Look, it all starts with the strategy. And I think you understand the strategy today. We have 2 growth engines. We have Cyber Safety, and we have the Trust-Based Solutions. Inside the Trust-Based Solutions, we have the LifeLock and MoneyLion, which are addressing direct consumer, and we have a marketplace. I do believe some of those categories are still underscaled compared to their potential. And we always look at opportunities to accelerate organic growth, if I can link to the prior question around your margin in Trust-Based Solutions. That is a growing market. And so if we see margin room, as we manage the business at around a business model of 20% growth for 30% margin, we're trying to reinvest excess margin to try to acquire more customers with the proof point that we know we can move them through a higher percentage of the digital lives that we would serve over time, thanks to the platform approach we have. That is the recipe. That's what we're focusing on. There are areas of the market that we are underrepresented. I think we mentioned the small businesses. It's really the very small businesses, and it's about offering protection, but also maybe some of the financial rails we have for MoneyLion, and we constantly look at this market. As we explore those markets, we obviously talk to everybody. And I would not start with size. I would start is, can we learn something in exchange? It could lead to a partnership. It could lead to something else. It could lead to a joint venture or it could lead to an acquisition sometimes. So we never really start from a transactional structure perspective. We more look like, is there value to increase the value we can bring to the customer on both sides of the fence. And I think you want us to go constantly look at that. And I will leave it at that. And as I mentioned, I'll reinforce what I said today. We are not working today on a transformative deal.

Got it. Got it. Very helpful. Natalie, for my follow-up, maybe for you. You and the team have talked about moving more of the MoneyLion business towards a similar membership model as what's been so successful in Cyber Safety, right, with memberships like Norton 360. I think you touched on this a little bit in the prepared remarks, but just to kind of flesh it out, where are we in that journey? And at least with the assumption that a membership model, which is going to be more ratable, right, is kind of short-term pain for long-term gain. If that's the assumption, when do we start to see that impact the growth in that segment, if at all?

Yes. So from a membership perspective, it is definitely part of the investment thesis when we looked at MoneyLion. We do believe, based on the years and years of success that we've got on the membership side on the Cyber Safety segment that we believe that we're able to offer an expanding portfolio of solutions when people are in a membership. We believe that on a go-forward basis, when you think about AI and you think about personalization, you think about healthy and productive engagement with your consumers, you want to be as inclusive of all the solutions that they need as possible and a membership offering allows you to do just that, not necessarily be going after purchase after purchase in more of the point products, but able to offer a much more inclusive offering to the consumers. It also allows us to get to know them so that when we do the predictive, when we do the behavioral analytics to be personalized and in constant contact with consumers, we know we want to move towards membership. So where are we at on MoneyLion One? We definitely are in the market, and we're scaling. I would say in terms of size and scale of the existing user base, we're just -- we're seeing green shoots, but it's not material yet. But we are definitely out in the market testing and scaling. And yes, so far, so good.

Your next question comes from the line of Meta Marshall with Morgan Stanley.

Great. Just as the partner channel continues to be a leading source of growth. Are there particular partners that you're adding that are more incremental that are more impactful? Or is it just kind of existing partners doing well with expanding their footprint?

Yes. I would say it's -- I would answer the question through the segments. So from a Cyber Safety segment perspective, the partner channels that we've known for a longer period of time, right, like we're more familiar with the employee benefits channel, xSP, telco, et cetera, those are still very much high contributors to growth. And the users that we get from them, there are different cohorts of customers, different types of engagements. But at the end of the day, it's a geo expansion. It's an expansion into cohorts that we don't believe we would as effectively reach from a direct perspective. And so we continue to foster, invest and scale those channels in a very, very healthy way. And then from a financial wellness perspective, of course, as we're adding more and more and more partners on both sides of the marketplace and Engine equation, so to speak, or transaction, that's where we're really seeing a lot of additional growth, a lot of diversification and just the ever-expanding products that we're able to solution and offer the customers in the marketplace.

And I would add that it's not different than the direct-to-consumer. On the Cyber Safety side, we continue to sell more of our comprehensive portfolio into the current existing base. And on the Trust-Based Solutions, it's about expanding into new channels, into new customer cohorts.

Got it. And then just maybe as a follow-up question on the Trust-Based Solutions margins, understanding kind of the investment to -- both in marketplace products and just in kind of marketing for that product. But do you feel like you are like managing towards keeping that 30% margin or you would sacrifice that margin a little bit to accelerate growth? Just how should we think about kind of investments that you're making and operating margins in that business going forward?

I would definitely continue to manage on the business model, i.e., long term and every quarter and every week and every month, and I think we're going to make adjusted decision based on what we see in the market is managing Trust-Based Solutions on that Rule of 50 with 30% margin for 20% growth. If we see an acceleration in the market, we will capture it but we'll manage with that in mind. There are different sort of investment. As I mentioned, in MoneyLion, we need to elevate the brand and really go and reach new cohorts and then move them into the membership, which is a whole journey by itself. In LifeLock, it's all about moving that into the agentic solutions. And in the Engine, it's about getting more verticals into the marketplace to make it more relevant to more partners. And all of that requires investment as we continue to grow. As you know, for our business model, we're not a business that's going to grow to get a little bit of top line and lose billions in the bottom line because that's not the market dynamic we have. And so expect us to continue to move towards durable growth with a disciplined margin approach.

Your next question comes from the line of Richard Poland with Wells Fargo.

I think it's encouraging to continue to see the Cyber Safety business hold in, in that mid-single-digit growth profile. I guess there's a lot of talk about the expansion with the Norton bundles. I'm curious, any color or commentary just around how we should think about the new user funnel on that side of the business?

Yes, let me take it. So another question I get, which is very similar to yours, is 5%, which, as you know, is the growth rate we manage again from a business model perspective, mid-single-digit growth rate at 60% margin. Is that kind of a ceiling? Or is there more? And I would say there could be more, but I want to see it. And the whole topic of Agentic that we've discussed for half of these earnings is part of that view where Norton can really stretch and be a lot of things with the flagship product on the suite, but moving into your Norton Reputation Management, your Norton Money and Norton Genie could be your security agentic solutions. And so depending on the market and market trends we see, especially on the Agentic side, I would think there is definitely a great room. Today, we have strong renewal rates. We have good new customer acquisition, but to position it as a mid-single digit. We're hopeful, but hopeful doesn't make a plan. So let's us continue to unveil innovations and see where the market trend goes for Norton before we explain more.

Awesome. That's very helpful. And I guess when we just think about the puts and takes of a more balanced macro environment. I think on one hand, there is kind of this building concern around AI. And so I could assume that, that could drive demand for that platform. But on the flip side, is there anything else to just kind of think through when it comes to what you're seeing within the consumer just overall health right now?

So I definitely would say that the agentic movement, the use of agent is creating angst and I think is underlying structural growth shift for us to make the protection product more relevant tomorrow than yesterday. Of course, the product has to adapt. The use case has to reach all the consumers from a risk perspective. Today, it's more contained in the enterprise, but it's only a matter of time. When it comes to the macro level, a tight environment, a difficult environment for consumers only creates more needs to better understand your cash flow when you earn your paycheck and how does that align to your spend and more solutions for financial wellness to optimize that environment. So we see those 2 trends, if you want, currently happening as a tailwind for our business.

Yes. And I would say you can see that evidenced in some of the prepared remarks as well as our metrics whether you're talking about the CS side, so the Cyber Safety segment with the cross-sell penetration ever being higher, the upsell and the growth coming from the higher tier memberships as current as well as new members elect to go higher and higher in that protection and with that upselling into higher ARPU tiers. And then as Vincent mentioned, the financial wellness, we've seen originations in Instacash continue on the PFM side continue to grow. The matched inquiries that you heard in my prepared remarks really point to not only volume at the top of the funnel for consumers being interested in new financial products, but then our matched inquiries basically give you a signal that the demand and the supply are coming together in a meaningful way in the Engine in the marketplace. So from all things, all those types of metrics bundled with what Vincent talked about more in the medium to long term and the trends and the economic signals, and then evidenced in the delivery in our quarterly results is how we get confidence in that.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.