Gen Digital Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements and factors that may affect future results The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements include statements that represent our expectations or beliefs concerning future events, including, without limitation, references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” “forecast,” “outlook,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” and similar expressions. In addition, projections of our future financial performance; beliefs regarding our business and strategies; anticipated growth and trends in our businesses and in our industries; the consummation of or anticipated impacts of acquisitions (including our ability to achieve synergies from acquisitions, including, but not limited to, our acquisition of MoneyLion), expectations about certain markets, divestitures, restructurings, stock repurchases, financings, debt repayments, investment activities and our liquidity; the outcome or impact of pending litigation, claims or disputes; risks associated with third party providers; evolving regulations and increased scrutiny from regulators; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our products and solutions; anticipated tax rates, benefits and expenses; the global macroeconomic outlook, including but not limited to, the impact of inflation, fluctuations in foreign currency exchange rates, changes in interest rates, and the impact of new trade policy, including the implementation of global tariffs; retaliatory trade regulations and policies; economic disruptions caused by the potential impact of volatility and conflict in the geopolitical and economic environment; general uncertainty in the financial and capital markets; and other global macroeconomic factors on our operations and financial performance; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to 20 Table of Contents update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including economic recessions, inflationary pressures and those other factors that we discuss in Part II Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended April 3, 2026. We encourage you to read those sections carefully. There may also be other factors that have not been anticipated or that are not described in our periodic filings with the Securities and Exchange Commission (SEC), generally because we did not believe them to be significant at the time, which could cause actual results to differ materially from our projections and expectations. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. OVERVIEW Gen Digital Inc. is a global leader in consumer Cyber Safety and Trust-Based Solutions, empowering people around the world to live safer digital lives while building confidence and control over their financial futures. Through its trusted brands, including Norton, Avast, LifeLock and MoneyLion, Gen offers cybersecurity, online privacy, identity protection and financial wellness solutions to consumers worldwide. Our Cyber Safety Platform includes our security, comprehensive suites, and privacy products, which deliver technology solutions and superior threat protection to help people navigate the digital world securely, privately and with confidence. Our Trust-Based Solutions includes our identity protection, restoration support services, digital reputation, and secure financial wellness, including our first-party MoneyLion products and our Engine marketplace offerings. Fiscal calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three months ended July 3, 2026 consisted of 13 weeks, whereas the three months ended July 4, 2025 consisted of 14 weeks. Our 2027 fiscal year consists of 52 weeks and ends on April 2, 2027. Key financial metrics The following tables provide our key financial metrics for the periods presented: Three Months Ended (In millions, except for per share amounts) July 3, 2026 July 4, 2025 Net revenues $ 1,336 $ 1,257 Operating income (loss) $ 443 $ 446 Net income (loss) $ 215 $ 135 Net income (loss) per share - diluted $ 0.36 $ 0.22 As Of (In millions) July 3, 2026 April 3, 2026 Cash, cash equivalents and restricted cash $ 564 $ 411 Contract liabilities $ 1,919 $ 1,977 Below are our financial highlights for the first quarter of fiscal 2027, compared to the corresponding period in the prior year: • Net revenues increased $79 million, primarily due to increased sales in our Trust-Based Solutions, partially offset by the impact of the additional week in the first quarter of fiscal 2026 on both segments. • Operating income (loss) remained relatively flat, primarily due to offsetting increases in net revenues, cost of revenues and operating expenses. • Net income (loss) increased $80 million and net income per share increased $0.14, primarily due to a decrease in interest and income tax expense. GLOBAL MACROECONOMIC CONDITIONS As a global company, our results of operations and cash flows may be influenced by global macroeconomic conditions and their impact on customer behavior. Global macroeconomic conditions include, but are not limited to, increased tariffs and an uncertain global trade environment, foreign currency exchange rate fluctuations, the impact of interest rate fluctuations, elevated inflation, ongoing and new geopolitical conflicts, the impacts of current and future trade regulations, instability in the global banking sector, slow growth and recession risks, and changes in legislation or regulations and actions by regulators, including changes in enforcement and administrative policies, any of which may be difficult to predict and may persist for an extended period. Despite challenging global macroeconomic conditions and although we recognize that inflation and broader economic uncertainty can influence customer behavior, we are confident in the long-term overall health of our business, the strength of our product offerings and our ability to continue to execute on our strategy, including bringing award-winning products and services in cybersecurity and offering comprehensive financial wellness to our customers. We continue to monitor the direct and indirect impacts of these global macroeconomic or other geopolitical factors. If the economic uncertainty continues, we may experience negative impacts on customer renewals, customer collections, sales and 21 Table of Contents marketing efforts, customer deployments, product development, or other financial metrics. Additional broader implications of these events on our business, results of operations, and overall financial position still remain uncertain and could result in further adverse impacts to our reported results. For further discussion of the potential impacts of global macroeconomic conditions on our business, please see Part I, Item 3 and “Risk Factors” in Part II, Item 1A below. CRITICAL ACCOUNTING ESTIMATES The preparation of our Condensed Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates, judgments and assumptions on historical experience and on various other factors we believe to be reasonable under the circumstances. We evaluate our estimates, judgments and assumptions on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates, judgments and assumptions about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates, judgments or assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and cash flows. Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2026. There have been no other material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the three months ended July 3, 2026. Recently issued authoritative guidance not yet adopted ASU 2024-03 and ASU 2025-01, Income Statement - Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. In November 2024, the Financial Accounting Standards Board (FASB) issued new guidance requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact of the adoption of this guidance on our Condensed Consolidated Financial Statements and disclosures. ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. In September 2025, the FASB issued new guidance to improve the operability of the guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods, including methods that entities may use to develop software in the future. This is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are currently evaluating the impact of the adoption of this guidance on our Condensed Consolidated Financial Statements and disclosures. RESULTS OF OPERATIONS The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Three Months Ended July 3, 2026 July 4, 2025 Net revenues 100 % 100 % Cost of revenues 23 21 Gross profit 77 79 Operating expenses: Sales and marketing 22 24 Research and development 9 9 General and administrative 6 6 Amortization of intangible assets 4 4 Restructuring and other costs 2 1 Total operating expenses 44 43 Operating income (loss) 33 35 Interest expense (9) (12) Other income (expense), net — 1 Income (loss) before income taxes 24 24 Income tax expense (benefit) 8 13 Net income (loss) 16 % 11 % Note: Percentages may not add due to rounding. 22 Table of Contents Net revenues Three Months Ended (In millions, except for percentages) July 3, 2026 July 4, 2025 Change in % Net revenues $ 1,336 $ 1,257 6 % Three Months Ended July 3, 2026 Compared with Three Months Ended July 4, 2025 Net revenues increased $79 million, primarily due to a $102 million increase in sales of our Trust-Based Solutions, partially offset by a $23 million decrease in sales of our Cyber Safety Platform, due to the $56 million impact of the additional week in the first quarter of fiscal 2026. The additional week had a $31 million impact on our Trust-Based Solutions net revenues, for a total impact of $87 million across both segments. Performance Metrics We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. We believe these key operating metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies. Our metrics may be calculated in a manner different than similar metrics used by other companies. The following table summarizes supplemental key performance metrics: Three Months Ended (In millions) July 3, 2026 July 4, 2025 Cyber Safety Platform $ 846 $ 869 Trust-Based Solutions 490 388 Total net revenues $ 1,336 $ 1,257 Direct revenues $ 1,063 $ 1,054 Partner revenues 273 203 Total net revenues $ 1,336 $ 1,257 Total bookings $ 1,284 $ 1,202 As of (In millions) July 3, 2026 July 4, 2025 Total paid customers 81 76 Revenue from Cyber Safety Platform decreased $23 million during the three months ended July 3, 2026, primarily due to an impact of $56 million from the additional week in the first quarter of fiscal 2026, partially offset by growth across our Cyber Safety membership offerings. Revenue from Trust-Based Solutions increased $102 million during the three months ended July 3, 2026, primarily due to continued growth in our Financial Wellness offerings, partially offset by the impact of $31 million from the additional week in the first quarter of fiscal 2026. Direct revenue reflects subscriptions sold directly through e-commerce or mobile channels, and revenue generated from financial transactions directly made through Gen properties or marketplaces. Partner revenue reflects partner-sourced and channel revenue via retailers, employee benefits, telcos, publishers, and strategic partnerships, including revenue generated from product usage or products sold through our financial marketplace. Total bookings are defined as customer orders received that are expected to generate net revenues in the future. We present the operational metric of bookings because it reflects customers’ demand for our products and services and to assist readers in analyzing our performance in future periods. We define paid customers as active users of our products and solutions, including subscribers with an active paid subscription to our products at the end of the reported period. Paid customers also includes product users with a unique account and at least one revenue-generating transaction in the relevant active period of each respective product category, whether through our first-party personal finance products, transacting through our financial marketplaces, or generating revenue through product usage. We exclude users on free trials and those who have not actively transacted in the relevant period of each respective product category. In order to properly reflect our customer cohorts that contribute to revenue given the dynamic nature of consumers and our product portfolio, our methodology is subject to change from time to time. The methodologies used to measure these metrics require judgment and we regularly review our metrics to improve their accuracy. However, our ability to recalculate our historical metrics may be impacted by data limitations or other factors that require us to apply different methodologies for such adjustments. We generally do not intend to update previously disclosed metrics for any such inaccuracies or adjustments that are deemed not material. 23 Table of Contents Net revenues by geographical region Three Months Ended July 3, 2026 July 4, 2025 Americas 72 % 70 % EMEA 21 % 21 % APJ 8 % 9 % The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan. Percentage of revenue in Americas increased primarily due to continued growth in our Financial Wellness product offerings during the three months ended July 3, 2026 as compared to the three months ended July 4, 2025. Cost of revenues Three Months Ended (In millions, except for percentages) July 3, 2026 July 4, 2025 Change in % Cost of revenues $ 307 $ 267 15 % Three Months Ended July 3, 2026 Compared with Three Months Ended July 4, 2025 Cost of revenues increased $40 million, primarily due to a $35 million increase in partner revenue share mainly in Trust-Based Solutions. Operating expenses Three Months Ended (In millions, except for percentages) July 3, 2026 July 4, 2025 Change in % Sales and marketing $ 300 $ 297 1 % Research and development 118 109 8 % General and administrative 80 74 8 % Amortization of intangible assets 56 54 4 % Restructuring and other costs 32 10 220 % Total operating expenses $ 586 $ 544 8 % Three Months Ended July 3, 2026 Compared with Three Months Ended July 4, 2025 Sales and marketing, research and development, general and administrative, and amortization of intangible assets expenses all remained relatively flat. Restructuring and other costs increased $22 million, primarily due to a $19 million increase in severance and termination benefits in connection with the Fiscal 2027 Plan. Refer to Note 9 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2027 restructuring activities. Non-operating income (expense), net Three Months Ended (In millions) July 3, 2026 July 4, 2025 Interest expense $ (124) $ (156) Interest income 3 9 Foreign exchange gain (loss) (1) — Gain (loss) on sale of property — (1) Other 2 2 Total non-operating income (expense), net $ (120) $ (146) Three Months Ended July 3, 2026 Compared with Three Months Ended July 4, 2025 Non-operating income (expense), net, decreased by $26 million, primarily due to a $32 million decrease in interest expense. 24 Table of Contents Provision for income taxes Three Months Ended (In millions, except for percentages) July 3, 2026 July 4, 2025 Income (loss) before income taxes $ 323 $ 300 Income tax expense (benefit) $ 108 $ 165 Effective tax rate 33 % 55 % Our effective tax rate for the three months ended July 3, 2026 and July 4, 2025, differs from the federal statutory income tax rate primarily due to state taxes, changes in unrecognized tax benefits and related interest and penalties, foreign exchange impacts, stock-based compensation, and the U.S. taxation on foreign earnings. The effective tax rate decreased primarily due to foreign currency movements on the remeasurement of unrecognized tax benefits and deferred tax liabilities on intangible assets. The Organization for Economic Cooperation and Development (OECD) and many countries have proposed to reallocate a portion of profits of large multinational enterprises (MNEs) with an annual global turnover exceeding €20 billion to markets where sales arise (Pillar One), as well as enact a global minimum tax rate of at least 15% for MNEs with an annual global turnover exceeding €750 million (Pillar Two). On December 12, 2022, the European Union reached an agreement to implement the Pillar Two directive of the OECD’s reform of international taxation at the European Union level. The agreement affirms that all Member States must transpose the Pillar Two directive by December 31, 2023. The rules were therefore applicable for fiscal years starting on or after December 31, 2023. Ireland, Czech Republic, and certain jurisdictions in which we operate have enacted legislation to implement Pillar Two and other countries are actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. The enactment of Pillar Two legislation is not expected to have a material adverse effect on our effective tax rate and Condensed Consolidated Financial Statements in the near term. Moreover, in June 2025, the G7 agreed to exclude United States MNEs from certain aspects of the Pillar Two global minimum tax rules (the G7 Statement) in exchange for the United States not imposing retaliatory taxes in the Act. We will continue to monitor and reflect the impact of such legislative changes, including the G7 Statement, which has not yet been incorporated into the OECD framework, in future Condensed Consolidated Financial Statements as appropriate. LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS Liquidity and Capital Resources We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt and proceeds from divestitures for our liquidity needs. Our capital allocation strategy is to balance driving stockholder returns, managing financial risk and preserving our flexibility to pursue strategic options, including acquisitions and mergers. Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of shares of our common stock. Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations, amounts available under our Revolving Facility and our future refinancing plans related to our upcoming maturities, will be sufficient to meet our working capital needs, support on-going business activities and finance the expected synergy costs related to our acquisitions through at least the next 12 months and to meet our known long-term contractual obligations. We are currently not aware of any trends or demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way that will impact our capital needs during or beyond the next 12 months. However, our future liquidity and capital requirements may vary materially from those as of July 3, 2026, depending on several factors, including, but not limited to, economic conditions; political climate; the expansion of sales and marketing activities; the costs to acquire or invest in businesses; outcome of income tax audits with relevant tax authorities; resolution of legal proceedings, including, but not limited to, regulatory proceedings, claims, mediations, arbitrations and litigation; and the risks and uncertainties discussed in “Risk Factors” in Part II, Item 1A below. Cash flows The following summarizes our cash flow activities: Three Months Ended (In millions) July 3, 2026 July 4, 2025 Net cash provided by (used in): Operating activities $ 434 $ 409 Investing activities $ (15) $ (873) Financing activities $ (267) $ 290 See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for our supplemental cash flow information. Cash from operating activities Net cash provided by operating activities of $434 million for the three months ended July 3, 2026 was primarily comprised of net income adjusted for the net effect of non-cash items. Changes in working capital sources and uses of cash include 25 Table of Contents decreases in Instacash Advances held for sale, contract liabilities, and accrued compensation and benefits offset by increases in other liabilities and income taxes payable. Cash from investing activities Net cash used in investing activities of $15 million for the three months ended July 3, 2026 was primarily related to payments for originations of notes receivables, partially offset by proceeds from principal repayments of notes receivables. Cash from financing activities Net cash used in financing activities of $267 million for the three months ended July 3, 2026 was primarily due to repurchases of common stock under our repurchase program, quarterly dividend payments, principal payments of our Term A and B Facilities and tax payments related to vesting of stock units. Cash and cash equivalents As of July 3, 2026, we had cash and cash equivalents of $533 million, excluding restricted cash, of which $306 million was held by our foreign subsidiaries. Our cash and cash equivalents are managed with the objective to preserve principal, maintain liquidity and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax; however, these distributions may be subject to applicable state or non-U.S. taxes. Debt We have an undrawn revolving credit facility of $1,495 million, net of our letters of credit, which expires in March 2031. Stock repurchases During the three months ended July 3, 2026 and July 4, 2025, we executed repurchases of 4 million and 5 million of our common stock under our existing stock repurchase program for an aggregate amount of $100 million and $134 million, respectively. Material Cash Requirements Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers. Debt instruments As of July 3, 2026, our total outstanding principal amount of indebtedness is summarized as follows. See Note 8 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our debt. (In millions) July 3, 2026 Term Loans $ 5,780 Senior Notes 2,450 Total debt $ 8,230 The Amended Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including compliance with specified financial ratios, and includes a springing maturity provision applicable solely to the Extended Term A Facility and Revolving Facility pursuant to which the obligations under such facilities may become due and payable prior to the stated maturity dates. As of July 3, 2026, we were in compliance with all debt covenants. See Note 8 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding our debt, including applicable financial ratios, debt covenant compliance and the springing maturity provision applicable to the Extended Term A Facility and Revolving Facility. Dividends On August 6, 2026, we announced a cash dividend of $0.125 per share of common stock to be paid in September 2026. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors. Stock repurchase program Under our stock repurchase program, we may purchase shares of our outstanding common stock on the open market (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and through accelerated stock repurchase transactions. As of July 3, 2026, the remaining balance of our stock repurchase authorization was $1,994 million and does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and other investment opportunities. Restructuring See Note 9 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for cash flow information associated with our restructuring activities. 26 Table of Contents Significant contractual obligations Our principal commitments consist of principal and interest payments related to our debt instruments, obligations under our purchase agreements, obligations under various non-cancellable leases and potential other legal contingencies. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of July 3, 2026, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $1,610 million in long-term income taxes payable has been excluded from our quarterly review of timing of contractual obligations. There have been no material changes, outside the ordinary course of business, to the contractual obligations reported in our Annual Report. For additional information about our debt obligations and certain other contingencies, see Note 8 and Note 15, respectively, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.