Prepared remarks
Good afternoon, everyone. Thank you for joining us. My name is Lauren, and I will be your conference operator today. This call is being recorded. Now, for opening remarks, I would like to turn the call over to Jason Starr, Head of Investor Relations. Please proceed.
Thank you, Lauren, and good afternoon, everyone. Welcome to Gen's Second Quarter Fiscal Year 2026 Earnings Call. Joining me today are Vincent Pilette, CEO; and Natalie Derse, CFO. As a reminder, there will be a replay of this call posted on the Investor Relations website, along with our slides and press release. I'd like to remind everyone that during this call, all references to the financial metrics are non-GAAP, and all growth rates are year-over-year unless otherwise stated. A reconciliation of non-GAAP to GAAP measures is included in our press release and earnings presentation, both of which are available on our IR website at investor.gendigital.com. We encourage investors to monitor this website as we routinely post investor-oriented information such as news and events and financial filings. Today's call contains statements regarding our business, financial performance and operations, including the impact of our business and industry that may be considered forward-looking statements, and such statements involve risks and uncertainties that may cause actual results to differ materially from our current expectations. Those statements are based on current beliefs, assumptions and expectations as of today's date, November 6, 2025. We undertake no obligation to update these statements as a result of new information or future events. For more information, please refer to the cautionary statement in our press release and the risk factors in our filings with the SEC, and in particular, our most recent reports on Form 10-K and Form 10-Q. And now I'll turn the call over to Vincent.
Thanks, Jason. Hello, everyone, and thank you for joining us today to discuss Gen's results for the second quarter of fiscal year 2026. This was another quarter of outstanding execution, exceeding our expectations as we capitalize on our global user base and compounding data advantage. We delivered record revenue and earnings, continued to drive strong customer and bookings growth and are making clear progress with our portfolio transformation. This performance demonstrates the strength and resilience of our business, underpinned by a high-margin subscription model now expanding into faster-growing adjacencies in secure financial wellness. It also reflects our strategic position as the most trusted partner in protecting digital lives, bringing confidence in a complex and increasingly AI-driven world. Before diving into the numbers, it is important to recognize the environment in which we operate. Consumers today face a rapidly evolving threat landscape. They face a new generation of cyber threats like AI-powered phishing, deepfakes, inner circle impersonation, and identity theft driven by large-scale data breaches. These threats are increasingly personalized, sophisticated, and harder to detect. The financial impact is real and rising. Cybercrimes against consumers are projected to exceed $15 billion annually in the U.S. alone, growing at double-digit rates. Meanwhile, financial wellness is a very real and prevalent consumer need. Two-thirds of Americans live paycheck to paycheck, often stitching together their financial lives across multiple digital platforms beyond traditional banks. In this environment, risk and financial wellness are deeply interconnected. When people live with little financial buffer, an incident of identity theft, a fraudulent charge, or even a scam can quickly upend their finances. The stakes go beyond security and protection; they are also about trust and well-being. People are not just searching for another financial product; they're seeking a trusted and reliable partner, one that can secure their identity, protect their data, safeguard their privacy, and empower their financial well-being through trusted decision-making along their journey. That is exactly the role Gen is built to play, and we are uniquely positioned to be the global consumer cyber safety and fintech leader now and in the future agentic world that is emerging around us. Let me review some of the highlights of the current quarter. We generated just over $1.2 billion in revenue, up 25% year-over-year. Our consumer fintech business, MoneyLion, delivered another exceptional quarter, growing 50%. And when including MoneyLion's results from the prior year, Gen grew revenue 10%, matching our strong Q1 performance. We continue to operate with financial discipline, maintaining a non-GAAP operating margin above 50% and driving a non-GAAP EPS result of $0.62, up 15% year-over-year even as we continue to make disciplined growth investments throughout our technology stack in AI, data, and platform architecture. These disciplined investments will continue to fortify our global leadership and, over time, further compound, allowing us to offer even more services and value to our customers to help them lead secure and safe financial and digital lives. Similar to Q1, our performance was broad-based. We generated growth across our Norton, Avast, LifeLock, and MoneyLion brands. Our bookings for the Cyber Safety segment grew 5% year-over-year coupled with a robust operating margin of 61% and healthy and stable customer retention. During the quarter, we expanded our scam and deepfake protection powered by Norton Genie Pro and Avast Scam Guardian to help users combat the rapid rise in AI-based scams. Early adoption is strong and accelerating. We support over 40 languages, with more countries coming on later this year. We are driving rapid development with our cyber safety assistant, delivering actionable insights to Norton 360 users. As more innovation is integrated into our cyber safety suite, we are seeing higher engagement, which we believe is helping drive strong Norton 360 and Avast One membership growth. Our refreshed privacy portfolio is also gaining momentum. Following the Norton VPN improvements, which we released earlier this year, and several positive reviews in leading tech publications that have boosted market awareness, identity and privacy have accelerated to double-digit growth. We also enriched our non-small business solution, combining security and financial protection features for entrepreneurs and teams. These efforts align with Gen's strategic direction to penetrate new customer cohorts, combining technology leadership and improved user experience. Independent testing continues to validate our leadership as Norton and Avast remain the top two brands in consumer protection and will continue to drive additional innovation in the portfolio through new features such as our AI-driven customer renewal model. Overall, cyber safety provides an important needed value proposition to consumers as we continue to operate this business with discipline, driving stable and profitable growth. Our Trust-Based Solutions segment delivered another standout quarter with revenue up over 25% on a pro forma basis, while operating margin came in at our 30% target. Our trusted brand LifeLock remains the leader in identity protection, allowing consumers to support their financial journey with the best credit reputation, consuming financial products at those moments of truth when identity, reputation, and financial well-being intersect. MoneyLion's exceptional results across our first-party personal finance products and our Engine marketplace demonstrate our disciplined execution, unrivaled portfolio, and the strong cyclical demand for our secure financial wellness services. The integration of MoneyLion has been one of our smoothest yet. With cost synergies delivered ahead of plan, we are now unlocking revenue synergies by unifying best-in-class data systems and solutions across our Cyber Safety and Trust-Based solutions. We have embraced MoneyLion's experimentation and innovation DNA and are focused on building new features in a category that is still transforming. Incorporating best practices from all of our businesses will ensure cutting-edge product performance, while also providing multiple opportunities to cross-promote our features to consumers across channels, such as the planned launch of the 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 insights is a natural use of our data advantage to help consumers make even better financial decisions. The LifeLock and Norton consumers will no longer need to leave the ecosystem for customized, precise recommendations that can improve their financial lives. These initiatives reflect our broader ambition to build the leading decisioning platform for consumers' secure financial empowerment. Gen now serves hundreds of millions of active and freemium customers across our ecosystem, creating a substantial base for future financial product and subscription cross-sell monetization. This strategy drives lifetime value expansion and sets up a strong growth trajectory. This is exactly what we outlined in our strategic vision for secure financial wellness: to enrich Gen's ecosystem by leveraging our trusted data platform where every decision and transaction feels secure, permitted, contextual, and embedding financial wellness like digital banking, insights, precision marketplace, and payments into our cyber safety and identity protection entry door. AI is now the connective tissue of everything we do across innovation, products, marketing, and customer experience. In cyber safety, AI powers behavioral-based threat detection and real-time scam identification, protecting users from phishing, deepfakes, and other emerging forms of attacks. In financial wellness, the MoneyLion Engine leverages AI through Spark, our proprietary underwriting platform that matches customers with the best and most relevant financial products, personalizing and accelerating their decision-making. Our AI-native Norton Neo browser pioneers personalized browsing by introducing safe and private memory support, transforming each browser instance into a unique personal assistant that users can trust. Within our customer success organization, we improved retention through tailored offers and enhanced user satisfaction, driving sustainable long-term revenue growth. As we unify our customers' data securely, we are developing personalized and permissioned AI-powered outcomes, redefining the trusted value we bring to consumers. Operationally, AI is already delivering tangible productivity gains. Our customer support automation and agentic framework continues to mature, now handling 55% of text-based chat and 40% of voice-based interactions, driving over 20% cost efficiency in this function to reallocate towards our platform investment. In R&D, we have applied agentic AI across the entire product development lifecycle, enabling us to shift over time resources for maintenance towards innovation and ultimately boost product velocity. Finally, in marketing, we have built an AI-enabled ecosystem that accelerates creative production and enhances productivity across every team from upper to lower funnel. This shift is creating a more agile, data-informed marketing organization that is operating at the pace of our ambitious innovation. We're very excited about the scale and growth we can deliver through this strategy through our global data advantage and consumer trust. With strong first half results and increased visibility in the second half of the year, we are raising our annual guidance of $95 million at the midpoint of our prior revenue range, representing over 25% growth on a reported basis. This underscores the momentum we see in our business as we transform into a customer-centric platform, leveraging our skilled customer base and using our data modes to drive personalization and trust at the core of our business. In summary, we delivered another very strong quarter and are raising our annual guidance again, demonstrating our strategy is working. We are ahead of plan with MoneyLion and setting our sights on capturing further growth synergies and leading with innovation grounded in trust. We are building the first AI-powered platform with a trust layer that unites security, privacy, identity, and financial wellness solutions into a market advantage that no one else holds at scale. Our ecosystem brings together a portfolio of competitive first-party products in cyber safety and trust-based solutions, along with an expanding partner network that underpins our Engine marketplace to also provide leading third-party products and solutions for our customers. And all of it is supported by a customer-driven platform that delivers personalization and contextualization at key moments of truth. To our investors and partners, I want to thank you for your confidence. To our employees, I want to thank you for your relentless commitment to our customers and to fulfilling our mission of powering digital freedom. Gen is executing with momentum, discipline, and purpose, and our opportunity has never been greater. And now I will turn it over to Natalie to discuss our financial results and financial guidance in more detail.
Thank you, Vincent, and hello, everyone. For today's call, I will walk through our Q2 results and also provide some additional color on our performance metrics. I'll then conclude by providing our outlook for Q3 and fiscal year 2026. I will focus on non-GAAP financials and year-over-year growth rates unless otherwise stated. I will also include commentary on our pro forma growth, which includes MoneyLion's results from the prior year for comparative purposes. Now on to our results. Q2 was another strong quarter for Gen with better-than-expected results. On a reported basis, Q2 bookings and revenue were over $1.2 billion, up 27% and 25% year-over-year, respectively. On a pro forma basis, Q2 revenue grew 10%, consistent with last quarter. And excluding MoneyLion, Q2 revenue grew 5%, which is consistent quarter-over-quarter performance and in line with our commitments. In our Cyber Safety segment, bookings were up 5% and revenue was up over 3% with broad-based growth across channels. With our expanded scam protection features and cyber safety AI assistant helping consumers outpace emerging threats, this has translated into strong sales of our leading Norton 360 comprehensive membership offerings and reflected in our accelerated bookings growth this quarter. More partners are also adopting our highest tier all-in-one cyber safety memberships and promoting our bundled solutions through their channels. As just one example, our employee benefits partners already see the expanded value we provide through Norton 360, and this channel continues to grow double-digits with a robust pipeline ahead of the annual enrollment period. More and more consumers understand the need to have full suite with identity protection, and we see it in our results. Additionally, across our go-to-market channels, we are leveraging our data and AI capabilities to drive more effective targeted campaigns through our in-product messaging platform, upselling more customers to higher-tier memberships with additional identity and privacy protection or cross-selling them additional add-on products that fit their immediate needs based on select moments of exposure. These post-sale levers continue to drive more growth, higher engagement, and in turn, higher retention. Our cyber safety platform remains our foundational bedrock, and the growth playbook we deploy continues to provide an accelerating flywheel rooted in innovation and serving customer needs. In our Trust-Based Solutions segment, on a pro forma basis, bookings and revenue grew 26% and 27%, respectively, and more than doubled on a reported basis. In our LifeLock business, growth remained stable with highly retaining customers and strong customer NPS. Additionally, MoneyLion's personal financial management solutions are scaling significantly with strong gains in new active users and increasing product consumption. Our Engine financial marketplace delivered another strong quarter, the fourth consecutive quarter of growth over 50%. The accelerating adoption of third-party financial products available on Engine reinforces our marketplace strategy and our mission to help consumers make better financial decisions through embedded experiences across financial and non-financial platforms and apps. This momentous business is powerful in and of itself. As we innovate across our Trust-Based Solutions segment, we believe it provides us with such a unique opportunity to cross-pollinate. Although we're just getting started, we are very excited about the green shoots in our early test results, driving offers and in turn, demand with our LifeLock cohorts. We expect this momentum to continue as we expand the marketplace catalog to include new third-party product categories, such as prime credit cards that are personalized for our diverse customer base. Overall, our direct channels continue to demonstrate strong fundamentals, growing revenue 17% as reported and 6% pro forma. 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's personal financial wellness and marketplace customers. While we are at the early stages of development, we wanted to introduce our expanded approach designed to capture the growing demand in a more focused manner as we continue to innovate and scale. We are no longer just a direct-to-consumer business, and there is no one-size-fits-all approach with such a diverse customer base. More to come on this as we drive further expansion across these vectors. Now turning to profitability. Q2 operating income was $623 million, translating to a 51% operating margin, in line with our expectations. Operating margin for the Cyber Safety Platform was 61%, and Trust-Based Solutions was 30%, each in line with our plan. Our margins remain robust as we continue to drive growth with a disciplined approach to resource allocation, scaling efficiency with AI and measured investment in our long-term strategic initiatives. Q2 net income was $387 million, and diluted EPS was $0.62, up 15% year-over-year as reported. This represents our eighth consecutive quarter of achieving or exceeding our 12% to 15% EPS growth target. Interest expense was $139 million in Q2. Our non-GAAP tax rate remains steady at 22%, and our ending share count was 624 million, up 2 million year-over-year. Turning to our balance sheet and cash flow, Q2 ending cash balance was $701 million, representing over $2.2 billion of liquidity when including our $1.5 billion revolver. Year-to-date operating cash flow was $525 million and free cash flow was $512 million, demonstrating the capital efficiency of our business model. As we shared, Q2 is seasonally high, our highest use of cash given the concentration of tax payments that are due within the quarter, including a $139 million transition tax payment, our last payment related to the 2017 Tax Cuts and Jobs Act. Worth noting, due to how specific calendar dates fall in this fiscal year, we have both of our semiannual interest payments in our first half of fiscal 2026, whereas typically, we have the first payment in the first half and the second payment in the second half of the fiscal year. Given this higher use of cash in Q2, we did not have any additional capacity for share buyback during the open period. We paid down $160 million of debt and ended the quarter with our net leverage at 3.2x EBITDA. We paid $77 million to shareholders in the form of a regular quarterly dividend of $0.125 per common share. For Q3 fiscal 2026, the Board of Directors approved a regular quarterly cash dividend of $0.125 per common share to be paid on December 10, 2025, for all shareholders of record as of the close of business on November 17, 2025. Our free cash flow generation remains very strong, and we stay committed to a balanced capital allocation as we enter into the second half of our fiscal year. Now let me share our Q3 and fiscal 2026 outlook. We are raising our revenue and EPS guidance again for fiscal 2026 based on our strong results and the momentum we're seeing. Our business remains resilient, bolstered by a highly recurring revenue base, and further supported by solid customer retention and substantial free cash flow generation. For fiscal year 2026, we now expect full year revenue in the range of $4.92 billion to $4.97 billion, up from our prior expectation of $4.8 billion to $4.9 billion, and reflects reported revenue growth of 25% to 26% year-over-year. We expect non-GAAP EPS to be in the range of $2.51 to $2.56, representing our continued commitment to achieving our 12% to 15% annual EPS growth. For Q3, we expect non-GAAP revenue in the range of $1.22 billion to $1.24 billion. We expect Q3 non-GAAP EPS to be in the range of $0.62 to $0.64, or 12% to 15% growth year-over-year. Our Q3 and full year guidance assumes high single-digit pro forma growth, combined with disciplined cost management, while funding targeted long-term growth investments in the Gen platform and additional AI capabilities. This guidance range also assumes current FX rates to Q2, although significant fluctuations remain possible given the volatility in currency markets that has taken place over the past few years. In summary, we are well positioned after a strong first half. We're accelerating growth while maintaining the same operating discipline that has long defined our strategy. We are driving healthy growth in both of our segments, and we've made tremendous progress with the integration of MoneyLion. Operating margins 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 deleveraging to drive strong returns for our shareholders. We continue to hit the mile markers we've laid out as we navigate towards our long-term growth objectives. I want to thank the entire team for staying focused and delivering great value to our customers and shareholders. We look forward to sharing more progress in the coming quarters. As always, thank you for your time today, and I will now turn the call back to the operator to take your questions.
Questions and answers
Our first question today comes from Rob Coolbrith with Evercore ISI.
Congratulations on the strong results. Just wondering, first of all, if you could maybe give us your view of the macro environment and the health of the consumer right now. And if we were to see a more significant downturn, how you'd expect that to play across the two segments of the business. And then also I wanted to ask on the transition. Sure. Please go ahead. Sorry.
Okay. You asked a question after that. Sorry about that to jump. This is Vincent. Thanks for the 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 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 can protect against thousands of dollars lost through cyber criminals. When you look back at history during downturns or upturns, we have not seen too much correlation to our subscription or security revenue streams. On the secured financial wellness, we now have millions of our customers connecting their bank accounts for monitoring and 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 very strong growth again this quarter under personal financial management offerings here, slightly under 50%, but very strong. We have not seen a change in patterns in consumption over the last few months, and we do not see it here as we speak so far. Generally speaking, when interest rates continue to trend down, normally, there's actually renewed activities and refinancing and other activities that supports 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 are boarding onto the marketplace. We were just at the Money20/20 conference, and there was a lot of very strong interest from financial partners to join the Engine marketplace by Gen. I think we'll continue to have that opportunity to offer for consumers whether the economy goes up or down; the need for the best financial decisions will remain strong.
Thank you for detailing the LifeLock integration in relation to financial wellness. Could you discuss the frequency of member interaction with LifeLock products during their financial product shopping? Additionally, could you elaborate on the mechanics of the cross-sell and the unique opportunities it presents?
Absolutely. Revenue synergies is a lengthy process. MoneyLion is fully integrated from a back-end and R&D perspective. We are finalizing the integration of the data to provide an enriched experience, and we are now unlocking the revenue synergies. Our focus is on two immediate components. The first is Norton Money, which includes EWA features for employee benefits and serves as a personal finance management tool for our Norton customer base. The second component is a curated marketplace that addresses consumer needs. LifeLock is our first immediate example. Since acquiring MoneyLion, we have enhanced the marketplace with credit card offerings for prime customers, which we're incorporating into LifeLock. LifeLock not only monitors credit but also manages your financial life during key moments, such as when you check your credit or financials before a purchase or when seeking to improve your credit score for a planned purchase. At these moments, we have embedded the marketplace into the LifeLock applications, yielding positive results, although from a small base. We still have a significant transformation ahead, as previously discussed, and progress is being made toward transforming LifeLock from a passive application that provides peace of mind to a more engaged platform where users actively validate and enhance their financial journey. We are seeing good progress with this shift, particularly with new tools like the Credit Builder tool and the curated marketplace.
Our next question comes from Roger Boyd from UBS.
Great. And congrats also on the strong results. I wanted to touch on partner revenue, which was again very strong and I think maybe accelerated organically, but you did note 50% growth in MoneyLion Engine and double-digit growth in employee benefits. Just any thoughts on how we should think about the trajectory of partner revenue over the back half of the year, anything to be mindful of from a seasonality perspective, particularly with MoneyLion Engine and then the employee benefits channel into open enrollment? And I have a follow-up.
Yes. I'll take that one because I think it's less financial and more structural. A few years ago when we did the Analyst Day, we said, hey, we have a big opportunity in our partner organizations. At the time, it was 90% direct and 10% partner. As we're expanding the portfolio, we said that in the long run, we think it will be more of an 80-20 split, and you're going to see partner growing faster than direct. It makes sense because many of our services are embedded into partner views, and then we had the view this long-term view of bringing this marketplace, adding more value to our consumers. What you see now, two years later, 8 quarters later since we laid out that strategy, it's finally taking root, quarter in, quarter out. You may have a little bit bigger gap or a smaller gap. I think you'll continue to see 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 are a bank nor a legal firm, but that all fits together around supporting financial wellness overall. I would not predict specific seasonality quarter in and quarter out that you see every year. Obviously, growth rates can change, but similar trends will continue moving forward.
Awesome. That's helpful, Vincent. And then Natalie, just on free cash flow. It looked like it was actually pretty robust after backing out the tax payment. I know you don't guide to it, but any color you can give just on how you think about free cash flow trajectory as that continues to improve? I know you touched upon it in the remarks, but any update on how you think about capital allocation between debt paydown and share repurchase?
Yes. Thanks, Roger. Our free cash flow generation will continue to stay strong. Yes, it's seasonally high in Q2. And, of course, we have that timing element that hurt a little bit more in Q2 than normal as well. Yes, as we accelerate growth rates and as we integrate, we will continue to operate in a disciplined fashion. We've laid out our margin expectations for each of the segments over the long term. We'll continue to deploy our capital in a disciplined and balanced way across accelerated debt paydown but also share repurchases. With the timing of the MoneyLion deal over the last three to four quarters, when we were able to get out in the open period, we just didn't have the opportunity to do much share repurchase. As we look to the back half, we'll get back to being much more balanced across accelerated debt paydown and share repurchases.
Our next question comes from Dan Bergstrom from RBC.
It's Dan Bergstrom for Matt Hedberg. So you highlighted higher engagement on Norton 360 in your prepared remarks. You also talked to some scams as providing some tailwind there. Beyond that, what are some keys to the momentum in upselling customers into those higher-tier Norton 360 memberships?
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 earn peace of mind in this environment where cyber threats are pretty dynamic. Depending on the plan, all the way to the all-in-one, including the LifeLock identity protection, you're fully protected. The majority of our customers are still on the Norton 360 lower and mid-level tier, not including the identity. At the beginning of the year, we moved Norton Genie, our anti-scam into that known 360 platform and have evolved Norton Genie from a pure AI-driven anti-scam to becoming really the AI cyber safety assistant. We've now just launched into 40 new countries in 40 languages, that feature. That feature is at the core of getting our applications on our platform more engaging where users can ask questions and automatically connect different privacy and security features at the moment it's needed. We have seen traction in the upper tier of the plan, Norton 360 with Norton Genie Pro, which is an upgraded feature providing not only security support but also insurance and blocking unwanted communications, creating a much richer experience with complete privacy and full protection. We are seeing traction with that. We're now launching Norton Money, which will be an 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, we’re continuing to see very good progress towards both the membership and the engagement with the platform.
That's great. I know paid customers is the new metric, but the old KPI around direct to cyber safety customers was in the slides, up 400,000 quarter-over-quarter. Understanding there's some rounding there, but that's impressive, but at the upper end of what we'd expect historically. I know it's a seasonally strong quarter here, but maybe what was behind the strength on the customer addition number?
Yes. I would say now it has been many, many quarters. I don't remember how many, maybe 7 or 8, that we've been in the range of about 250,000 to 400,000. You're right, it's on the high side of the range, but we see it on the high side, in line with our expectations as we've been driving increased engagement, more channels to acquire customers, and improvement on retention. I think it's more progress across all of the dimensions that I reviewed. Now as you know, our customer base is evolving. We see it in two categories. One is subscriber-generated revenue, as Natalie mentioned, and the other one is product usage-generated revenue. We see a very strong increase across all dimensions, and our goal will be to continue to increase the subscription. We did provide the old metric just for people to understand and assess the health of our core Gen the way we looked at it before we split into two segments, which I think will be useful for investors.
Our next question comes from Saket Kalia from Barclays.
Congrats on another raised guide. Vincent, perhaps for you, picking up off that thread. You've talked about the potential for new business models in the MoneyLion base. It seems to be doing very well, right, just as it is. However, I think there's such a subscription DNA at Gen; you've kind of talked about that as a possibility. Without pre-announcing anything, how do you envision something like that looking, if that makes sense?
Yes, totally. Just to put in context, maybe some investors don't have the full history that we've had. Since you know us very well and covered 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. Many customers like that. They use the product for free, and when they transact, a very small fee gets booked. What they say is, 'don't break what's working.' We are trying to manage very carefully because it's really working for the MoneyLion installed base; the team knows how to bring innovation into that environment. We will maintain that. When you come to a little bit more premium customers who prefer subscription models, they like to have a subscription, they pay, and then they have access to many different features a la carte or as much as they want. We are building those subscription models, which may include the ability to use the PFM tool, consume some liquidity products, do Credit Builder for their kit, or having access to investment features on the platform. We know that's more suited to our type of customer base. The features are there, and it's a question of balance on how we're going to drive marketing and where we're going to have membership versus transaction-based revenue. Over time, you will see that progression. As you know, we always said that a full shift from transaction to subscription will lead to a short-term gap and a longer value over time. We are hopeful to manage that transition towards more subscriptions without significantly impacting our overall, knowing that it’s all about driving long-term customer value for maximizing that CLV.
Yes. Thanks, Saket. Good to hear from you. Yes, MoneyLion margin, that's where we started, approximately 20%. Keep in mind, as we blend MoneyLion with Trust-Based Solutions and integrate it with Gen overall, we have achieved the cost synergies that we have laid out for ourselves as we integrate them as an acquisition, just high level, especially the back office and some of the other fixed costs that we could strip out of the business. That's done. We also have revenue synergies that we're going after. You heard them peppered through the messaging today and our slide where in our day 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 the 50% growth rate. As we look forward, the mix is definitely there, and it’s an opportunity for us to balance. But keep in mind, we want all parts of the 30, 60, and 90 margins. They provide us with different layers and levels and types of value and access to different customers. The 30% margin on the marketplace is going to fuel customer acquisition and give us access to diverse data for deeper analysis and customization. The first-party products at 60%, and all the way up to the retargeting at 90%, create a very healthy model. It’s a flywheel effect! The challenge quarter-in and quarter-out will be ensuring the right percentage of the business comes from different segments. We will find that right balance for the business, steering for healthy, sustainable, accelerating growth as we integrate across Trust-Based Solutions and all of the different services that we’re innovating.
Our next question comes from Tomer Zilberman from Bank of America.
Maybe going along the same track of MoneyLion, right? You had two solid quarters of MoneyLion growth, 45% to 50%. You previously guided it to grow 30%. I think your guidance now calls for an exit rate of 30%. Just wanted to get more color on why we wouldn't see these elevated growth levels sustain into the back half, and apologies if I missed anything in your prepared remarks. Can you pair that with commentary around the business model transition you're expecting in the second half?
Absolutely, I'll address that first. When we acquired MoneyLion and completed the deal in April, it was just six months ago, although it feels longer. At that time, they were growing at 25% to 30% with a 15% operating margin. Since the start of this year, as we've integrated and focused on different aspects like marketing and utilizing our customer base, we've seen improved performance: 45% growth in the previous quarter and 50% this quarter, while we also enhanced the operating margin by over 5 points, now exceeding 20%. We are not predicting that this growth will continue at 50%. It's likely we'll experience a slight boost, but it would be sensible to anticipate a return to a 30% growth rate with 20% margins. If I were to set a new guideline, like the Rule of 50, it would pertain to managing the business with those targets. We are confident that we can find opportunities for growth in the marketplace. There are various strategies for doing this, such as converting more transactional customers—those who lack a solid recurring pattern—into members, or offering additional value through a bundled membership. We are planning this approach over time while adhering to the Rule of 50, targeting a growth rate of 30% with a 20% margin. Each quarter, we'll gain more insights into the upcoming trends. Our current exit rate of 30% growth does not reflect any significant macroeconomic impact, as, like I mentioned earlier, we do not observe changes in consumption patterns among the millions of customers using our platform.
Got it. And maybe as a follow-up, if I move towards the core Cyber Safety business. I know someone addressed earlier that you grew your customers by 400,000 sequentially. But if we look at the growth trends, they diverged a little bit from last quarter. Last quarter, if I have it right, revenue and bookings grew 4%. This quarter, revenue was 3%. Bookings were 5%. What drove that slight delta? Do you think that the 400,000 adds this quarter and the better bookings growth can translate into better revenue growth over the next few quarters?
Yes, Tomer, it's Natalie. Keep in mind, revenue will reflect the trailing 12-month bookings. If you go back and look at the bookings as reported, that's where you would see a 3% growth rate. Also, we're only rounding at whole numbers. When you get into the decimals, it's sub-2 points. So it's really not that different between bookings rate of growth and revenue like you see 2 points on the surface. Yes, as we look forward, it's not just the customer count acquisition. It's the balance across the segments; it's the innovation; it's the scale; it's AI coming through; it's more personalization; it's more customization through IPM. Cross-selling and upselling are still alive and well. Partner mixing in; there's just so many factors even when you look at both on a pro forma basis but even excluding MoneyLion. The core business has so much opportunity. We are driving all of the growth levers that we possibly can with all of the innovation coming to market. Looking forward, we're focused on pro forma growth, which is pointing to a high single-digit rate of growth.
Our next question comes from Meta Marshall from Morgan Stanley.
Great. 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 and which you're finding traction within the business? As a follow-up question, just any OBBBA impact on tax rate that we should be expecting?
Okay. Let me take the one on the use of AI. All of our AI initiatives are split into two buckets. One is to use our data platform to build AI-native features from Norton Genie to Spark to others, Norton Browser that you see there. I 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 also how security will look like in the world of agent-to-agent interaction, 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 agents. Super, super important topic. The second bucket is around transforming Gen into an AI-first company, which is really changing our workflows, not jumping directly into AI platforms or tools but changing our workflows to be able to automate and use AI where it's needed. Obviously, in support and services, we're further along. The tools and the processes in the market are more mature, which today have roughly half of our contacts fully contained in an AI environment, whether it's one or multiple bots. That has generated significant savings, which we have reused to build our data approach or data platform to our business. I mentioned marketing. Marketing is probably the second to R&D that I'm going to talk about. We're transforming. Marketing combines everything from upper funnel or branding down to performance marketing, unified under one leader, combined organization; and we've realigned around value creations around their brand, leveraging tools, AI first to really develop the framework to our vision. The eventual goal is to equip our product leaders to do everything from ideation to first-level performance materials, assisted by AI bots without human intervention. Today, we are not there, but within the marketing function, they started getting really good traction on developing materials and even creatives, all through AI. This has also enabled the redirection of savings towards performance marketing to accelerate growth. In R&D, we've applied agentic AI across the entire product development lifecycle, piloting to shift more resources from maintenance towards innovation and ultimately improving product velocity. We see great potential; it’s slower to materialize and capture, but we are on a great path; that's how we're becoming an AI-first company.
Our tax rate is long-term focused. The 22% you see in our non-GAAP results is assumed in the guide as well. The Beautiful Bill just helps with cash flows in terms of cash taxes in the short term. In the long term, there’s no material change. We don’t really influence that or include that change in the long-term tax rate expectations.
Our final question today comes from Joseph Gallo from Jefferies.
As you think through the cross-sell opportunities between the MoneyLion and the Gen Digital basis and vice versa, which ones seem to be gaining the most traction early on? Are there any more go-to-market efforts left to implement to accelerate?
Yes, very good. 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 merit of the core business on their own, each one of them, along with a core platform of data and operations. But we haven't yet delivered the value of bringing everything together. The most natural one and the most immediate one is integrating financial insights and options in the LifeLock app. We started that project organically and then led to the acquisition of MoneyLion. We are now embedding that and I think it's going to gain traction. We're very careful and creative; we are not doing aggressive marketing. We know our LifeLock customers will benefit from those insights and new options, but we're following the demand. We are not trying a forceful marketing campaign or inside app that could be very annoying. Preserving the peace of mind is key, and we'll drive at that pace. The second is bringing Norton Money into Norton as an alternative to identity protection solutions, and the most immediate one is MoneyLion features into our employee benefit channel that represent probably the best channel on selling the entire portfolio and have traction across all dimensions. We are about to launch that. In the employee benefits channel, you’ll need some time for onboarding with new employers, and that will show results. Early discussions are very positive. Overall, we are just at the beginning of the journey around revenue synergy.
Great to hear there is more to come. And then I know you called out a consistent macro, but Americas has been pretty consistently strong. Is there anything to call out on the other geos?
Actually, you're right. We haven't talked too much about the other geographies. I was just discussing that with Natalie and the Head of Corporate FP&A yesterday when reviewing the results in Europe. They've been very strong, positively surprising how broad-based our growth rates have been. The U.S. first, then you know for a while, we had Latin America leading the way. For the last two quarters, we've seen a lot of strength coming from Europe and we haven’t reintroduced financial wellness yet. That's more to come in the next few quarters and years. We're very excited about all of the levers we have to drive that long-term value for our customers.
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 lines.