Gen Digital (GEN) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Gen Digital Inc.'s unaudited condensed consolidated financial statements and management's analysis Item 1. Financial Statements (Unaudited) This section presents Gen Digital Inc.'s unaudited condensed consolidated financial statements and notes for the period ended July 4, 2025 Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in millions) | Metric | July 4, 2025 | March 28, 2025 | | :-------------------------------- | :----------- | :------------- | | Total Assets | $16,360 | $15,495 | | Total Liabilities | $13,995 | $13,226 | | Total Stockholders' Equity (Deficit) | $2,365 | $2,269 | | Cash, cash equivalents and restricted cash | $828 | $1,006 | | Goodwill | $10,817 | $10,237 | | Long-term debt | $8,575 | $7,968 | Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenues, expenses, and net income Condensed Consolidated Statements of Operations (in millions, except per share amounts) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Net revenues | $1,257 | $965 | | Gross profit | $990 | $775 | | Operating income (loss) | $446 | $417 | | Net income (loss) | $135 | $181 | | Net income (loss) per share - diluted | $0.22 | $0.29 | - Net income decreased by $46 million, and diluted EPS decreased by $0.07, primarily due to an increase in income tax expense[10] Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's comprehensive income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (Loss) (in millions) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Net income (loss) | $135 | $181 | | Foreign currency translation gain (loss) | $59 | $(5) | | Comprehensive income (loss) | $194 | $176 | Condensed Consolidated Statements of Stockholders' Equity (Deficit) This section outlines changes in the company's stockholders' equity, reflecting net income, dividends, and stock transactions Changes in Stockholders' Equity (Deficit) (in millions) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Balance as of March 28/29 | $2,269 | $2,140 | | Net income (loss) | $135 | $181 | | Other comprehensive income (loss) | $59 | $(5) | | Shares withheld for taxes | $(44) | $(24) | | Repurchases of common stock | $(134) | $(274) | | Cash dividends declared | $(80) | $(79) | | Stock-based compensation | $66 | $31 | | Fair value of CVR issued | $73 | — | | Balance as of July 4/June 28 | $2,365 | $1,970 | Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in millions) | Activity | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Net cash provided by (used in) operating activities | $409 | $264 | | Net cash provided by (used in) investing activities | $(873) | $(2) | | Net cash provided by (used in) financing activities | $290 | $(466) | | Change in cash, cash equivalents and restricted cash | $(178) | $(202) | | Ending cash, cash equivalents and restricted cash | $828 | $644 | - Cash used in investing activities significantly increased due to payments for acquisitions, primarily the MoneyLion acquisition[24] - Cash provided by financing activities turned positive, driven by proceeds from debt issuance, partially offset by debt repayments and stock repurchases[24] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of Business and Significant Accounting Policies This note describes Gen Digital Inc.'s business, brands, and significant accounting policies, including recent acquisitions - Gen Digital Inc. is a global company focused on Digital Freedom through consumer brands like Norton, Avast, LifeLock, and MoneyLion, offering Cyber Safety Platform and Trust-Based Solutions[27] - The fiscal quarter ended July 4, 2025, consisted of 14 weeks, one week longer than the prior year period (June 28, 2024, had 13 weeks), impacting financial comparisons[29] - New significant accounting policies were adopted due to the MoneyLion acquisition, particularly for Trust-Based Solutions revenue recognition (referral arrangements, transactional services) and the treatment of Instacash Advances[31][34] Note 2. Recent Accounting Standards This note outlines recently adopted and issued accounting standards that may impact the company's financial reporting - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, requiring disaggregated income tax disclosures[45] - ASU 2024-03 (Expense Disaggregation) is effective for annual periods beginning after December 15, 2026, requiring additional expense category disclosures[46] Note 3. Sale of Instacash Advances This note details the nature and sale of Instacash Advances, a non-recourse earned wage access product - Instacash Advances are non-recourse earned wage access (EWA) products, not loans, providing customers with early access to anticipated income deposits without interest or mandatory fees[48][50] - During the three months ended July 4, 2025, the company sold $823 million of Instacash Advances under a Master Receivables Purchase Agreement with Sound Point Capital Management LP[52] - A $36 million loss on the mark-to-market and sale of Instacash Advances was recognized in sales and marketing expense for the three months ended July 4, 2025[55] Note 4. Business Combinations This note provides details on the MoneyLion acquisition, including consideration, financial impact, and strategic rationale - Gen Digital Inc. completed the acquisition of MoneyLion on April 17, 2025, for approximately $970 million net of cash acquired, extending its identity solutions into comprehensive financial wellness[58][62] - The acquisition consideration included $935 million in cash, $21 million for assumed equity awards, and 12 million Contingent Value Rights (CVRs) with a fair value of $73 million[59][60][62] - MoneyLion contributed $168 million in net revenues and $35 million in after-tax earnings to Gen Digital's results for the three months ended July 4, 2025[70] Note 5. Revenues This note disaggregates the company's net revenues by component and provides information on remaining performance obligations Components of Net Revenues (in millions) | Component | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Subscription and service revenue | $1,253 | $965 | | Net interest income on notes receivable | $4 | — | | Net revenues | $1,257 | $965 | - The company recognized $800 million from contract liabilities balances as of March 28, 2025, during the three months ended July 4, 2025[74] - As of July 4, 2025, remaining performance obligations totaled $1,303 million, with approximately 93% expected to be recognized as revenue over the next 12 months[75] Note 6. Goodwill and Intangible Assets This note details changes in goodwill by segment and provides a breakdown of the company's intangible assets Changes in Goodwill (in millions) | Segment | Balance as of March 28, 2025 | Acquisitions | Translation adjustments | Balance as of July 4, 2025 | | :-------------------- | :--------------------------- | :----------- | :---------------------- | :------------------------- | | Cyber Safety Platform | $7,371 | — | $38 | $7,409 | | Trust-Based Solutions | $2,866 | $527 | $15 | $3,408 | | Total | $10,237 | $527 | $53 | $10,817 | Intangible Assets, Net (in millions) | Asset Type | July 4, 2025 Net Carrying Amount | March 28, 2025 Net Carrying Amount | | :-------------------------- | :------------------------------- | :------------------------------- | | Customer relationships | $773 | $717 | | Developed technology | $836 | $737 | | Other | $151 | $74 | | Total finite-lived intangible assets | $1,760 | $1,528 | | Indefinite-lived trade names | $739 | $739 | | Total intangible assets | $2,499 | $2,267 | - Amortization expense for purchased intangible assets was $119 million for the three months ended July 4, 2025, an increase from $100 million in the prior year period[81] Note 7. Supplementary Information This note provides supplementary details on cash, accounts receivable, and short-term contract liabilities Cash, Cash Equivalents and Restricted Cash (in millions) | Category | July 4, 2025 | March 28, 2025 | | :-------------------------------- | :----------- | :------------- | | Cash | $377 | $462 | | Cash equivalents | $443 | $544 | | Restricted cash | $8 | — | | Total | $828 | $1,006 | Accounts Receivable, Net (in millions) | Category | July 4, 2025 | March 28, 2025 | | :-------------------------------- | :----------- | :------------- | | Trade receivable | $194 | $173 | | Notes receivable | $108 | — | | Instacash Advances | $1 | — | | Turbo Fees and Tips | $16 | — | | Allowance for doubtful accounts | $(5) | $(2) | | Total | $314 | $171 | Short-term Contract Liabilities (in millions) | Category | July 4, 2025 | March 28, 2025 | | :-------------------------------- | :----------- | :------------- | | Deferred revenue | $1,213 | $1,189 | | Customer deposit liabilities | $570 | $657 | | Total | $1,783 | $1,846 | Note 8. Financial Instruments and Fair Value Measurements This note describes the company's financial instruments and their fair value measurements, including debt and derivatives Financial Instruments Measured at Fair Value (in millions) | Asset | July 4, 2025 Fair Value | March 28, 2025 Fair Value | | :---------------- | :---------------------- | :------------------------ | | Money market funds | $443 | $544 | | Interest rate swaps | $3 | $3 | | Total assets | $446 | $547 | - The total fair value of current and long-term fixed rate debt was $2,536 million as of July 4, 2025, based on Level 2 inputs[92] Note 9. Leases This note provides information on the company's lease costs, weighted-average lease term, and discount rate Lease Costs (in millions) | Cost Type | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :---------------- | :------------------------------ | :----------------------------- | | Operating lease costs | $5 | $3 | | Short-term lease costs | $1 | $1 | | Variable lease costs | $1 | — | | Total lease costs | $7 | $4 | - The weighted-average remaining lease term is 4.6 years, with a weighted-average discount rate of 6.17% as of July 4, 2025[93] Note 10. Debt This note details the components of the company's debt, including new issuances and compliance with covenants Components of Debt (in millions) | Debt Instrument | July 4, 2025 | March 28, 2025 | | :-------------------------------- | :----------- | :------------- | | 12.50% ROAR 2 SPV Credit Facility | $49 | — | | Term A Facility | $3,346 | $3,519 | | 6.75% Senior Notes due 2027 | $900 | $900 | | Term B Facility | $2,368 | $2,386 | | 7.125% Senior Notes due 2030 | $600 | $600 | | Incremental Term B Facility due 2032 | $750 | — | | 6.25% Senior Notes due 2033 | $950 | $950 | | Total principal amount | $8,963 | $8,355 | | Total debt (net of discount/costs) | $8,863 | $8,259 | - A new $750 million Incremental Term B Facility due April 16, 2032, was entered into to fund a portion of the MoneyLion acquisition cash consideration[69][96] - As of July 4, 2025, the company was in compliance with all financial debt covenants[101] Note 11. Derivatives This note explains the company's use of derivative instruments to manage interest rate and foreign currency risks - The company uses foreign exchange forward contracts and interest rate swap agreements to reduce volatility from foreign currency exchange rates and interest rates, not for speculative trading[102] - Interest rate swap agreements effectively converted $1 billion of variable rate borrowings under the Term A Facility to fixed rates (3.762% and 3.55%) until their maturity on March 31, 2026[104] - A net deferred gain of $3 million related to interest rate hedges is estimated to be recognized in earnings over the next 12 months[108] Note 12. Restructuring and Other Costs This note outlines costs associated with restructuring plans, including workforce reductions and contract terminations - The April 2025 Plan, initiated in connection with the MoneyLion acquisition, has an estimated total cost of $30 million, with $4 million incurred to date for workforce reduction, contract terminations, and facilities consolidation[111] - The September 2022 Plan, related to the Avast acquisition, is largely complete, with immaterial remaining activity and accrual balance anticipated for fiscal year 2026[110] Note 13. Income Taxes This note details the company's effective tax rate, income tax expense, and factors influencing tax liabilities Effective Tax Rate (in millions, except percentages) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Income (loss) before income taxes | $300 | $276 | | Income tax expense (benefit) | $165 | $95 | | Effective tax rate | 55% | 34% | - The effective tax rate for the three months ended July 4, 2025, was 55%, primarily due to state taxes, changes in unrecognized tax benefits, foreign exchange impacts, and U.S. taxation on foreign earnings[112] - The One Big Beautiful Bill Act, enacted on July 4, 2025, is not expected to have a material impact on the company's effective tax rate[113] Note 14. Stockholders' Equity This note provides information on dividends, Contingent Value Rights, and stock repurchase program activity - A cash dividend of $0.125 per share of common stock was declared on August 7, 2025, to be paid in September 2025[114] - 12 million equity-classified Contingent Value Rights (CVRs) were issued to MoneyLion shareholders, entitling holders to $23.00 per CVR in Gen common stock if specific stock price conditions are met[115] Stock Repurchase Program Activity (in millions, except per share amounts) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Number of shares repurchased | 5 | 11 | | Average price per share | $27.86 | $24.65 | | Aggregate purchase price | $134 | $272 | Note 15. Stock-Based Compensation This note details the company's stock-based compensation expense by category and unrecognized compensation Stock-Based Compensation Expense (in millions) | Category | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Cost of revenues | $2 | $1 | | Sales and marketing | $24 | $9 | | Research and development | $14 | $9 | | General and administrative | $26 | $12 | | Total stock-based compensation expense | $66 | $31 | - Total unrecognized stock-based compensation expense related to unvested awards was $432 million as of July 4, 2025, to be recognized over an estimated weighted-average amortization period of 2.13 years[119] Note 16. Net Income (Loss) Per Share This note presents the calculation of basic and diluted net income per share, including outstanding shares Net Income (Loss) Per Share (in millions, except per share amounts) | Metric | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Net income (loss) | $135 | $181 | | Net income (loss) per share - basic | $0.22 | $0.29 | | Net income (loss) per share - diluted | $0.22 | $0.29 | | Weighted-average shares outstanding - basic | 617 | 621 | | Weighted-average shares outstanding - diluted | 624 | 627 | - The 12 million Contingent Value Rights (CVRs) are excluded from the diluted net income per share calculation as the contingent conditions for issuance of common shares have not yet been met[120] Note 17. Segment and Geographic Information This note provides financial information by reportable segment and geographic region, including revenue breakdown - Following the MoneyLion acquisition, the company now operates with two reportable segments: Cyber Safety Platform and Trust-Based Solutions[124] Net Revenues by Segment (in millions) | Segment | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------- | :------------------------------ | :----------------------------- | | Cyber Safety Platform | $869 | $780 | | Trust-Based Solutions | $388 | $185 | | Total Net Revenues | $1,257 | $965 | - Americas accounted for 70% of net revenues for the three months ended July 4, 2025, an increase from 66% in the prior year, primarily due to the MoneyLion acquisition[130] Note 18. Commitments and Contingencies This note details the company's legal proceedings, commitments, and contingencies, including patent and consumer protection cases - The company has accrued approximately $601 million for probable losses from a patent infringement case (Trustees of the University of Columbia in the City of New York v. NortonLifeLock) and has appealed the judgment[139] - Avast paid a CZK 351 million (approximately $15 million) fine related to Jumpshot data practices, affirmed by the Czech DPA, and has initiated a judicial challenge[142] - The company is vigorously defending against multiple litigations related to MoneyLion, including a CFPB civil action and a NYAG civil action, alleging violations of consumer lending laws[149][151] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed analysis of Gen Digital Inc.'s financial performance and condition Overview This overview introduces Gen Digital Inc.'s business, brands, and the fiscal quarter's key characteristics - Gen Digital Inc. is a global company focused on Digital Freedom through consumer brands like Norton, Avast, LifeLock, and MoneyLion, offering AI-powered Cyber Safety Platform and Trust-Based Solutions[156] - The fiscal quarter ended July 4, 2025, consisted of 14 weeks, one week longer than the prior year period (June 28, 2024, had 13 weeks), impacting financial comparisons[158] Key Financial Metrics This section presents key financial metrics, highlighting changes in revenues, operating income, and net income Key Financial Metrics (in millions, except per share amounts) | Metric | July 4, 2025 | June 28, 2024 | | :-------------------------------- | :----------- | :------------ | | Net revenues | $1,257 | $965 | | Operating income (loss) | $446 | $417 | | Net income (loss) | $135 | $181 | | Net income (loss) per share - diluted | $0.22 | $0.29 | | Cash, cash equivalents and restricted cash (As Of) | $828 | $1,006 | | Contract liabilities (As Of) | $1,873 | $1,923 | - Net revenues increased $292 million, primarily due to higher sales in Cyber Safety Platform and Trust-Based Solutions (including $168 million from MoneyLion acquisition) and the additional week in Q1 FY26[167] - Operating income increased $29 million, while net income decreased $46 million and diluted EPS decreased by $0.07, primarily due to an increase in income tax expense[167] Global Macroeconomic Conditions This section discusses the impact of global macroeconomic conditions on the company's operations and cash flows - The company's operations and cash flows are influenced by global macroeconomic conditions, including inflation, foreign currency exchange rate fluctuations, interest rate fluctuations, and geopolitical conflicts[162] - Management is confident in the long-term health of the business despite challenging conditions but acknowledges potential negative impacts on customer renewals, collections, and sales if economic uncertainty persists[163][164] Critical Accounting Estimates This section outlines significant estimates and judgments used in preparing financial statements, such as business combinations - The preparation of financial statements requires significant estimates and judgments, particularly for business combinations, loss contingencies, and income taxes, based on historical experience and reasonable assumptions[166] - No other material changes in critical accounting estimates were made during the three months ended July 4, 2025, beyond those adopted due to the MoneyLion acquisition[168] Results of Operations This section analyzes the company's net revenues, operating expenses, and effective tax rate for the period Net Revenues and Growth (in millions, except percentages) | Metric | July 4, 2025 | June 28, 2024 | Change in % | | :---------------- | :----------- | :------------ | :---------- | | Net revenues | $1,257 | $965 | 30% | - Net revenues increased $292 million, driven by an $89 million increase in Cyber Safety Platform products and a $203 million increase in Trust-Based Solutions (including $168 million from MoneyLion acquisition), plus an $87 million favorable impact from an additional week in Q1 FY26[172] Operating Expenses (in millions, except percentages) | Expense Category | July 4, 2025 | June 28, 2024 | Change in % | | :-------------------------------- | :----------- | :------------ | :---------- | | Sales and marketing | $297 | $183 | 62% | | Research and development | $109 | $81 | 35% | | General and administrative | $74 | $52 | 42% | | Amortization of intangible assets | $54 | $43 | 26% | | Restructuring and other costs | $10 | $(1) | (1,100)% | | Total operating expenses | $544 | $358 | 52% | - The effective tax rate for the three months ended July 4, 2025, was 55%, up from 34% in the prior year, primarily due to state taxes, changes in unrecognized tax benefits, foreign exchange impacts, and U.S. taxation on foreign earnings[189] Liquidity, Capital Resources and Cash Requirements This section details the company's cash flow activities, liquidity, capital resources, and future cash requirements Cash Flow Activities (in millions) | Activity | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Net cash provided by (used in) operating activities | $409 | $264 | | Net cash provided by (used in) investing activities | $(873) | $(2) | | Net cash provided by (used in) financing activities | $290 | $(466) | - Cash provided by operating activities increased $145 million, while cash used in investing activities increased $871 million, primarily due to the MoneyLion acquisition[198][199] - Cash provided by financing activities increased $756 million, driven by $741 million from the Incremental Term Loan B issuance and lower stock repurchases[200] - The company has an undrawn revolving credit facility of $1,494 million and $2,594 million remaining under its stock repurchase authorization[202][208] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines Gen Digital Inc.'s exposure to market risks, primarily interest rate and foreign currency fluctuations Interest Rate Risk This section describes the company's exposure to interest rate fluctuations on its variable-rate debt and hedging strategies - As of July 4, 2025, the company had $2,499 million in fixed-rate debt and $6,464 million in variable-rate debt (SOFR-based)[213][214] - A hypothetical 100 basis point change in SOFR would result in a $65 million increase in annualized interest expense on variable-rate debt[214] - Interest rate swap agreements effectively converted $1 billion of variable-rate Term A Facility borrowings to fixed rates until March 31, 2026, mitigating interest rate volatility[215] Foreign Currency Exchange Rate Risk This section details the company's exposure to foreign currency exchange rate fluctuations and hedging practices - The company is exposed to foreign exchange gains or losses due to operations in multiple currencies, including Euro, Japanese Yen, British Pound, Australian Dollar, Czech Koruna, and Canadian Dollar[217] - Monthly foreign exchange forward contracts are used to hedge foreign currency balance sheet exposures, with gains and losses recorded in Other income (expense), net[219] Item 4. Controls and Procedures This section details the evaluation of Gen Digital Inc.'s disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of July 4, 2025 - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of July 4, 2025[223] Changes in Internal Control over Financial Reporting This section reports on changes to internal control over financial reporting, including MoneyLion's integration and prior material weakness - No material changes to internal control over financial reporting occurred during the quarter, except for the ongoing integration of MoneyLion into operations and internal control processes[224][225] - MoneyLion reported a material weakness in its internal control over financial reporting prior to acquisition, related to cash disbursements for its Credit Builder Loan product, which Gen Digital is evaluating for remediation[227] Limitations on Effectiveness of Controls This section acknowledges the inherent limitations of control systems, providing reasonable but not absolute assurance - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations, including resource constraints and judgments about future events[228] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, and equity security sales Item 1. Legal Proceedings This section refers to Note 18 for detailed information regarding the company's legal proceedings and contingencies - Information on legal proceedings is incorporated by reference from Note 18 of the Notes to the Condensed Consolidated Financial Statements[231] Item 1A. Risk Factors This section outlines significant risks that could materially and adversely affect Gen Digital Inc.'s business and financial condition Summary Risk Factors This section provides a concise overview of key risks related to business strategy, operations, legal, and financial aspects - Key risks include inability to develop new solutions, intense competition, AI development issues, acquisition/divestiture challenges, customer retention, sales channel management, industry changes, international operations risks, talent retention, incorrect customer data, cybersecurity events, data privacy regulations, business continuity, reliance on Broadcom, customer support quality, solution complexity, negative publicity, sustainability/governance, seasonality, and regulatory compliance[232] Risks Related to Our Business Strategy and Industry This section details risks associated with product development, market competition, AI integration, and acquisitions - Failure to develop new and enhanced solutions, or to continually improve existing products, especially with AI integration, could adversely affect business and operating results[235][236] - Operating in a highly competitive and dynamic market, with competition from various software vendors, operating system providers, and financial service companies, poses a risk of market share loss and revenue reduction[241][242][243] - Issues in AI development and deployment, such as flaws, bias, or 'hallucinatory' outputs, could lead to reputational harm, legal liability, and adverse effects on operations[249] - Acquisitions (e.g., MoneyLion) and divestitures create risks including integration challenges, customer retention issues, increased costs, and diversion of management attention[253][256] - The ability to retain existing customers, expand sales, and convert non-paying users to paying customers is crucial, with retention rates susceptible to customer satisfaction, competition, and economic conditions[255][257] Risks Related to Our Operations This section covers operational risks including international activities, talent retention, cybersecurity, and third-party reliance - International operations expose the company to risks such as managing dispersed operations, protecting intellectual property, foreign laws, currency fluctuations, geopolitical conflicts, and multiple tax regimes[276][278] - Future success depends on attracting and retaining key personnel in a competitive marketplace, especially AI and machine learning experts, with volatility in stock price potentially affecting recruitment[279][281] - Cybersecurity events, including sophisticated attacks and AI-driven threats, pose significant risks to systems, data, reputation, and future sales, potentially leading to legal, financial, and reputational harm[285][286][287] - Dependence on Broadcom for critical engineering and threat response services for Norton products creates a risk of significant business disruption if these services are not delivered[298][300] Risks Related to Legal and Compliance This section outlines risks from regulatory compliance, evolving legal regimes, and ongoing lawsuits and investigations - The company's solutions are highly regulated by various international and U.S. federal/state laws (e.g., FCRA, GLBA, FTC Act, BSA/AML), with non-compliance potentially leading to fines, penalties, and business restrictions[312][315] - Evolving legal and regulatory regimes, especially for open banking and AI/machine learning, create uncertainty and could require significant expenses, impact profitability, or alter business practices[320][321] - The regulatory regime for blockchain technologies and digital assets is uncertain and evolving, potentially requiring new licenses or exposing the company to liability if digital assets are deemed securities[323][325] - Lawsuits and investigations, including patent infringement and consumer protection claims, require significant management time, incur legal expenses, and could prevent product sales or result in substantial fines/damages[336][338][340] Risks Related to Our Liquidity and Indebtedness This section addresses risks stemming from substantial debt, restrictive covenants, and reliance on funding sources - The company's substantial indebtedness ($8,963 million outstanding as of July 4, 2025) poses risks including significant cash flow usage for debt service, refinancing difficulties, interest rate exposure, and potential default on covenants[346] - The Amended Credit Agreement imposes operating and financial restrictions, limiting the company's ability to incur debt, pay dividends, or dispose of assets, with potential default consequences[348] - Reliance on various funding sources for loans and cash advances means failure to renew or replace existing arrangements on acceptable terms could materially affect business, financial condition, and cash flows[351] General Risks This section covers broad risks such as macroeconomic conditions, quarterly financial fluctuations, and potential stock dilution - Adverse macroeconomic conditions, including high inflation and interest rates, can lead to higher financing costs, reduced marketing spend by partners, and disproportionately affect MoneyLion customers with limited credit history[355][356][357] - Fluctuations in quarterly financial results, driven by factors like demand, competition, economic conditions, and acquisitions, have affected and could continue to affect the stock's trading price[360][361] - The company may be required to issue shares under its Contingent Value Rights (CVR) agreement if specific stock price conditions are met, potentially diluting existing stockholders[363] Risks Related to Taxes This section details risks related to changes in tax rates, new tax legislation, and potential tax audit liabilities - Changes to effective tax rates, including new tax legislation (e.g., One Big Beautiful Bill Act, OECD Pillar One/Two proposals) or exposure to additional income tax liabilities from audits, could increase tax expense and reduce net income/cash flows[364][365][367] - Disagreements with taxing authorities regarding intercompany arrangements and taxable income allocation across jurisdictions could result in additional taxes, interest, and penalties[368] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the company's stock repurchase activities and remaining authorization under the program Repurchase of Equity Securities This section details the number of shares repurchased and the average price paid per share during the quarter Stock Repurchases (in millions, except per share data) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value Remaining (in millions) | | :-------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------- | | March 29, 2025 to April 25, 2025 | — | $— | $2,728 | | April 26, 2025 to May 30, 2025 | 5 | $27.86 | $2,594 | | May 31, 2025 to July 4, 2025 | — | $— | $2,594 | | Total | 5 | | | - As of July 4, 2025, $2,594 million remained authorized under the stock repurchase program with no expiration date[371] Item 5. Other Information This section discloses that no directors or officers adopted or terminated Rule 10b5-1 trading arrangements Insider Adoption or Termination of Trading Arrangements This section confirms no insider trading arrangements were adopted or terminated by directors or officers - None of the company's directors or officers adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the fiscal quarter ended July 4, 2025[372] Item 6. Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including various agreements and certifications - The report includes exhibits such as the Second Amendment to Amended and Restated Credit Agreement and the Contingent Value Rights Agreement, both filed on April 17, 2025[375] - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are furnished[375] Signatures This section contains the formal signatures of Gen Digital Inc.'s CEO and CFO, affirming the report's submission - The report was signed by Vincent Pilette (Chief Executive Officer, President and Chairman of the Board) and Natalie Derse (Chief Financial Officer) on August 13, 2025[377]