Gen DigitalGEN

Gen Digital reported profit of $0.71 per share, topping the $0.69 analysts expected. Revenue reached $1.34 billion, also coming in ahead of targets. This performance is particularly notable because the quarter had one fewer week than the same period last year, yet the company still managed to grow its results.

The company is seeing success in its plan to move customers beyond basic antivirus software into more expensive identity protection and financial safety tools. Because these services are sold as subscriptions, they provide a steady stream of cash that the company can use to pay down the debt it took on for the Avast merger. Management now expects the rest of the year to be stronger than originally planned and raised its full-year guidance accordingly.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

The company reports its first quarter results today after the market closes. Analysts expect revenue of about 1.31 billion dollars and earnings of roughly 69 cents per share. While the company has a long streak of beating these targets, the numbers that matter most for the long term are its debt levels and customer retention.

We are watching to see if the company is using its cash to pay down the nearly 10 billion dollars in debt it took on for the Avast merger. We also want to see if customers are sticking with their subscriptions and moving into higher-priced identity protection plans, which is the core of our view that this business is more profitable and resilient than its low stock price suggests.

See the full quarter, and how our tracked metrics did

Key highlights

• Full year outlook raised: Management raised its full year revenue forecast to a range between $5.375 billion and $5.475 billion, up from the prior estimate of $5.325 billion to $5.425 billion. This increase shows the company expects its cyber safety and financial health products to stay in high demand through the rest of the year.
• Bookings growth accelerating: Bookings, which measure customer orders to be recognized as revenue later, grew 11% to $1.284 billion after adjusting for an extra week in the prior year. This double digit growth is a sign that the company is successfully signing up more people for its security and identity protection services.
• Paid customer base expanding: The company grew its total count of paying customers to 81 million, an increase from 76 million at the same time last year. Adding 5 million paying users is vital because these subscriptions provide the steady, recurring cash that the business relies on to pay down its debt.
• Trust based solutions surging: Revenue from trust based solutions, which include identity theft protection and financial wellness tools, rose to $490 million compared to $388 million a year ago. This segment now makes up roughly 37% of total sales, helping the company move beyond just selling antivirus software.
• Partner revenue showing strength: Revenue from partners like retailers and telecom companies grew to $273 million from $203 million last year. Finding more ways to sell through other businesses helps the company reach customers it might not find through its own websites and app stores.

Our take: This was a very strong start to the year, and raising the full year guidance this early shows management has a lot of confidence in the current momentum. The growth in paid users to 81 million proves the company can still find new customers even as it integrates recent mergers. It is a clean result that keeps the long term growth story firmly on track.