GEN · Research
Gen Digital at 8.52x EBITDA: $5.78B of Its Debt Floats and a 5.25x Covenant Guards It
Gen Digital earns $1.32B of owner cash at a 41.68% operating margin, but 70.23% of its $8.23B debt principal floats with SOFR. A 5.25x leverage covenant and a springing maturity sit over the revolver and Term A loan.
- EV / GAAP EBITDA
- 8.52x
- Floating-rate debt
- $5.78B of $8.23B principal
- Owner cash
- $1.32B after stock pay and capex
- Interest per 100bp of SOFR
- $58M a year
| Scorecard | Read | Filing |
|---|---|---|
| Key multiple | 8.52x EV / GAAP EBITDA on $2.61B (operating income $2.12B plus D&A $0.49B); EV $22.23B | 10-K, 10-Q cash flow |
| Thesis | The cash flow is strong, and the debt that funds it floats and carries two triggers | 10-Q Note 8, Item 3 |
| What proves it wrong | Interest stays at or below $124M a quarter while the $900M of 6.75% notes due Sep 30, 2027 are retired from cash flow with the $1.50B revolver undrawn | 10-Q Note 8 |
| Second test | The floating share of principal falls below 70.23% without a covenant amendment | 10-Q Item 3 |
| Next catalyst | Fiscal second quarter results on Oct 28, after the close | Company press release |
| Debt | $8.16B at carrying value ($8.23B principal less $74M of unamortized costs); $1.50B revolver undrawn | 10-Q Note 8 |
| Cash | $533M of cash and equivalents; restricted cash excluded | 10-Q balance sheet |
| Owner-cash staircase, TTM to Jul 3, 2026 | $M | EV / amount |
|---|---|---|
| GAAP EBITDA (operating income $2,117M plus D&A $493M) | 2,610 | 8.52x |
| Operating cash flow | 1,570 | 14.16x |
| Less stock pay of $225M | 1,345 | 16.53x |
| Less capex of $22M: owner cash | 1,323 | 16.81x |
The floating debt behind the multiple
Gen sells consumer cyber safety subscriptions at a 78.01% gross margin. Trailing revenue is $5.08B and the GAAP operating margin is 41.68% [3][5].
That is how a $22.23B enterprise value lands at 8.52x EBITDA.
The debt behind that value is $8.16B at carrying value and $8.23B at principal. Of the principal, $5.78B pays SOFR plus a margin, or 70.23%.
The other $2.45B is fixed-rate senior notes [1][2].
The 10-Q prices the exposure: a 100 basis point move in SOFR changes annualized interest by $58M [2]. That is 4.38% of owner cash and 2.22% of GAAP EBITDA (derived).
Interest expense was $124M in the quarter against $156M a year earlier, down 20.51% [3]. The exposure cuts both ways, and it is the part of the capital structure that an EBITDA multiple does not price.
Two triggers sit above the rate risk. The revolver and the Extended Term A Facility carry a consolidated leverage covenant of 5.25x, rising to 5.75x for four quarters after an acquisition above $250M [1].
On our GAAP basis, net debt is 2.92x EBITDA (derived), but the covenant uses credit-agreement EBITDA, which the 10-Q does not give.
Owner cash and peers
Cash conversion is high. Operating cash flow was $1.57B, stock pay was $225M (14.33% of operating cash flow) and capex was $22M.
Owner cash is $1.32B, which puts EV at 16.81x [3][5].
Operating cash flow carries Instacash noise. The quarter booked a $60M loss on sale of advances and a $86M outflow for advances held for sale, and Gen sold $1.19B of advances to Sound Point under a facility now sized at $300M through Jul 30, 2028 [6].
| Company | EV / GAAP EBITDA | EV / operating cash flow | EV / owner cash | Latest quarter revenue growth | Stock pay, % of revenue |
|---|---|---|---|---|---|
| Gen Digital (GEN) | 8.52x | 14.16x | 16.81x | 6.3% | 4.4% |
| Palo Alto Networks (PANW) | 205.58x | 69.99x | 136.24x | 31.2% | 15.5% |
| SentinelOne (S) | EBITDA negative | 151.30x | Owner cash negative | 20.6% | 29.3% |
| Akamai (AKAM) | 17.09x | 13.98x | 168.29x | 5.4% | 11.8% |
| Adobe (ADBE) | 10.23x | 9.50x | 12.05x | 12.9% | 8% |
Gen has the lowest EV / EBITDA of the set, against Adobe at 10.23x and Akamai at 17.09x. The owner-cash multiple tells a closer story: Adobe is 12.05x and Gen is 16.81x.
At Gen, owner cash is 50.69% of GAAP EBITDA, with $537M of trailing interest expense and taxes between the two lines [5][3].
What proves the thesis wrong, and what we watch
- Oct 28: interest expense at or below $124M a quarter and a floating share of principal below 70.23% [11][3].
- The $900M of 6.75% notes due Sep 30, 2027 retired from cash flow with the revolver undrawn.
- Instacash held-for-sale outflows shrinking from $86M a quarter, which lifts operating cash flow without a change in the business.
- Any change to the 5.25x covenant or the springing-maturity liquidity threshold. The threshold in dollars and covenant EBITDA sit in the credit agreement, so we do not estimate headroom.
Figures are derived from filed statements. Nothing here is a price view.
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