VeriSign (VRSN) 23 Apr 202020 Q1 Earnings call transcript

Good day, everyone. Welcome to VeriSign's First Quarter 2020 Earnings Call. Today's conference is being recorded. Recording of this call is not permitted unless preauthorized.

At this time, I'd like to turn the conference over to Mr. of and President Treasurer. Vice Atchley, Investor Corporate Relations David Please sir. go ahead,

and First Welcome for Earnings today, of Operator. healthy. you, safe Quarter are joining hope staying you to call everyone Thank to VeriSign's XXXX and each you Call. our we Thank

Joining of Executive locations Jim interference, Vice advance from verisign.com. CFO. call, be you will Chairman which their President on Bidzos, being and There be COO; for website, respective is Strubbe, quality of issues the first This few that sound investor call. also available presentation on will site. in call if or any will replay end posted. VeriSign CEO; our find and delays Todd President a About from we release. this your and me Executive remotely webcast you earnings today's the the quarter hours, presentation available are and George within experience and relations a patience And XXXX under Kilguss, the Thank during call are At

SEC our performance forward-looking financial identify public recent disclosure. include VeriSign filed on retains a our and we in cause remarks that materially policy and discuss it guidance actual the to is would contained quarter our uncertainties subject statements risk detail unless risks comment in statements. through that are factors from its which results during to reports those are in done on in unaudited, differ forms results earnings not to the long-standing the that most release with the Financial specifically XX-Q, forward-looking the and documents XX-K or

matters call. GAAP website EBITDA and reconciliation Relations information today's measures section our by which X results today be slide of adjusted is found flow. in discussing presentation, will after the will results non-GAAP we available financial VeriSign, the on to to appended this call be Investor cash non-GAAP used and free GAAP and the The include

moment, afterward, With a over prepared the Jim remarks. And to your In provide I Jim. to questions. turn call will that, like open some will for we would and George call the

Thanks, afternoon, David, and everyone. good

address global we are protecting businesses helping partners. our our COVID-XX, As operations, local focused through challenges the posed and communities supporting work managing people, our small people to our general on by

While ability and preparation with unprecedented, COVID-XX global issues disruption the posed are most routinely fall readiness they are to remotely. our by Internet company's critical plans, The local, maintain by infrastructure include within employees which the regional events. exercised, standard caused for working

to our registry operate our and ICANN services at .net the governed including by by created in standards the COVID-XX. .com of We are of all to performance services, even continue environment for and prepared route demanding operations rigorous

local during quarter help initial first personnel Worldwide United as and first & COVID-XX Way's Community communities, Fund. medical the in made our responders Additionally, million the announced and March, to we and Semper an donation America's Recovery Virginia Fund $X Fi in Northern to the Response area,

our company help channel business in which available can to operations, blog, our efforts people, communities our Additional small be manage verisign.com. through help is at our partners and found protect

and on focused base first which in the delivered domain our able core to expanded for quarter like name quarter financial I'd solid Now VeriSign I'm consistent updates another report we results. address business, to results. and

the the related for ability and together binding framework new VeriSign to which formalized letter On the on .com separate entered intent, agreement that domain we and ICANN VeriSign of to announced a resiliency March in security the XX, initiatives and and into to system. registry third ICANN amendment work a

it interest and will hold by confident helping certainty supports remain stability .com the Internet resiliency serve public with globally. the pleased of are that to and the security, functions and the in outcome agreements We pricing and providing process these the by critical

end we In for and the all announced through of that including TLDs, registry the have COVID-XX, XXXX. .com in .net, fees disruption caused by addition, of global we light

over stated X, $X and the for activities activities the beginning we year provide last the entire the on years that As resiliency believe DNS enhance quarter, this regarding commitment support X XXXX, stability letter commitment ICANN one-time to intent, by January community. the We to benefit of and per funded million Internet of preserve Internet. security, and to the will

Officer Strubbe an senior management Operating and further Chief promoted Vice as Todd from February, in Operating President and team. Officer, was strengthening update, Executive to our Also, Chief President

and of X.X%. name to XX.X Relating totaled .net domain highlights. million operational names growth consisting in million XXX.X for of .com .net the year-over-year of March, and for names with base XXX.X first quarter rate million end a At the .com

quarter, first the base and new the increased million name million we X.XX by domain registrations, processed During names. XX

approximately XX.X% of our to the that not XXXX believe renewal the we quarter first XX.X% XX.X%. rate of preliminary renewal Although measurable fourth quarter are and fully rates the XX for days until achieved be quarter, of the the after XXXX. the compares first This of end quarter XXXX in will in rate

that it of when the And that read, renewal rate. in just sentence afternoon it of just press fourth in I the press the says the release this of XXXX mentions the the way, we released in XXXX XX.X% By our fourth quarter release, instead typo. has quarter a

the fourth quarter So And the I XX.X%. suppose. renewal fourth the XXXX. -- of yourself, sorry, of was ahead fourth quarter getting XXXX of That's rate it quarter first typo, the -- says

point that to out wanted just I typo. So

So back the to business.

more range domain name expect year. of this now of between reflects base for by the we XXXX, rate a For X% growth the growth the Recognizing balance of base domain name view X.XX%. COVID-XX, and presented cautious a updated uncertainty

shares XX, our repurchase available X.X common has resulted million. no program, the share program that expiration. share in repurchase authorized At first we of the which repurchased and During $XXX million XXXX, stock remain for million quarter, continued $XXX current under March

and at the business the and end of including investing strong repurchases. securities liquidity Our cash, marketable the position remains best evaluate financial continually of cash consider We cash, our and liquidity $X.XXX the needs in billion uses share and for quarter. the overall potential with equivalents

to turn George. I'd call now the And like over to

good everyone. afternoon, and Jim, you, Thank

XX, first quarter the XXXX, Jim donations primarily same ended operating generated X% flat mentioned $XXX quarter revenue in and the in the by expenses delivered from year a from with of million quarter, decrease quarter. earlier. X% lower $XXX is and marketing totaled operating a expense the offset sequential million, up ago decrease result sales the in that million of a year million in of For $XXX and $XXX in same partially The a Operating $X the last from March company million, income $XXX million, in quarter XXXX, quarter the up ago. expense

compared for $XXX The operating quarter produced same million $X.XX quarter this which year compared XX% to the year earnings earlier, the margin totaled share came a to quarter first in compared a income the quarter per of in year year. to last in to the Net diluted $XXX million $X.XX same ago. XX.X%

the $XXX unrecognized $X.XX. per our tax noted of As earnings income income benefits. in benefit previously quarter tax increased This release, recognition net by share the of earnings for million included income diluted

$X.XXX maintained billion. As liabilities of total XXXX, of billion assets total and March the $X.XXX of XX, company

flow first and included for first Operating compared Assets quarter for the cash with was equivalents flow million securities. and $XXX billion cash free $XXX quarter marketable of last was million million, $XXX the year. and $X.XXX $XXX million, cash, respectively, cash

the expectation of is revenue of guidance. of compensation, investment expected that This includes is stock-based still infrastructure, billion XX.X% marketing billion. $X.XXX capabilities forecast which The base our discuss and mentioned Revenue full earlier. expected and operating range remainder incremental sales still and margin, growth be year continued XX.X%. updated and now Jim be to XXXX $X.XXX reflects will between the reflects X% XXXX. to domain range rate range in during X.XX% of I our the operational to between expense name in security This guidance and

an income a million. year rates. and and the of and Interest expected the which expenditures rate expected expect income interest is This We reflects expense benefit between million income full X% between quarter. interest still balances to updated nonoperating million. decreased be cash be $XXX our tax and in of recognized X%, benefit $XX due to effective $XX $XX are tax be expense first million now to now million expected Capital reflects net $XX lower between range on to

of not to be XX% will tax income expense pretax expect between positions of of a for our we in XX% to remeasurement are range by taxes earlier expected of the of the XXXX, percent the XXXX as Cash impacted pretax of discussed For XX% still be uncertain balance and and income. tax for XX%. accrual

the In balance sound continuing of demonstrate for period summary, of financial uncertainty. quarter, focused XXXX market this during and look continued VeriSign performance the execution to to forward our during we

closing to back call the turn Jim I'll remarks. his for Now

you, George. Thank

everwhere, at would I like appreciate skill work everyone not well Before training, We and I of crisis. our effort our efforts this and the of the the hope during moving dedicated on which critical here acknowledge call, but to of focused only infrastructure. continues staff, question-and-portion commitment and this team, safe. remains remains critical to they operating stay demonstrating are of to and hard VeriSign

remotely call, before know questions your walk which through few participants are questions. that Given would we on your a additional for are we dialing for the mind this call open in we to like

net capital demand of allocation? job across exercised, first provide VeriSign readiness chain, answer Protecting maintain impacts company's with could your multiple of relied ability services locations continents. centers than The for COVID-XX's service The distributed as critically remains unconditionally the root recognize now on that's terms to registry one. to on critical question ever. that as are you operation your employees well in and infrastructure and remotely. The redundant answer and that then supply as infrastructure most working plans, is then our .net for.com include hundreds we operations VeriSign infrastructure the information which .com worldwide maintains that operates more X as within ask customers, well and operates Internet I'll routinely is, business more that infrastructure,

given infrastructure DNS are is locations. VeriSign technology, at functions not across multiple teams perform vendor VeriSign's and globe type on source power of the a location, technical key from to a diverse dependent or able single

ICANN our are environment operations to operate all of created services our governed by demanding route to the at COVID-XX. by including for rigorous services, registry .net in even We and and prepared of standards .com performance the continue

that infrastructure for and we appropriate everything or on businesses our important our power given to ensure where source to supply to ongoing continue a type vendor is single remember have monitoring are infrastructure. our for of necessary It clearly a is action issues to these respect operation the times the to chain, regards of and at taking are economy. these In we're location. With that uncertain technology, dependent our not customers,

this crisis, our actions blog XXXX. through As help TLDs, business businesses to taking we're order all including of is small we end small by net, to registry VeriSign support discussed In our and post, common our in partners. through of freezing affected individuals for prices channel the

as registered restore from may is back is during addition, have of get VeriSign names which the their April left pay what registrar, availability. domain known for domain domain X person accidentally .net into who In name waiving and back the protect X, until goes time general the the can fee before an .com to lapse fee who restore names. a is one-time This registration inopportune Typically, it June time. helps a name at name when a a period by deleted there is registrants

during well recognizing to relates renewal registrations as that the we a good as the That names, you for more .net and and growth cautious As .com today's view COVID-XX the guidance results duration for see improved it stated I first uncertainty updated preliminary the rate. name being quarter over of of the year. reflects an demand in as range impact economic saw domain domain base demand new earlier, the for of a rest the said, crisis,

with our track performance on domain reminder, website. base a the As you of the name can updates daily

amounts. more regarding capital is unprecedented line at return the these historical times, next that recognizing will for and market are a with allocation, in quarter, that be least of uncertainty capital period Finally, our

of COM .com? XX Amendment the Second the changes, pricing address. period. With which each to and years you under price with for last the in can the increases take Registry agreed Commerce, cooperative Amendment U.S. finalized, changes X to Department I'll X allow of Agreement for X reflects agreement certain limited question every amendment when ask of .com including increases the price X-year

months' a by in prices the to increase. price and XX, XXXX. announced began XX, X order to date require .net, as our VeriSign was October have The and March, first small is XXXX, businesses of registry including reminder, in of taken VeriSign pandemic. top-level any on Therefore, That earliest Also, VeriSign period XXXX said, through com registry end a for the COVID-XX that provide of increase. all .com the October support and the domains, freezing could price its affected notice individuals agreements net as we

last Now called updates the awaiting we mentioned Are our on an to on a rules. answer third of call, stats question take the on in like before last independent yours. under could ruling there ICANN's and arbitration whether As VeriSign were process the we I'd .web? review participate any

further in in We As panel announced review independent new permitted in this .co at do our arbitration to time. updates the aspects XX-K the not VeriSign participate February, have and process. of

we'll questions. your the open Now for call

we're and for do appreciate to participants, As your a of reminder, we experience to issues. ready our we Operator, nature the we will remote first if due the each to patience question. best question, respond technical

first our Rob question from take we'll Baird. And Instructions]. with today Oliver [Operator

congratulations promotion. a guys answering questions takes Jim, on you own of already efficiency, Great. level. yes, And, it to are your but, model your Todd, a new

are but are terms You've seeing out renewal in want tweak just SMBs mean, into bit I of the is domain what color from plays more forecasting very strong, get effects curious the And of rates, were most guys modest. any fairly a you that taken strong mine, to about activity. slight guys COVID-XX? range did I just residual on down and maybe and of your what on which flush how revised you the seeing

economic I impact of I'll we're beforehand would COVID-XX. is answer here, Jim. but, to there's from going about significant talking ask X your to than QX that And is obvious the This obviously, last this say more just George question. substance quarter.

So you would question, crisis would. that you our again, of say, our view the is in this all have just answer But me I clarity for more of cautious George, reflected guidance. because if let

deeper up little From really previously we rate driver George. from we of a rate bit the being see ago it's we a renewal look, Rob, did tick levels. see When the Sure. year renewal perspective, a rates take that. renewed

to So previously renewed on previously names base as a we're stages. seeing those who normal people before, we've that names. hold function about seen talked And as have to the that's continue we

as itself, name performance clearly As the the mentioned, Jim had a at we what domain we in look base was good quarter, QX. here actually first

million. were up delivered from and a units New X.X% year ago $X.X

U.S. the that, to name United quarter, the say year. for but domain the and name we're China demand little outpaced strength registrars an eye a we overcompensated the market continue softer, would mentioned, keeping base here good really was States on saw QX. I and the domain the you strength As the in from of base to registrars. for helping rest In the And that the from grow

Citi. Our with next question will come Jones from Nick

reads, say, pricing But the just early if Just not same then prices XXXX, do XXXX? in take quick XX, I'm are that's first me, the you follow not the X to the in you without, to asking any increases in quick one ones, were XX, able you timing the it a to taking two are if specific have you I And Ultimately, way October able tick pricing the on sure guess, on year? .com October I but XXXX, could X I then -- one agreement. guess, the take And timing. contract you for one. follow-up. my you in aren't as XXXX? increases

your think question. Okay. I best Well, I can the way answer

all, actually let getting that a of your employ. question First that we me process is of to sort say just

COM VeriSign give each you to year. agreement price X-year I a X let answer years to the October as that, helpful of defined X-year that. is will than of agreement, over rather XX. to of about to price to allowed October period XX year every X% time the me XX in fly, start maximum the the period X the XXXX. pricing interpret XX, of question, to that the Amendment the up some of Amendment Under with preceding take be cooperative `is under is think, frame increase to So established Amendment This in as your last the on try consistent that facts just X October Pricing

those get facts think you I the So kind of me of mechanics, sort to of to. the the are help you where and should want that

is helpful. risk That's .com the Or quickly -- of new demand? you large a level then top TLDs and domain, acquired does. any That's there have increase new one, on helpful. Does registry That a around just of code the do potentially And second country some that? kind registrar that that impacting thoughts TLDs. issues

NeuStar. referring of you're acquisition assume GoDaddy's I So to

us, has to we important and recognize to that our So let domains, for an users level partner we and all that value that channel net say partners in see continue is common me well. channel of tremendous as just the and expect value End top GoDaddy continue. know been

is owns So registrar our operate and continue channel to note is these also, important registry. registries, including important to Donuts, channel is which Google partners that registrar Registry it's integration which Name.com, of a which case, not partners that large a has TLD be Google, registrars each vertical for also new. VeriSign. In Several

We'll Sterling take with our question last JPMorgan. Auty from

it's results start you. to based maybe the added. stronger net than have at names quarter, on I million the look the would I anticipated X.X revenue with George, If in

net other helped one-time maybe revenue something comment? can So there you revenue to either helped was those Was additions quarter? that revenue? non-domain-related seasonality or Or the there the that of any

the was There fourth didn't in was that material have quarter. revenue no that non-domain we present name

very a fourth your think quarter. may be had impacting perception I what is strong we very,

us helping bit QX. quite fourth that's a a domains here a in just getting here waterfalling in and and quarter quarter, the tailwind And the had we of first come so into few little

way. to change GoDaddy future or I'd about integration of might you NeuStar, acquisition consolidation terms like think doing registries? Does of with. this influence at vertical perhaps it great. this Okay, what and Web the look then or in And on of

that impact really any on any thinking about I -- I really has don't it see that.

first agreement there, registry. I vertical work real .web com. per the to speculate As them out no not XX apply to are that relationships this to about .web, certainly of mean, clarified fine. is time But was no become a but on integrated, com the to we've meant about early But think se. There let a several registrar so those registry it's said, that and say say there's update point, the has the I discussed comment vertically just Amendment that. me the ability be cooperative to I only this integration within to at

we And So Agreement. X for integrated vertically the com. can't be now Amendment similar the agreement clarification doesn't to That included net registry is a Registry have COM clarification. in

then update you other you could the any .web, And delaying process? be Or on provide COVID-XX mentioned you would what Is have. color helpful. Okay. did

preceding even I don't in actually this arbitration crisis, even -- believe has. The have COVID-XX have appearance the the always telephonic. been it of are COVID-XX proceedings

need And upcoming that's I least in person, everything there has telephonic. on court speculate But so planned it's be thus but at believe appearances far unlike be in an this been show would where hearing is to about what there. there. that is up year to and later people physically happen I can't gone

been So no slowdown. thus far, there's

will what Beyond speculate that, I about can't happen.

an later this you in-person So there that year. mentioned one is

or let's So be to quarter us say, next does a the of an there kind so? that .web, that resolution would indication give over not

a know what that that about familiar hearing hearing. at know when. to don't or subject exactly with the be has the what of flexibility that there I that everyone of know proceeded all not. on was particular level I telephonic. again, that plans happen or that's least proceedings change will an I of can't in-person literally so crisis rules, because, may have planned plan. was far not the things with I been the I'm speculate if have just the or impact just detail COVID-XX

Got it. question. And last

today? seeing. overhead handle the you look some utilization about to supply spikes You have ample Do does the network VeriSign we're the of talked that capacity in the like chains. What

within resiliency data traffic out How usage. and some the the VeriSign of network? Internet Some showed others is performance the Akamai the in from coming significant capacity just utilization of pretty

pleased designed certainly, loads. planned -- performance capacity. under the We our we perspective, for of Excess are traffic criteria like excess and situations increased with in capacity. loads this, -- earlier, stated very the we which network with also are considerable not from been we're an without design I but And It's just environment traffic traffic work-from-home deal network, traffic capacity always from our has accommodating increased a the issues. to with as

the That or Atchley will today's session. to turn remarks. additional over I now closing question-and-answer David for conclude Mr. any will conference

Thank call. evening. Thank department the any Relations call. This Have questions our Please for with call follow-up you, good you Operator. a from your Investor participation. this concludes

participation. That does you conclude your conference. for Thank today's

may You now disconnect.