VeriSign (VRSN) 25 Jul 242024 Q2 Earnings call transcript

Good day, everyone. Welcome to VeriSign's Second Quarter 2024 Earnings Call. Today's conference is being recorded. Recording of this call is not permitted unless preauthorized.

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

Welcome operator. Quarter to XXXX you, Earnings Second VeriSign's Thank Call.

few will call President release. Joining me and CFO. webcast Vice CEO; -- Investor hours, and of available Relations this end VeriSign President Chairman, are website, on you This from and verisign.com. which the the are Jim George site, the Bidzos, of will Kilguss, There, Executive and being presentation replay under is and that about the the also be presentation call At within posted. on find a our earnings be available call, will Executive

afterward, which will website we Investor be Financial appended Jim And with for forward-looking can will some results are risks the open be subject call. Relations presentation, EBITDA flow. report discussing SEC, found are and the to specifically unaudited, our and cash that include information on unless public our and two GAAP we after slide we non-GAAP in update release today's VeriSign, results measures the free matters questions. available statements VeriSign provide your the remarks. GAAP the prepared financial this the in reconciliation does is documents section in our or non-GAAP and adjusted of to results the and discuss XX-K. used our the will disclosure. done detail is call by George today not Form filed quarter that guidance earnings through remarks a during to include financial it uncertainties recent in performance on The most call and

the like Jim. to that, turn to would call With over I

afternoon thank joining to Good you David. for and you, Thank us. everyone,

milestone I'd DNS and XXX% availability This we like infrastructure. marked name an years our industry secure, last the XX note stable unparalleled resilient of operating we for resolution in for .com, uninterrupted system. domain represents achievement to cover that .net week, results, Before

our successfully global For well infrastructure significant amidst and in queries of maintained, have teams operated the century, the commerce. over of enables that ever and of the world billions most some X/X of trillions built, supports of the day a dollars technologically experienced, hundreds changes has evolved

answer XX we with technology million do per a days per a day, average, queries X.X XXX We challenging day, Internet global year, over resilience, fact, cyber billion XXX evolving amidst a In and threat billion this a demand and environment. hours on week, ever-increasing days a B. that's second. and X

operational financial Turning on now to of and our focusing critical infrastructure stability Internet our quarter mission by as results. another a We delivered provider.

For the grew and domain domain name year-over-year. per names. grew revenues quarter, share year-over-year basin totaled income XX.X% X.X% operating XXX.X X.X% of end June, earnings the second .net At million the year-over-year, .com, grew

XX.X% compared names. name domain last a million registrations perspective, quarter, the XX.X new expected quarter by to to be quarter X.X During The compared same the XXXX the second million with X.X second rate a registration of the second ago. From million new decreased approximately for for is renewal base the names year quarter year. XX.X% with ended

and new continue spend reduced years. to are are in levels pricing compared factors with trends on prioritize weaker impacting below marketing XXXX have customers higher through to and previously expectations. prior see new registrations we acquisition renewal As retail that leading registrars impacting we original customer over and are registrations our reported, to ARPU U.S. These rates

U.S. was During by names. the lowered XXX,XXX second quarter, the region about

second EMEA slightly weakness to domain continues and quarter. China-related the during up region base sequential in In contributed as most addition decline the of name remaining The the our second expected, and quarter. from was

the returning to second new weeks half support our growth in to several programs our goal past name have registrars registrar and XXXX. marketing We of the of out base rolled over domain

to given of X% to be in the negative factors However, we domain expect for X% change mentioned, we've full the between name base ongoing negative the XXXX. a impact the now year

Our $XXX quarter. cash, in continues securities equivalents end financial marketable the of and the remain and million at to cash stable liquidity with position

the second shares $X.X authorized has the we the million. During total share to which million VeriSign the no Directors quarter, authorized for repurchased share program, increased $XXX by $X.XX of repurchase billion, repurchase of under available and Board a X.X billion has today, Effective expiration. amount stock for of common

turn to his report return I'll like George I'd George. now to with when financial has over remarks. the completed And closing call

Thanks, Jim, and good afternoon, everyone.

first up of the $XXX delivered from million, X.X% quarter company of of $XXX increase totaled generated year $XXX million, million X from a XX, million the XXXX in expense quarter $XXX XX, in quarter ended for for revenue X the ended second the months a million ago. the X XXXX quarter the and year quarters the same of the quarter which million June ago. an to same compares XXXX $XXX of XXXX, the and $XXX for months of and Operating For June second income operating X.X%

$XXX diluted of second $X.XX the second for million a per $XXX year quarter of earnings same quarter of in XXXX. million $X.XX compared earlier, compared the share quarter totaled to income for XXXX, Net the to which produced

in flow was and quarter. $XXX the second cash flow million respectively, million free ago and for with $XXX $XXX million, million cash quarter year the Operating compared $XXX was

to tax updated is expense expected still be million. between between interest billion expenditures million. includes $X.XXX to and be $XX million full I'll nonoperating our effective expected to an still still $XX in billion year is to $XX of be billion. be XX% XXXX range $XX to the rate now now $X.XXX guidance. And million billion. to GAAP income Operating is and net, are Capital $X.XXX and Interest estimates, Revenue of $X.XXX which is discuss be XX%. to expected the to expected between income expense now income expected between

quarter. continued VeriSign performance during sound Overall, to financial demonstrate second the

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

Thank you, George.

will change in that we name for reasons While remain. for below year prior we've fundamentals levels XXXX believe our the to we base continue expect the discussed, domain be the business

to marketing and registrar in adopted to go-to-market programs As registration earlier, additional our activities. into introduce improvement once target I mentioned integrated and trends we support registrar continue new

Our of mission to our returning responsibly and reliable to shareholders consistent stewardship financial services, business providing deliver support to our efficiently and remain care capital fulfill commitment our infrastructure managing goals and our results. unchanged

the concludes your you Thank This for today. your question. ready for the first attention call now we'll Operator, And prepared open our for questions. we're remarks.

Our Baird. Instructions] Oliver first Rob from [Operator question with

and the I'll registrars, America particularly question talked some you you and focus would a on a at that in the then Great. the I've out you first from that ARPU. hop others. I what have view? a got activity about taking the talk I guess, the there back North the be, that bit a you're view newer few, seeing about data of you share the in then concern there would either Jim, from and queue. And gTLDs into .com couple gives Can are or little persuade perhaps that of

Okay.

or increased earlier expected channel a our wholesale having twice we -- on flexibility has while and weakness primary components prices limited with remains spend factors bigger and in year. more more. the originally impact the are ARPU ARPU our unregulated -- reduced -- the ARPU is primary pricing The register increasing marketing, register than two So on this there. factor than longer lasting These Xx focus retail focus the U.S. some

focus some seen on we've bundle. increases through the Also, margin overall price registrars to

they've marketing addition, In reduced expenditures.

other increases limited on to and small is So the may our the think retail had price relative we have price while wholesale overall impact, U.S. by channel unregulated the actions the increases comp an price in impact taken

gTLD traditional new the new demand, that lifetime low-cost them. up China. of cohorts. But and there's market the to XX taking names CCTLDs gTLDs. seem market to and these from to would just of I question, very compared rates be are monetization new gTLDs have relation In values some share a lower picking add lower of There thriving tend renewal million primarily to

Some these demand we're that our more names base. the China from registrar of are a seeing speculative declining

different important me are to some they individual does there's operator to and low premiums a some that under not are note They're which They run special new very like registries really operate they as registrars, And a allowed remind it's operations a it registry, that but registry offer a us registering offer those deals transparent. public want. outsource renewal provider They're don't And them. basically difference who more between sell you to and reserve flexible let and anytime service contracts. companies. to gTLDs few Very can They marketers. very back-end for pricing. and initial that

So overhead. to they have low tend very

prices employees. very very, have them these still very, of at Some very and They TLDs can low be profitable. sell few

these that have don't we a market. certainly company, but And understand the are we again, we not can public factors they're much -- visibility, in so

accurate So picture to look little bit a closer the there. you to need get

Got it.

may. Very Okay. appreciate I color. all the Jim. if I helpful, me, other Two for

suggesting would that ask The a follows, report the ] something be there's our but second also for NTIA understanding from letter -- them today, an the ground. can out they in a to they I all same. York It's guess, for want, there legal that that no was New just But review .com? asking to been congressional think earlier the so tank contract came [

came wanted to just I which today? that letter, your out to reaction So get

the the seen and We've NTIA. letter questions to

of typically NTIA for X that occur I do around years but agreement. renewal speak was .com the registry can't So reaction our the every questions

Some are the letter of questions about wholesale price increases. the in .com

wholesale completely know, XXXX, regulated. Since transparent com $X.XX. pricing gone price you As the our and up is has

much the is not Our in the I increases. as about prices that have average where gone market retail either XXX price today's from on wholesale for wholesale just passed price. is in Or research cap price market, consumers, .com be to time the more than up to as shows domain twice prices wholesale or secondary estimated mentioned, our where, benefit a $X,XXX the always as

research market VeriSign, digital you revenue. operates know over global a B. the year, VeriSign's $X know, $X secondary helps you VeriSign as economy. at of enable the the critical with per all And billion Academic billion any that market, to that's sizes unlike in actor which exceeds which infrastructure secondary

on one market cost high players resale We these prices domains about .com pass at consumers. for .com market secondary the domains understand the has X.X on secondary secondary the to warehoused Businesses that buy of on market. these that million

assist been to about of is pricing issue com yet. an best that of do hasn't part it questions name prices, retail, we'll secondary the fast the expect market we while our market of addressed especially The So important domain sufficiently NTIA. by and discussion wholesale

thoughts extremely Okay. would your That's question most would .com and Is helpful. the ultimate contract we that risk investors recent the from be. there get be most often on I guess a great.

the DOC to no there's com a continue there's in contract ICANN seeking, Registry of believe clear like cooperative a a which then presumptive agreements we the to -- as is right operate under provision would should the decide Well, that and the no, no XX VeriSign not word, .com agreement ICANN all we're sunset that Amendment agreement, which cooperative rebid renewal. to

really know queue. you others, That's if hop back have but or I'll helpful. the Okay. two I you in -- one

it. appreciate I So

our Egalirunian next question Citigroup. take [ Will from with ]

Similarly, of Commerce. agreements, most the the we've agreement lately getting and questions -- our Cooperative Agreement around ICANN both the Department of with with been [indiscernible] with

an -- cooperative to to These on doing if they you two at would X, the August have whether just maybe the Are are interrelated clarify? So that opportunity Is date not to all just separate clarify. give that DOC they're the agreement. contracts. notice

of is the Does people, Department does Commerce where within contract? Meaning, guess, most that the sit lately that contract regardless? the negotiated cooperative about ICANN part sits. pricing? happens sit What for Department Where the then sets get Does of the of on that And part Commerce? investors I the that the agreement. the pricing are with if confused

Yigal Okay. ]. Thanks, [

So time the of maybe the is. very helpful it on their and covered are would briefly if at high I level interrelationship just what two contracts and be briefly a that interest

I thing that was first think that asked the me. you

and to Agreement Department registry oversaw So between XXXX VeriSign was the agreement And prior Commerce. that NTI a ICANN. renewal conditions the contract in our of of Cooperative past is the with the contract with that

right ICANN did. with what NTIA of approve negotiated our we to we had to exercise after So renewal, presumptive the

XX ICANN. that priority didn't we ongoing change Amendment XXXX, agreement that In with basically consent to certain gave provisions do of provided registry the

not The the deliver had not we the first provisions, we and not was the performance that change termination one requirements to that change pricing. change

new pricing ability so And Amendment the with permitted registry And limited through part in of X a to is pricing contract raise agreement. the in that was com that now is to prices. ICANN, XXXX that XXXX

quite if sort has for Cooperative the Renewal is The way, Commerce to like a has of it's chooses It's the the give intends unilateral So Department sunset Agreement so. One and see, do that therefore, Agreement has the different that don't to it the by to notice We word. outcomes. X the ICANN is to that of not it coming sunset. Cooperative as renewal here. up agreement. right

of I It's business contract com the think exact done, an don't is to and which ICANN strange. our renew we which things, it under we renewal done X is evergreen we the nothing the seek same that provisions those a sort change with that agreement get do. automatically If renewal. has, can provided renews never is

the I a I they and to right at haven't August one. looked but while, I don't have contract the as of could date. notice, However, said, believe and think I date give it is -- they sunset the that right in part I that's

date to which notice that give which and the November. expire or I either the will choose they that's be have notice, at would the to must they if they give believe contract, renew that sunset end by it, So of so

all want be its changed So give are would outcomes renew years if another unless sunset they If the it, can't with provisions changes. X whatever of for they notice agree to Those will we intact. August automatically mutually they that contract do the to nothing, by X.

So that's the ICANN agreement. the agreement, cooperative

exercised you And we And we things, never X the with agreements, now, right presumptive recently thousands one we've that requires they straightforward don't that actually of those a Although separate, hundreds, of renewal. registry change renewal. .net, most which seek as do. with contain every to relatively like all ICANN, of can see

the I on think thinking call, you're so last And anticipate that got a maybe question we I'll it.

We engaged ICANN. with are

up November XX. renewal are in comes We the for very preparing engaged registry which much by .com renewal,

So advance of your hope in we're answers on we're that and I question. well that, working it.

know question. I part it's does. the of multi It a

between now ICANN the correct? Just sits to be -- pricing registry again, pricing VeriSign the right wholesale the the clear, that and Is in component agreement.

to Commerce was it Agreement the through on. X agreement with required Amendment the of negotiated Those in into in changes do. and com was pass Cooperative Department XXXX, it Well, in the it's XXXX moved as

in So negotiations and them we ICANN. change with our can't

can together. So you requirements the termination provisions. they does And as see do and work all performance as stay how the those

Yes. legal here. Understood. of lot There's a elements

So that's.

components, It's but pretty the -- But a if sort look I of are bit the yes. outcomes you understand. straightforward. No, tricky, at carefully different

to add going until what or is to couple that's the clarification. there Yes. color weeks, would can has Understood. with about about so maybe you're little So I not the registrars you in a helpful maybe -- can and been anything the it's ask come from you're a bit to you doing want next of the And marketing really of want I -- bit, U.S. but ask the outcome there's there helpful. saying on I doing what -- is that little registrars? receptiveness you're be year, that know a just but that

lead on a is that. Sure. taking George

George? So

Thanks, Jim.

last the [ we new the mentioned annual launched the have at year, marketing in out that rolled to beginning programs addition some So Yigal we of programs. ], quarter, we as

installed rolled bases. we models, quarter, from, And During Again, QX, programs their .net. strategy on registrars the the that programs and geographic our some some late this out launched is on footprints registrar choose business new can really on options community broaden different to depending to .com. we've

to is of would it I while positive take And registrar work their had, strategies. programs has think, bit say feedback go-to-market registrars to course, we've time there, but the engagement some to those a will early. programs been it those initial little good I into of

some working enhance in but begin here quarter and up that fourth fourth know, also modify And well. those programs for the about So target programs we actual as you registrars to feedback. start to as and to still in days, additional We the will may XXXX. talk to gotten and we've early tend quarter gear

look feedback those the to So we best that that community. on, work any get for tweak to we'll make they registrar we've programs of rolled out that better sure try to the

last right. one. ask All And I'll one

Just on the updated gain guidance.

on half, the the X% current level. continue would would first down seem that not trends giving trends, get current based at the You're imply end, to -- worse, the low at that

think what So you're or just it go contemplated -- What just is it Is the something that from happen about want incremental to get trends? to know caution What's needs how number? to down X X. to around seeing there. to down

Yes, sure.

down we're So if X at the first of look year, we're look first X for half months, -- you simply, if names. you million the about the

And so half. for trend here going continue our probably second the midpoint that, guidance that the to of is suggests

and programs some there I upside start being start into positive range. Jim any that things us Having worsens as think stop flexibility has government marketplace, has i.e., turn the China renewal extent aggressive with that that or taking exercise rates some not marketplace trends said of potentially downside to registrars of some a the where on to to marketing root, on as if China if get to the their can Chinese [indiscernible] to weaken continuing bottom or little the news of the in ARPU are those activities continues of recent and for if been some our the the from those bit gap stimulus close the out pricing put around mentioned, that, take could root or that worsen, of those market

year. second think first be I the the half half But this guidance right similar midpoint simplest now, to our of of will the thing the suggests that

to is interest I for we .com. think This other registrar that everybody Amendment Cooperative to think is aware be that that couple generally they recall in is We them there's .com. we of think don't normally only integrated Jim. Agreement things in But that you can't We investors. changed. of for got the clarification one But vertically them. And cannot might be cannot I our a .com. applies I just of aren't be own of -- because XX,

So we for restriction a registrar become the our not be has .com. own anything, years we registrar don't could plans we any that few cannot been -- Cooperative Agreement is but quite a in have to for there for a forever that

where function and requirements registrations people And some who is, to called query a continue there to there's can support that. are

important But Just performance think see the termination. agreement, XX, pricing technical to one find. there's Amendment all level pretty the but for the and more SLA, I it's we all for easy clarity, the service think change And to investors sunset. don't one, I by in are since and -- ones either agreement or we way, the vertical see we got [indiscernible] that clarification nothing don't on ones to change there's integration, in of we would seek any other see we termination cooperative and really the don't a

Got the Thanks for it. clarification.

Sure.

take from last our will Rob Oliver We question Baird. with

capital on been, for squeezing more. the a which Jim returning time or saw for tremendous you just unwound essentially Thanks thinking advantage in for question I businesses buyback. you so our noncore re-up guys. guys allocation. and and I this view Jim, competitive many you guess, VeriSign, has since me to George, the your just of one to about is a

some yes, your allocation way? that capital gTLD aggressive strong wondering response with question, a other that either the very guys was the which in it new to you to can't do .com or new strategy, what current growth said rethink in M&A the any integration vertical because, you the But coupled of you financial or getting just market via ] .com. to with gTLDs, clearly, just with interesting in and malaise might have about activity position extent However, Gal's you [ cause with more

be question. good those about of anything to it. I'd to We any don't a say reluctant It's guide things.

this say I that, -- the Now TLD aware, of that have pursued do through pursuit course, growth we litigation, you're will as unfortunately, and a in of update, .web, there's and new we though continues, no quarter.

years that was that and for having and plan good billion But queries good think is new delivered remember the growth choice and our for XX mission, our that customers giving a XXX plan, a it TLD primary delivering also mission. a a a us. day adding I to But primary more

strategic is SLAs, framework against important very a balances a that have our meeting We growth which obviously thing.

if So are we to. become things mentioned, intention doing all guide wanted the we a to But for of you wouldn't no that registrar and the we certainly processes. flexibility have that. that and But .web, you other the mentioned, have complicated we to things other

say financial at long can I serving look our it's can allocation, is that results you of capital All track today you us well. as our if record from see

Thanks, Great. it. Thank you, I guys. Jim. appreciate

now Atchley conclude for This question-and-answer David to call to the would does final turn today's I like session. remarks. back

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

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