Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VeriSign Inc (VRSN, Financial) achieved 27 years of 100% uninterrupted availability for the .com and .net domain name resolution system.
- Revenues grew 4.1% year-over-year, operating income increased by 7.1%, and earnings per share rose by 12.3% year-over-year.
- The company has a stable financial and liquidity position with $690 million in cash, cash equivalents, and marketable securities.
- VeriSign Inc (VRSN) repurchased 2.2 million shares for $388 million and increased the share repurchase authorization by $1.11 billion.
- The company introduced new registrar marketing programs to support domain name base growth in the second half of 2025.
Negative Points
- The domain name base decreased by 1.8 million names in the second quarter.
- New registrations dropped to 9.2 million from 10.2 million in the same quarter last year.
- The renewal rate for the second quarter of 2024 is expected to be approximately 72.6%, down from 73.4% a year ago.
- US registrars are prioritizing ARPU over customer acquisition, leading to weaker trends in 2024.
- China-related weakness continues to impact the domain name base, contributing to a sequential decline.
Q & A Highlights
Q: Can you talk about the view that newer gTLDs are taking share from .com and what you're seeing in the data?
A: While the primary factor in the US weakness remains registrar focus on ARPU and reduced marketing spend, very low-cost new gTLDs seem to be picking up some of the monetization demand, primarily from China. However, these names tend to have lower renewal rates and lower lifetime values compared to traditional cohorts. New gTLDs operate under more flexible contracts and can offer special deals, very low initial and renewal pricing, and are not as transparent as .com.
Q: There was a congressional letter to the NTIA asking for them to review the contract for .com. What is your reaction to that letter?
A: We've seen the letter and the questions to NTIA. Our pricing is completely transparent and regulated. Since 2018, the .com wholesale price has gone up $1.74. The benefit from our capped wholesale prices is not always passed on to consumers. The issue of retail and secondary market pricing is an important part of the discussion of the .com domain name market that hasn't been sufficiently addressed yet.
Q: Is there a risk to the .com contract?
A: No, there's no provision in the cooperative agreement to rebid .com. Should the DOC decide to sunset the cooperative agreement, VeriSign would continue to operate the .com registry under the ICANN contract, which has a presumptive right of renewal.
Q: Can you clarify the interrelationship between the registry agreement with ICANN and the Cooperative Agreement with the Department of Commerce?
A: The Cooperative Agreement oversees the conditions of renewal with our registry agreement with ICANN. Amendment 35 in 2018 gave ongoing consent to renew provided we don't change certain provisions like termination, performance requirements, and pricing. The ICANN agreement requires that we don't change these provisions, and it contains a presumptive right of renewal.
Q: Where does the wholesale pricing component sit?
A: The wholesale pricing was negotiated with the Department of Commerce in 2018 and moved into the .com agreement through Amendment 3 in 2020. We cannot change these pricing terms in our negotiations with ICANN.
Q: Can you provide more color on the marketing programs you're doing with registrars in the US?
A: We've rolled out new programs to the registrar community on .com and .net. The initial feedback has been positive, but it will take time for registrars to integrate these programs into their go-to-market strategies. We will continue to tweak these programs based on feedback to ensure they work best for the registrar community.
Q: The updated domain guidance implies trends might get worse. What needs to happen to go from down 2% to down 3%?
A: The midpoint of our guidance suggests that the second half will be similar to the first half of this year. If our marketing programs take root or if there are positive changes in the market, it could close the gap. Conversely, if trends worsen, such as continued weakness in the China market or aggressive pricing by registrars, it could lead to the lower end of our guidance.
Q: Given the current malaise in .com growth, might you rethink your capital allocation strategy?
A: We have pursued growth through the pursuit of a new TLD, .web, which continues in litigation. Our primary mission remains delivering critical infrastructure services. While we have the flexibility to become a registrar for .web, we have no intention of doing so. Our long track record of capital allocation has served us well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
