VERISIGN INC/CA Q1 FY2025 earnings call

• VeriSign, Inc. celebrated 30 years since incorporation. - As of the end of March, the domain name base for .com and .net totaled 169.8 million, an increase of 777,000 from year-end 2024. - First quarter new registrations were 10.1 million, higher than the previous quarter and the same quarter last year. - Renewal rate improved. - Saw improving trends in domain name bases across the US, EMEA, and Asia Pacific regions. - Registrars showed increased engagement with marketing programs. - Repurchased 1 million shares in the first quarter, returning $230 million to shareholders. - Declared a cash dividend of 77¢ per share. - Financial and liquidity position was stable with $649 million in cash, cash equivalents, and marketable securities at quarter-end. - George Kilguss retired after 13 years as Executive Vice President and CFO, and John Callis will become CFO in May.

In the first quarter of 2025, VeriSign, Inc. generated revenue of $402 million, marking a 4.7% increase from the same quarter the previous year. The renewal rate for the first quarter of 2025 stood at 75.3% compared to 74.1% in the corresponding period of the prior year. For 2025, the change in the domain name base is expected to range from a negative 0.7% (or 70 basis points) to a positive 0.9% (or 90 basis points). Regarding the full-year 2025 guidance, revenue is projected to be between $1.635 billion and $1.650 billion, operating income is expected to be in the range of $1.110 billion to $1.125 billion, interest expense and net non-operating income is anticipated to be an expense between $50 million and $60 million, capital expenditures are forecasted to be between $30 million and $40 million, and the GAAP effective tax rate is expected to be within the 21 - 24% range.

• Revenue for 2025 is expected to be between $1.635 billion and $1.650 billion. - Operating income is projected to be in the range of $1.110 billion to $1.125 billion. - Interest expense and net non-operating income is expected to be an expense between $50 million and $60 million. - Capital expenditures are forecasted to be between $30 million and $40 million. - The GAAP effective tax rate is expected to be within the 21 - 24% range.

Financial results and forward-looking statements are subject to risks and uncertainties detailed in VeriSign, Inc.'s documents filed with the SEC, specifically the most recent Form 10-K and 10-Q reports.

Q: Hey, good afternoon, thanks. I'll start with George. Congrats on the retirement, George, and good luck on the next steps. And I guess you left investors a little bit of a parting gift here on the dividend. Can you elaborate a little bit on the timing of why now is the right time to initiate a dividend? And on the comment that it doesn't change how you think about total shareholder return, does that mean that we should expect fewer buybacks because of dividends or maybe just put it in context of that, and then I'll have some follow-ups.

A: Hi, Ygal. It's Jim. Let me answer part of that question for you. Maybe I invite George to comment further. But first of all, we're pleased to be able to diversify the method of shareholder return to now include regular dividends. I don't think there's much more to say than what I covered in my prepared remarks. The company has had a long track record of returning excess cash to shareholders and has been considering the quarterly cash dividend for quite some time. Today's announcement is consistent with that long track record and with our expectations of and confidence in the continued stability and strength of our business. George, did you want to add anything?

Q: Okay, thanks. And then so two follow-ups on the business and the trends. So with one Q domain name base outperforming your expectations, you're taking up your outlook for the year because of that. Can you just talk about what you think were the biggest drivers of that performance relative to what you were expecting at the beginning of the year? And as we kind of work our way through the rest of the year, particularly with some of the macro questions, what are the factors that get you to the low end of the range versus the high end of the range over the course of the rest of the year? And then the second question, on .net, we didn't get the pricing increase in February like we have the past few years. Just any updated thoughts on how you're thinking about pricing there.

A: Thank you. Sure, Ygal, it's George. With regard to our guidance, you're right. We're off to a solid start of the year, delivering 770,000 net adds here in Q1. And as a result, we took the guidance up, as Jim mentioned, from down 0.7% to positive 0.9%, which is a range of about 1.2 million names down to 1.5 million names up with a midpoint of about 200,000 there. I think at the end of the day, what the guidance is really reflecting is the positive trends we're seeing here. But as Jim mentioned, it also reflects a measure of caution as we're still early in the cycle, and the macroeconomic outlook is a bit unclear. We also have some seasonality to the domain name base in the first quarter, which is typically our strongest. But I think we're encouraged by the results and the activity of our registrars, and hence, we took the guidance up pretty substantially here in Q1. As regard to your second question on .net price increases, I think you're aware that we really don't provide guidance with regard to pricing changes for our TLDs. But we do have to provide a six-month notice of any potential changes that we make. For .net, our last price increase became effective in February 2024, which placed our wholesale price for .net at $10.91. We, of course, regularly review our pricing strategies in conjunction with our go-to-market strategies for our TLDs. But, as I mentioned, we don't provide pricing guidance for them as well.

Q: Great. Thank you so much.

Q: Great, thanks, guys. Good afternoon. Appreciate it. I have a couple of questions. Jim or George, I'll start with you guys. First, just on some of the activities around your marketing channel programs that you guys sort of kicked off last year. Would love to get an update on those. What sort of traction you're seeing with them? George, I know you just commented that you were encouraged by the registrar activity generally. I think part of that might be registrars reengaging, but I would love to understand what portion of that is action you guys are taking and where you're seeing success with your marketing channel program. And then I had a couple of follow-ups.

A: Yeah. Sure, Rob. To your question for credit marketing programs, so as we mentioned over the past few quarters, we rolled out a variety of new programs late in 2024 and early 2025. To date, we've seen good registrar interest in those programs. While it's still early, we do attribute some of the improved new registration trends we saw in the fourth quarter and here again in the first quarter to registrar engagement with the programs that we rolled out. I would call our activity that we saw here in the last two quarters activity from what I would call early adopters of the programs that we rolled out last year. We also have some registrars that are continuing to test the programs that we rolled out here in 2025. So we'll continue to monitor and work with the registrar community here to help them engage in our programs throughout the year. But I think early results are we're encouraged by them, but I think we still have some work to do.

Q: Great. That's helpful. Thanks. I appreciate it. Jim, on the strong domain guide, I think you said that it includes a measure of caution relative to the macro, which I think were your words. And I'd love to hear your take on the macro because on the one hand, it seems if the registrars are starting to spend more and we were super encouraged to see two leading registrars pony up for Super Bowl ads, which I think that was the first time in a handful of years that we've been tracking it that we saw that sort of a financial commitment, which was a positive. But obviously, there are some concerns on the macro right now. So I would love to hear just from you kind of what your take currently is on the macro. I guess a variance on the question earlier about how we might get on one or other end of that range.

A: Sure. I'll give it a shot here. I think, first of all, the components of all those pieces are first of all, some things that we laid out last year that we would do and some things that we expected to shift favorably. So there are a couple of tailwinds that we thought would shift to headwinds, and it looks like that's beginning to happen a bit. A return to new customer acquisition and the focus on ARPU by the channel. And as you know, Super Bowl, for example, it's clearly an indication of spend on new customer acquisition. So that's a favorable shift that we've seen since then. The things that we've done in our marketing programs that we've mentioned before, for example, we offered a range of programs simply as a way of providing needed flexibility in what was an evolving channel. It had changed traditional registrars. Yes, of course, they are customers, but also, we had web builders, etcetera. So one size fits all didn't approach didn't work as well. I think that's where we're seeing some interesting promising take-up even though it's a bit early. I think the other thing that the component that we really can't identify is just, you know, not an economist, but I think I can recognize a bit of turmoil here, and I think it's just clarity. It's a question of clarity. As that clarifies, I think we'll get a better idea of where the future is and offer any updated guidance, of course, as appropriate. But this is just based on it being early in the year. A bit of uncertainty about where things will land. Hopefully, they will shortly, and we'll be able to give you better info. But we are certainly appreciative of the positive changes that we've seen. As I said, we've done what we can control, and we're seeing some results from that, and they trend favorably. And also, we're picking up some headwinds that have shifted into tailwinds that are helping us return to or getting off ARPU and returning to new customer acquisition by the registrars. Programs that are working for them. So those are the different components. The uncertainty is obviously the macroeconomic environment, which we just need more clarity on before we can get more comfortable.

Q: Got it. Okay. Helpful. Yeah. You and everyone else. I had two other quick ones. One, John, welcome. And George, congratulations on your retirement. I guess just a quick question about some of the higher expenses that George had called out. Is this a new run rate of higher expenses? And just would love to get a sense from you of kind of your philosophy relative to that expense run rate.

A: Hey, thanks, Rob. This is John. If you look at the midpoint of our operating income guidance for the year, it implies a slight improvement in our operating margin. But it also implies a slight amount of spend that we incurred, a similar amount of spend that we incurred in the first quarter for the balance of 2025. Now as George mentioned in his prepared remarks, this is mainly due to slight increases in headcount and some of our incentive-based compensation programs. You know, as in past quarters, we'll continue to focus on disciplined expense management and do that within our strategic framework.

Q: Got it. Great. Thanks. Look forward to working with you. And then, last one for me is just any update from you guys on .web or anything we should be aware of there? Thanks very much.

A: Thanks, Rob. Jim here. We do have a small update on .web. Just as in the first IRP, think arbitration IRP, this new IRP panel that we have has again rejected Altinovo's attempt to invalidate certain procedural rules. The hopes that doing so would exclude our participation in these IRP proceedings. With that effort rejected, we anticipate a ruling soon on our application to participate in the IRP and the final hearing in November. To reiterate, VeriSign, Inc., we intend to become the operator for .web, and we intend to bring this new TLD to our customers as soon as we can. We believe AltaNova's use of ICANN's processes to stop this from happening is an abusive process and is being pursued in bad faith to keep .web off the market. So that's the update this quarter.