Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ———————— FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 000-23593 ———————— VERISIGN, INC. (Exact name of registrant as specified in its charter) Delaware 94-3221585 ...

VeriSign, Inc. (NASDAQ:VRSN) Q4 2020 Earnings Conference Call February 11, 2021 4:30 PM ET Company Participants David Atchley - Vice President, Investor Relations & Corporate Treasurer Jim Bidzos - Executive Chairman & Chief Executive Officer Todd Strubbe - President & Chief Operating Officer George Kilguss - Executive Vice President & Chief Financial Officer Conference Call Participants Rob Oliver - Robert W. Baird Nick Jones - Citi Sterling Auty - JPMorgan Operator Good day, everyone. Welcome to VeriSign' ...

Q4 & Full Year 2020 Earnings Conference Call February 11, 2021 Safe Harbor Disclosure Statements in this presentation other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding (i) Q4 2020 renewal rate expectations, (ii) Domain Name Base increase expectations, and (iii) our full year 2021 finan ...

Q3 2020 Earnings Conference Call October 22, 2020 Safe Harbor Disclosure Statements in this presentation other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding (i) Q3 2020 renewal rate expectations, (ii) Domain Name Base increase expectations, and (iii) our full year 2020 financial guidance ...

VeriSign, Inc. (NASDAQ:VRSN) Q3 2020 Earnings Conference Call October 22, 2020 4:30 PM ET Company Participants David Atchley - Vice President, Investor Relations and Corporate Treasurer Jim Bidzos - Executive Chairman and Chief Executive Officer George Kilguss - Executive Vice President and Chief Financial Officer Conference Call Participants Rob Oliver - Baird Nick Jones - Citigroup Sterling Auty - JPMorgan Operator Good day, everyone. Welcome to VeriSign's Third Quarter 2020 Earnings Call. Today's confere ...

[Report Information](index=1&type=section&id=Report%20Information) This section provides filing details for VeriSign, Inc.'s Form 10-Q for the quarter ended September 30, 2020, including its filer status and common stock outstanding [Filing Details](index=1&type=section&id=Filing%20Details) This report is VeriSign, Inc.'s 10-Q quarterly report for the period ended September 30, 2020, identifying the company as a large accelerated filer with 114,109,868 shares of common stock outstanding as of October 16, 2020 - VeriSign, Inc. submitted its quarterly report (Form 10-Q) for the period ended September 30, 2020[2](index=2&type=chunk) - The company is identified as a **Large Accelerated Filer**[3](index=3&type=chunk)[4](index=4&type=chunk) - All required reports and interactive data files have been submitted within the past 12 months[3](index=3&type=chunk) Shares Outstanding Information | Class | Shares Outstanding as of October 16, 2020 | | :--- | :--- | | Common stock, $0.001 par value per share | 114,109,868 | [PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents VeriSign, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended September 30, 2020 [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section contains VeriSign, Inc.'s unaudited condensed consolidated financial statements for the period ended September 30, 2020, including balance sheets, statements of comprehensive income, stockholders' deficit, and cash flows, along with related notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents VeriSign, Inc.'s condensed consolidated balance sheets as of September 30, 2020, and December 31, 2019, detailing assets, liabilities, and stockholders' deficit Condensed Consolidated Balance Sheets (Selected) | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 145,701 | 508,196 | | Marketable securities | 1,004,658 | 709,863 | | Other current assets | 55,767 | 60,530 | | **Total current assets** | **1,206,126** | **1,278,589** | | Property and equipment, net | 248,587 | 250,283 | | Goodwill | 52,527 | 52,527 | | Deferred tax assets | 76,903 | 87,798 | | Deposits for purchased intangible assets | 145,000 | 145,000 | | Other long-term assets | 35,163 | 39,812 | | **Total long-term assets** | **558,180** | **575,420** | | **Total assets** | **1,764,306** | **1,854,009** | | **Liabilities and Stockholders' Deficit** | | | | Accounts payable and accrued liabilities | 198,342 | 209,988 | | Deferred revenue | 779,666 | 755,178 | | **Total current liabilities** | **978,008** | **965,166** | | Long-term deferred revenue | 281,887 | 278,702 | | Senior notes | 1,789,453 | 1,787,565 | | Long-term tax and other liabilities | 101,206 | 312,676 | | **Total long-term liabilities** | **2,172,546** | **2,378,943** | | **Total liabilities** | **3,150,554** | **3,344,109** | | **Stockholders' deficit** | **(1,386,248)** | **(1,490,100)** | | **Total liabilities and stockholders' deficit** | **1,764,306** | **1,854,009** | - Total assets decreased to **$1,764,306 thousand** as of September 30, 2020, from $1,854,009 thousand as of December 31, 2019[11](index=11&type=chunk) - Cash and cash equivalents significantly decreased from **$508,196 thousand** at year-end 2019 to **$145,701 thousand** as of September 30, 2020[11](index=11&type=chunk) - Marketable securities increased from **$709,863 thousand** at year-end 2019 to **$1,004,658 thousand** as of September 30, 2020[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section provides VeriSign, Inc.'s condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2020, and 2019, highlighting revenue and net income trends Condensed Consolidated Statements of Comprehensive Income (Selected) | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 317,879 | 308,421 | 944,768 | 921,118 | | Operating income | 206,649 | 205,616 | 619,693 | 607,561 | | Net income | 170,979 | 153,913 | 657,574 | 463,974 | | Basic earnings per share | 1.49 | 1.30 | 5.70 | 3.90 | | Diluted earnings per share | 1.49 | 1.30 | 5.68 | 3.89 | - Revenue for the three months ended September 30, 2020, increased by **3%** year-over-year to **$317,879 thousand**[12](index=12&type=chunk) - Revenue for the nine months ended September 30, 2020, increased by **2.6%** year-over-year to **$944,768 thousand**[12](index=12&type=chunk) - Net income for the nine months ended September 30, 2020, significantly increased by **41.7%** to **$657,574 thousand**, primarily due to a notable change in income tax (benefit)[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) This section presents VeriSign, Inc.'s condensed consolidated statements of stockholders' deficit for the three and nine months ended September 30, 2020, and 2019, detailing changes in equity Condensed Consolidated Statements of Stockholders' Deficit (Selected) | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Total stockholders' deficit, beginning of period | (1,400,324) | (1,425,167) | (1,490,100) | (1,385,474) | | Repurchases of common stock | (173,879) | (198,953) | (603,705) | (583,485) | | Stock-based compensation expense | 13,078 | 13,081 | 37,526 | 39,522 | | Net income | 170,979 | 153,913 | 657,574 | 463,974 | | Total stockholders' deficit, end of period | (1,386,248) | (1,451,919) | (1,386,248) | (1,451,919) | - Total stockholders' deficit improved to **$(1,386,248) thousand** as of September 30, 2020, from $(1,490,100) thousand as of December 31, 2019[11](index=11&type=chunk)[14](index=14&type=chunk) - For the nine months ended September 30, 2020, the company repurchased **$603,705 thousand** of common stock, an increase from $583,485 thousand in the prior-year period[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section provides VeriSign, Inc.'s condensed consolidated statements of cash flows for the nine months ended September 30, 2020, and 2019, outlining cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Selected) | Metric | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | 534,962 | 560,294 | | Net cash used in investing activities | (305,820) | (237,827) | | Net cash used in financing activities | (591,128) | (570,333) | | Effect of exchange rate changes | (506) | (208) | | Net decrease in cash, cash equivalents, and restricted cash | (362,492) | (248,074) | | Cash, cash equivalents, and restricted cash, end of period | 155,109 | 118,679 | - Net cash provided by operating activities for the nine months ended September 30, 2020, was **$534,962 thousand**, a decrease from the prior-year period[17](index=17&type=chunk) - Net cash used in investing activities increased to **$305,820 thousand**, primarily due to increased purchases of marketable securities[17](index=17&type=chunk)[85](index=85&type=chunk) - Net cash used in financing activities increased to **$591,128 thousand**, primarily due to increased common stock repurchases[17](index=17&type=chunk)[86](index=86&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to VeriSign, Inc.'s condensed consolidated financial statements, offering additional context on presentation, financial instruments, balance sheet items, stockholders' deficit, earnings per share, revenue, stock-based compensation, non-operating income, and income taxes [Note 1. Basis of Presentation](index=7&type=section&id=Note%201.%20Basis%20of%20Presentation) This note explains the basis of presentation for the unaudited condensed consolidated financial statements, noting their preparation according to Form 10-Q instructions and management's assessment of fair presentation - These unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q instructions and do not include all information and notes typically provided in audited financial statements[19](index=19&type=chunk) - Management believes all necessary adjustments, including normal recurring accruals and other adjustments, have been included for fair presentation[19](index=19&type=chunk) - Certain prior period amounts have been reclassified to conform to current period presentation, with no impact on previously reported net income[20](index=20&type=chunk) [Note 2. Financial Instruments](index=7&type=section&id=Note%202.%20Financial%20Instruments) This note details VeriSign, Inc.'s financial instruments, including cash, cash equivalents, and marketable securities, and their fair value classifications Cash, Cash Equivalents, and Marketable Securities | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Cash | 27,162 | 33,238 | | Time deposits | 4,078 | 3,924 | | Money market funds (Level 1) | 123,869 | 149,624 | | Debt securities issued by U.S. Treasury (Level 1) | 1,004,658 | 1,040,678 | | **Total** | **1,159,767** | **1,227,464** | | Cash and cash equivalents | 145,701 | 508,196 | | Restricted cash (included in other long-term assets) | 9,408 | 9,405 | | **Total cash, cash equivalents, and restricted cash** | **155,109** | **517,601** | | Marketable securities | 1,004,658 | 709,863 | | **Total** | **1,159,767** | **1,227,464** | - As of September 30, 2020, the fair value of debt securities held was **$1 billion**, including less than **$0.1 million** in unrealized gains[21](index=21&type=chunk) - All debt securities are scheduled to mature within one year and are classified as Level 1 in the fair value hierarchy[21](index=21&type=chunk)[22](index=22&type=chunk) - As of September 30, 2020, the fair values of senior notes due in 2023, 2025, and 2027 were **$757.9 million**, **$554.9 million**, and **$585.9 million**, respectively, and are classified as Level 2[23](index=23&type=chunk) [Note 3. Selected Balance Sheet Items](index=8&type=section&id=Note%203.%20Selected%20Balance%20Sheet%20Items) This note provides a breakdown of selected balance sheet items, including other current assets, other long-term assets, accounts payable and accrued liabilities, and long-term tax and other liabilities Composition of Other Current Assets | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Prepaid expenses | 22,032 | 19,818 | | Prepaid registry fees | 22,578 | 21,717 | | Accounts receivable, net | 6,356 | 1,524 | | Contingent consideration receivable | — | 14,721 | | Other | 4,801 | 2,750 | | **Total other current assets** | **55,767** | **60,530** | - For the nine months ended September 30, 2020, the company received **$20.4 million** in contingent consideration related to the divested security services business, with the excess over the accounts receivable balance recognized as non-operating income[24](index=24&type=chunk) Composition of Other Long-Term Assets | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Operating lease right-of-use assets | 11,184 | 9,133 | | Restricted cash | 9,408 | 9,405 | | Long-term prepaid registry fees | 7,942 | 7,753 | | Other tax receivables | 1,254 | 6,927 | | Other | 5,375 | 6,594 | | **Total other long-term assets** | **35,163** | **39,812** | Composition of Accounts Payable and Accrued Liabilities | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Accounts payable and accrued expenses | 10,469 | 17,177 | | Taxes payable and other tax liabilities | 34,176 | 33,435 | | Customer deposits | 46,890 | 52,804 | | Accrued employee compensation | 44,106 | 49,869 | | Accrued interest | 33,021 | 24,318 | | Accrued registry fees | 12,419 | 11,529 | | Customer incentives payable | 10,971 | 13,547 | | Other accrued liabilities | 6,290 | 7,309 | | **Total accounts payable and accrued liabilities** | **198,342** | **209,988** | Long-Term Tax and Other Liabilities | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Long-term tax liabilities | 96,190 | 308,112 | | Long-term operating lease liabilities | 5,016 | 4,564 | | **Total long-term tax and other liabilities** | **101,206** | **312,676** | - For the nine months ended September 30, 2020, the company remeasured certain previously unrecognized income tax benefits, resulting in the recognition of **$191.8 million** in income tax benefits, with **$167.8 million** related to a 2013 worthless stock deduction[28](index=28&type=chunk) [Note 4. Stockholders' Deficit](index=10&type=section&id=Note%204.%20Stockholders'%20Deficit) This note details changes in stockholders' deficit, focusing on common stock repurchases and the remaining authorization under the share repurchase program - As of February 6, 2020, the Board of Directors authorized the repurchase of **$1 billion** of common stock, comprising **$743 million** in new authorization and **$257 million** from the existing program balance[29](index=29&type=chunk) - For the three months ended September 30, 2020, the company repurchased **800 thousand** shares of common stock at a total cost of **$170 million**, with an average price of **$206.61** per share[29](index=29&type=chunk) - For the nine months ended September 30, 2020, the company repurchased **2.8 million** shares of common stock at a total cost of **$564.9 million**, with an average price of **$198.84** per share[29](index=29&type=chunk) - As of September 30, 2020, approximately **$505.6 million** remained available for future repurchases under the stock repurchase program[29](index=29&type=chunk) [Note 5. Calculation of Earnings per Share](index=10&type=section&id=Note%205.%20Calculation%20of%20Earnings%20per%20Share) This note outlines the calculation of basic and diluted earnings per share, including the weighted-average shares outstanding Weighted-Average Shares Used in Earnings per Share Calculation | Metric | Three Months Ended September 30, 2020 (Thousands of Shares) | Three Months Ended September 30, 2019 (Thousands of Shares) | Nine Months Ended September 30, 2020 (Thousands of Shares) | Nine Months Ended September 30, 2019 (Thousands of Shares) | | :--- | :--- | :--- | :--- | :--- | | Weighted-average common shares outstanding | 114,655 | 118,194 | 115,456 | 118,966 | | Weighted-average potential common shares: | | | | | | Unvested restricted stock units and employee stock purchase plan | 176 | 375 | 243 | 444 | | Shares used to calculate diluted earnings per share | 114,831 | 118,569 | 115,699 | 119,410 | - The weighted-average shares used for basic and diluted EPS calculations both decreased in 2020, reflecting the impact of share repurchases[31](index=31&type=chunk) [Note 6. Revenues](index=11&type=section&id=Note%206.%20Revenues) This note provides a breakdown of revenue by geographic region and discusses factors influencing deferred revenue balances Revenues by Geographic Region | Region | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | United States | 202,934 | 193,392 | 599,845 | 577,395 | | Europe, Middle East, and Africa | 54,034 | 51,480 | 159,103 | 155,221 | | China | 27,463 | 30,647 | 86,676 | 88,337 | | Other | 33,448 | 32,902 | 99,144 | 100,165 | | **Total revenues** | **317,879** | **308,421** | **944,768** | **921,118** | - Revenue in the United States and EMEA regions increased for both the three and nine months ended September 30, 2020, while revenue from China decreased[32](index=32&type=chunk) - The increase in deferred revenue balance was primarily driven by billing for domain name registrations and renewals during the first nine months of 2020, partially offset by refunds for domain name renewals deleted within the 45-day grace period[33](index=33&type=chunk) - As of September 30, 2020, the deferred revenue balance represents the company's remaining performance obligations, with most expected to be recognized as revenue within 12 months[33](index=33&type=chunk) [Note 7. Stock-based Compensation](index=11&type=section&id=Note%207.%20Stock-based%20Compensation) This note details the classification and nature of stock-based compensation expenses for the reported periods Classification of Stock-Based Compensation Expense | Expense Category | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Cost of revenues | 1,558 | 1,725 | 4,761 | 5,064 | | Sales and marketing | 830 | 864 | 2,558 | 2,866 | | Research and development | 1,810 | 1,513 | 5,266 | 4,744 | | General and administrative | 8,480 | 8,518 | 23,521 | 25,563 | | **Total stock-based compensation expense** | **12,678** | **12,620** | **36,106** | **38,237** | Nature of Stock-Based Compensation Expense | Nature | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Restricted stock units (RSUs) | 10,871 | 10,650 | 29,060 | 28,318 | | Performance restricted stock units | 1,102 | 1,222 | 5,146 | 7,554 | | Employee stock purchase plan (ESPP) | 1,105 | 1,209 | 3,320 | 3,650 | | Capitalized (included in property and equipment, net) | (400) | (461) | (1,420) | (1,285) | | **Total stock-based compensation expense** | **12,678** | **12,620** | **36,106** | **38,237** | - Total stock-based compensation expense for the nine months ended September 30, 2020, was **$36,106 thousand**, a slight decrease from the prior-year period[35](index=35&type=chunk) [Note 8. Non-operating Income, Net](index=12&type=section&id=Note%208.%20Non-operating%20Income,%20Net) This note explains the components of non-operating income, net, highlighting changes in interest income, transition services revenue, and gain on sale of business Composition of Non-Operating Income, Net | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Interest income | 805 | 6,457 | 7,500 | 21,045 | | Transition services revenue | — | 3,750 | 2,100 | 11,850 | | Gain on sale of business | (9) | 64 | 5,602 | 817 | | Other, net | (21) | 227 | 60 | 425 | | **Total non-operating income, net** | **775** | **10,498** | **15,262** | **34,137** | - Non-operating income, net, significantly decreased for both the three and nine months ended September 30, 2020, primarily due to lower interest income from debt securities investments and the expiration of the transition services agreement in February 2020[36](index=36&type=chunk) - The gain on sale of business increased in 2020, reflecting contingent consideration received related to the divested security services business exceeding estimated receivables[36](index=36&type=chunk) [Note 9. Income Taxes](index=12&type=section&id=Note%209.%20Income%20Taxes) This note details income tax expense (benefit) and effective tax rates, explaining the factors contributing to changes in tax positions Income Tax Expense (Benefit) and Effective Tax Rate | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Income tax expense (benefit) | 13,908 | 39,568 | (90,226) | 109,825 | | Effective tax rate | 8 % | 20 % | (16)% | 19 % | - For the nine months ended September 30, 2020, the company recognized an income tax benefit of **$90,226 thousand** compared to an expense of $109,825 thousand in the prior-year period, resulting in a negative **16%** effective tax rate[37](index=37&type=chunk) - The effective tax rate differs from the **21%** statutory federal rate primarily due to a lower foreign effective tax rate and excess tax benefits related to stock-based compensation, partially offset by state income taxes and U.S. taxation of foreign earnings (after foreign tax credits)[37](index=37&type=chunk) - The company remeasured certain previously unrecognized income tax benefits, resulting in the recognition of **$191.8 million** in income tax benefits during the first nine months of 2020, with **$167.8 million** related to a 2013 worthless stock deduction[38](index=38&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=13&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section discusses VeriSign, Inc.'s financial condition and results of operations for the period ended September 30, 2020, covering business overview, key highlights, COVID-19 impact, revenue and expense analysis, and liquidity [Overview](index=13&type=section&id=Overview) This overview describes Verisign as a global provider of domain name registration services and internet infrastructure, focusing on .com and .net top-level domains - Verisign is a global provider of domain name registration services and internet infrastructure, offering registry services and authoritative resolution for .com and .net top-level domains[42](index=42&type=chunk) - As of September 30, 2020, the company had **163.7 million** .com and .net domain name registrations, driven by online advertising, e-commerce, and internet user growth[43](index=43&type=chunk) - Domain name registration growth may be hindered by overall economic conditions, competition from country code top-level domains (ccTLDs) and new generic top-level domains (gTLDs), and changes in internet user behavior[43](index=43&type=chunk) [Business Highlights and Trends](index=13&type=section&id=Business%20Highlights%20and%20Trends) This section highlights key business metrics and trends, including revenue growth, domain name registrations, and renewal rates Key Business Highlights | Metric | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $317.9 million | $308.4 million | $944.8 million | $921.1 million | | Operating income | $206.6 million | $205.6 million | $619.7 million | $607.6 million | | .com and .net domain registrations | 163.7 million (as of September 30, 2020) | 157.4 million (as of September 30, 2019) | | | | New .com and .net domain registrations | 10.9 million | 9.9 million | | | | .com and .net renewal rate for Q2 2020 | 72.8% | 74.2% | | | - Revenue increased by **3%** year-over-year for both the three and nine months ended September 30, 2020[45](index=45&type=chunk) - As of September 30, 2020, .com and .net domain name registrations increased by **4%** year-over-year, with a net increase of **1.7 million** from June 30, 2020[45](index=45&type=chunk) - The .com and .net renewal rate for the second quarter of 2020 was **72.8%**, lower than **74.2%** in the prior-year period[45](index=45&type=chunk) [COVID-19 Update](index=14&type=section&id=COVID-19%20Update) This section provides an update on the company's response to the COVID-19 pandemic, its impact on domain demand, and pricing decisions - The company established a task force to monitor the pandemic, implementing measures like travel restrictions, modified sick leave policies, and remote work for most employees to protect staff[48](index=48&type=chunk) - The pandemic has, to date, led to increased demand for domain names, particularly from businesses and entrepreneurs seeking to establish or expand online presence[48](index=48&type=chunk) - Revenue growth in the first three quarters of 2020 was primarily driven by increased .com TLD registrations, but the pandemic's future impact on growth remains uncertain[48](index=48&type=chunk) - The company announced a freeze on registration and renewal prices for all TLDs, including .com and .net, until March 31, 2021[51](index=51&type=chunk) [Results of Operations](index=15&type=section&id=Results%20of%20Operations) This section analyzes VeriSign, Inc.'s operating results, including revenue, cost of revenues, sales and marketing, research and development, general and administrative expenses, interest expense, non-operating income, and income taxes Operating Results as a Percentage of Revenue | Metric | Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 100.0 % | 100.0 % | 100.0 % | 100.0 % | | Cost of revenues | 14.2 % | 14.4 % | 14.2 % | 14.5 % | | Sales and marketing | 2.6 % | 3.2 % | 2.5 % | 3.5 % | | Research and development | 6.2 % | 4.7 % | 5.9 % | 5.0 % | | General and administrative | 12.0 % | 11.0 % | 11.8 % | 11.0 % | | **Total costs and expenses** | **35.0 %** | **33.3 %** | **34.4 %** | **34.0 %** | | Operating income | 65.0 % | 66.7 % | 65.6 % | 66.0 % | | Interest expense | (7.1)% | (7.4)% | (7.2)% | (7.4)% | | Non-operating income, net | 0.3 % | 3.4 % | 1.6 % | 3.7 % | | Income before income taxes | 58.2 % | 62.7 % | 60.0 % | 62.3 % | | Income tax (expense) benefit | (4.4)% | (12.8)% | 9.6 % | (11.9)% | | Net income | 53.8 % | 49.9 % | 69.6 % | 50.4 % | [Revenues](index=15&type=section&id=Revenues) This subsection analyzes revenue trends, primarily from .com and .net domain registrations, and discusses pricing agreements and the COVID-19 related price freeze - Revenue primarily derives from .com and .net domain name registrations, with the company collecting a fixed annual fee from registrars[51](index=51&type=chunk) - For the three and nine months ended September 30, 2020, revenue increased by **$9.5 million** and **$23.7 million**, respectively, mainly due to a **4%** increase in .com TLD registrations[52](index=52&type=chunk)[53](index=53&type=chunk) - The company has agreements with the Department of Commerce and ICANN allowing for price increases of up to **7%** for .com domains and up to **10%** annually for .net domains during specific periods[51](index=51&type=chunk) - In response to the COVID-19 crisis, the company has frozen registration and renewal prices for all TLDs, including .com and .net, until March 31, 2021[51](index=51&type=chunk) [Geographic revenues](index=16&type=section&id=Geographic%20revenues) This subsection provides a comparative analysis of revenue by geographic region, highlighting growth in the US and EMEA and a decline in China Comparative Geographic Revenues | Region | Three Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | United States | 202,934 | 5 % | 193,392 | 599,845 | 4 % | 577,395 | | Europe, Middle East, and Africa | 54,034 | 5 % | 51,480 | 159,103 | 3 % | 155,221 | | China | 27,463 | (10)% | 30,647 | 86,676 | (2)% | 88,337 | | Other | 33,448 | 2 % | 32,902 | 99,144 | (1)% | 100,165 | | **Total revenues** | **317,879** | | **308,421** | **944,768** | | **921,118** | - Revenue growth in the United States and EMEA regions during the first nine months of 2020 was primarily driven by increased sales to registrars in those areas[56](index=56&type=chunk) - Revenue from registrars in China decreased in 2020 due to lower new registrations and renewal rates in that region[56](index=56&type=chunk) [Cost of revenues](index=16&type=section&id=Cost%20of%20revenues) This subsection analyzes the cost of revenues, noting its stability compared to the prior year and future expectations Comparative Cost of Revenues | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of revenues | 45,024 | 1 % | 44,443 | 134,205 | — % | 134,013 | - Cost of revenues remained largely consistent for the three and nine months ended September 30, 2020, compared to the prior-year periods, primarily due to reduced salary and employee benefits expenses from personnel function adjustments to R&D, offset by other minor items[58](index=58&type=chunk) - The cost of revenues as a percentage of revenue is expected to remain consistent with the first nine months for the remainder of 2020[60](index=60&type=chunk) [Sales and marketing](index=18&type=section&id=Sales%20and%20marketing) This subsection analyzes sales and marketing expenses, highlighting a decrease due to reduced marketing initiatives and future expectations Comparative Sales and Marketing Expenses | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | 8,389 | (15)% | 9,857 | 23,883 | (27)% | 32,775 | - Sales and marketing expenses decreased by **$8.9 million** for the nine months ended September 30, 2020, primarily due to a **$6.4 million** reduction in advertising and marketing expenses from fewer regional marketing initiatives[62](index=62&type=chunk) - Sales and marketing expenses as a percentage of revenue are expected to increase for the remainder of 2020 as the company executes more advertising and marketing activities[63](index=63&type=chunk) [Research and development](index=18&type=section&id=Research%20and%20development) This subsection analyzes research and development expenses, noting an increase due to personnel adjustments and COVID-19 related benefits Comparative Research and Development Expenses | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | 19,708 | 35 % | 14,619 | 55,268 | 21 % | 45,704 | - Research and development expenses increased by **$9.6 million** for the nine months ended September 30, 2020, primarily due to a **$7.2 million** increase in salary and employee benefits from personnel function adjustments, new hires, and increased paid leave benefits for COVID-19[64](index=64&type=chunk) - Research and development expenses as a percentage of revenue are expected to remain consistent with the first nine months for the remainder of 2020[65](index=65&type=chunk) [General and administrative](index=18&type=section&id=General%20and%20administrative) This subsection analyzes general and administrative expenses, detailing increases from personnel, charitable contributions, software, and legal fees, partially offset by lower stock-based compensation Comparative General and Administrative Expenses | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Percentage Change | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | General and administrative | 38,109 | 12 % | 33,886 | 111,719 | 11 % | 101,065 | - General and administrative expenses increased by **$10.7 million** for the nine months ended September 30, 2020, primarily due to a **$6.4 million** increase in salary and employee benefits, **$3.1 million** in charitable contributions (supporting COVID-19 response and equal justice), **$2.2 million** in software license fees, and **$1.8 million** in legal fees[68](index=68&type=chunk) - A **$2.0 million** decrease in stock-based compensation expense partially offset these increases[68](index=68&type=chunk) - General and administrative expenses as a percentage of revenue are expected to remain consistent with the first nine months for the remainder of 2020[69](index=69&type=chunk) [Interest expense](index=19&type=section&id=Interest%20expense) This subsection analyzes interest expense, noting its stability and future expectations - Interest expense remained largely consistent for the three and nine months ended September 30, 2020, compared to the prior-year periods[70](index=70&type=chunk) - Quarterly interest expense is expected to remain consistent with the first nine months for the remainder of 2020[70](index=70&type=chunk) [Non-operating income, net](index=19&type=section&id=Non-operating%20income,%20net) This subsection analyzes non-operating income, net, detailing decreases in interest and transition services revenue, and an increase in gain on sale of business Composition of Non-Operating Income, Net | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Interest income | 805 | 6,457 | 7,500 | 21,045 | | Transition services revenue | — | 3,750 | 2,100 | 11,850 | | Gain on sale of business | (9) | 64 | 5,602 | 817 | | Other, net | (21) | 227 | 60 | 425 | | **Total non-operating income, net** | **775** | **10,498** | **15,262** | **34,137** | - Interest income decreased for both the three and nine months ended September 30, 2020, due to lower interest rates on debt securities investments[71](index=71&type=chunk) - Transition services revenue decreased due to the expiration of the transition services agreement for the divested security services business in February 2020[71](index=71&type=chunk) - Gain on sale of business increased in the first nine months of 2020, reflecting contingent consideration received exceeding estimated receivables[71](index=71&type=chunk) [Income tax expense (benefit)](index=20&type=section&id=Income%20tax%20expense%20(benefit)) This subsection analyzes income tax expense (benefit) and effective tax rates, explaining the impact of tax benefits and future projections Income Tax Expense (Benefit) and Effective Tax Rate | Metric | Three Months Ended September 30, 2020 (Thousands of USD) | Three Months Ended September 30, 2019 (Thousands of USD) | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | :--- | :--- | | Income tax expense (benefit) | 13,908 | 39,568 | (90,226) | 109,825 | | Effective tax rate | 8 % | 20 % | (16)% | 19 % | - For the nine months ended September 30, 2020, the company remeasured certain previously unrecognized income tax benefits, resulting in the recognition of **$191.8 million** in income tax benefits, with **$167.8 million** related to a 2013 worthless stock deduction[74](index=74&type=chunk) - The full-year effective tax rate for 2020 is projected to be a net benefit of **6% to 9%**, reflecting the recognized **$191.8 million** tax benefit[75](index=75&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses VeriSign, Inc.'s liquidity and capital resources, including cash and marketable securities, debt obligations, and cash flow from operating, investing, and financing activities Cash and Marketable Securities | Metric | September 30, 2020 (Thousands of USD) | December 31, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Cash and cash equivalents | 145,701 | 508,196 | | Marketable securities | 1,004,658 | 709,863 | | **Total** | **1,150,359** | **1,218,059** | - As of September 30, 2020, the company's primary liquidity sources were **$145.7 million** in cash and cash equivalents and **$1,004.7 million** in marketable securities[76](index=76&type=chunk) - All debt securities have contractual maturities within one year and are primarily invested in U.S. Treasury securities[76](index=76&type=chunk) - As of September 30, 2020, the company had **$550 million** in senior unsecured notes due 2027, **$500 million** due 2025, and **$750 million** due 2023[78](index=78&type=chunk) - The company believes existing cash, cash equivalents, marketable securities, and funds generated from operations, combined with borrowing capacity under its **$200 million** revolving credit facility, are sufficient to meet working capital, capital expenditure, and debt service needs for the next 12 months[79](index=79&type=chunk) [Cash flows from operating activities](index=22&type=section&id=Cash%20flows%20from%20operating%20activities) This subsection analyzes cash flows from operating activities, noting a decrease due to increased tax payments and reduced interest and transition services income Cash Flows from Operating Activities | Metric | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | 534,962 | 560,294 | - Net cash provided by operating activities for the nine months ended September 30, 2020, decreased primarily due to increased income tax payments, reduced interest income on investments, and lower cash receipts from transition services, partially offset by decreased cash paid to suppliers and increased cash receipts from customers[83](index=83&type=chunk) [Cash flows from investing activities](index=22&type=section&id=Cash%20flows%20from%20investing%20activities) This subsection analyzes cash flows from investing activities, highlighting an increase in net cash outflow due to higher purchases of marketable securities and equipment Cash Flows from Investing Activities | Metric | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Net cash used in investing activities | (305,820) | (237,827) | - Net cash used in investing activities for the nine months ended September 30, 2020, increased primarily due to higher purchases of marketable securities and investments (net of maturities and sales) and increased equipment purchases, partially offset by contingent consideration received from the divested security services business[85](index=85&type=chunk) [Cash flows from financing activities](index=22&type=section&id=Cash%20flows%20from%20financing%20activities) This subsection analyzes cash flows from financing activities, noting an increase in net cash outflow due to higher stock repurchases Cash Flows from Financing Activities | Metric | Nine Months Ended September 30, 2020 (Thousands of USD) | Nine Months Ended September 30, 2019 (Thousands of USD) | | :--- | :--- | :--- | | Net cash used in financing activities | (591,128) | (570,333) | - Net cash used in financing activities for the nine months ended September 30, 2020, increased primarily due to higher common stock repurchases[86](index=86&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=22&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that there have been no significant changes in the company's market risk exposure since December 31, 2019 - There have been no significant changes in the company's market risk exposure since December 31, 2019[87](index=87&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=23&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section discloses the company's assessment of disclosure controls and procedures, confirming their effectiveness, and discusses changes and inherent limitations in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=23&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection details the evaluation of disclosure controls and procedures, confirming their effectiveness as of September 30, 2020 - As of September 30, 2020, the company's Chief Executive Officer and Chief Financial Officer assessed the effectiveness of disclosure controls and procedures as effective[89](index=89&type=chunk) - Disclosure controls and procedures are designed to ensure that information required to be disclosed in SEC reports is recorded, processed, summarized, and reported timely[89](index=89&type=chunk) [Changes in Internal Control over Financial Reporting](index=23&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This subsection states that there were no material changes in internal control over financial reporting during the quarter ended September 30, 2020 - There were no changes in the company's internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control during the three months ended September 30, 2020[90](index=90&type=chunk) [Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting](index=23&type=section&id=Inherent%20Limitations%20of%20Disclosure%20Controls%20and%20Internal%20Control%20over%20Financial%20Reporting) This subsection acknowledges the inherent limitations of disclosure controls and internal control over financial reporting, which may not prevent all errors or fraud - Due to inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent all material misstatements or fraud[91](index=91&type=chunk) - Control systems can only provide reasonable, not absolute, assurance, and their effectiveness is subject to risks such as changing conditions or declining adherence to policies and procedures[91](index=91&type=chunk) [PART II—OTHER INFORMATION](index=24&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part provides additional information, including legal proceedings, risk factors, unregistered equity securities sales, and a list of exhibits [ITEM 1. LEGAL PROCEEDINGS](index=24&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, but management believes they will not materially adversely affect its financial condition, operating results, or cash flows, though litigation costs and management distraction are possible - The company is involved in various investigations, claims, and lawsuits, but management believes these will not materially adversely affect its financial condition, results of operations, or cash flows[94](index=94&type=chunk) - Any litigation could result in significant legal expenses and diversion of management's attention[94](index=94&type=chunk) [ITEM 1A. RISK FACTORS](index=24&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section details various risk factors that could materially impact the company's business, prospects, operating results, or financial condition, including the COVID-19 pandemic, business agreement risks, government regulation, system security, internet governance changes, market competition, registrar relationships, system interruptions, macroeconomic conditions, international operations, intellectual property, litigation, strategic initiatives, key employee dependence, tax policy changes, marketable securities value fluctuations, real estate ownership, and anti-takeover protections and debt management [The effects of the COVID-19 pandemic could adversely affect our business, operations, financial condition and results of operations, and the extent to which the effects of the pandemic will impact our business, operations, financial condition and results of operations remains uncertain.](index=24&type=section&id=The%20effects%20of%20the%20COVID-19%20pandemic%20could%20adversely%20affect%20our%20business,%20operations,%20financial%20condition%20and%20results%20of%20operations,%20and%20the%20extent%20to%20which%20the%20effects%20of%20the%20pandemic%20will%20impact%20our%20business,%20operations,%20financial%20condition%20and%20results%20of%20operations%20remains%20uncertain.) The COVID-19 pandemic's effects could adversely impact the company's business, operations, financial condition, and results, with the extent of its future impact remaining uncertain - The COVID-19 pandemic and responses have caused significant market volatility, business and economic disruptions, and uncertainty[96](index=96&type=chunk) - The extent of the pandemic's impact on the company's business, operations, financial condition, and results of operations is uncertain, depending on factors like duration, effectiveness of response measures, impact on employees, customers, and suppliers, ability to maintain critical infrastructure, and effects on domain name registration demand[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - As of the report date, the company's financial condition and results of operations have not been adversely affected by the COVID-19 pandemic, but future uncertainty remains[97](index=97&type=chunk) [Risks arising from our agreements governing our business could limit our ability to maintain or grow our business.](index=24&type=section&id=Risks%20arising%20from%20our%20agreements%20governing%20our%20business%20could%20limit%20our%20ability%20to%20maintain%20or%20grow%20our%20business.) Risks from business agreements, particularly those governing gTLD operations, could limit the company's ability to maintain or grow its business due to restrictions, obligations, changes, or challenges - The vast majority of the company's revenue is derived from operating gTLDs like .com and .net, and restrictions, obligations, changes, or challenges to these agreements could materially adversely affect the business[98](index=98&type=chunk) - The Cooperative Agreement with the Department of Commerce (DOC) has been extended until November 30, 2024, allowing for annual .com domain price increases of up to **7%** in the last four years of specific six-year periods[98](index=98&type=chunk)[100](index=100&type=chunk)[103](index=103&type=chunk) - ICANN has the right to modify new gTLD registry agreements under certain conditions, potentially imposing unfavorable contractual obligations[102](index=102&type=chunk) - The company has the right to increase .net domain registration prices by up to **10%** annually during the term of its agreement with ICANN[105](index=105&type=chunk) - The Third .com Amendment clarified that vertical integration restrictions apply only to the .com TLD, prohibiting the company from directly or indirectly acquiring more than **15%** ownership interest in any ICANN-accredited registrar selling .com domain registrations[106](index=106&type=chunk) - The .com, .net, and .name registry agreements include "presumptive" renewal rights, but renewal terms may need to be similar to those of the five largest gTLD registry agreements[108](index=108&type=chunk) - ICANN may adopt consensus or temporary policies unfavorable to the company's strategy or business, increasing operational costs or legal risks[109](index=109&type=chunk) [Governmental regulation and the application of new and existing laws in the U.S. and overseas may slow business growth, increase our costs of doing business, create potential liability and have an adverse effect on our business.](index=26&type=section&id=Governmental%20regulation%20and%20the%20application%20of%20new%20and%20existing%20laws%20in%20the%20U.S.%20and%20overseas%20may%20slow%20business%20growth,%20increase%20our%20costs%20of%20doing%20business,%20create%20potential%20liability%20and%20have%20an%20adverse%20effect%20on%20our%20business.) Government regulation and the application of new and existing laws in the U.S. and overseas may slow business growth, increase operating costs, create potential liability, and adversely affect the company's business - The application of new and existing laws and regulations in the U.S. and overseas to the internet and communications industry may be unclear, and compliance costs or non-compliance could limit operations, create significant liability, and lead to litigation[112](index=112&type=chunk) - The Chinese government has issued new regulations and begun enforcing existing ones, imposing additional costs and risks on the company's registry services in China, potentially impacting domain name registration growth or renewal rates[112](index=112&type=chunk)[113](index=113&type=chunk) - The company faces challenges from various privacy, data protection, and data security laws and regulations in its international operations, such as the EU's GDPR, which could increase compliance costs and potential liabilities[115](index=115&type=chunk) - Federal, state, or foreign governments may attempt to regulate internet transmissions or prosecute the company for legal violations, potentially leading to increased compliance costs, reputational damage, liability, fines, or changes in business practices[116](index=116&type=chunk) [Undetected or unknown defects in our systems or services, security breaches including from vulnerabilities, defects in the technologies, components, and services in our supply chain, and Distributed Denial of Service ("DDoS") attacks could expose us to liability and materially harm our business and reputation.](index=27&type=section&id=Undetected%20or%20unknown%20defects%20in%20our%20systems%20or%20services,%20security%20breaches%20including%20from%20vulnerabilities,%20defects%20in%20the%20technologies,%20components,%20and%20services%20in%20our%20supply%20chain,%20and%20Distributed%20Denial%20of%20Service%20(%22DDoS%22)%20attacks%20could%20expose%20us%20to%20liability%20and%20materially%20harm%20our%20business%20and%20reputation.) Undetected defects, security breaches, supply chain vulnerabilities, and DDoS attacks could expose the company to liability and materially harm its business and reputation - The services provided by the company may contain undetected defects or errors, potentially leading to service interruptions, customer data breaches, reputational damage, claims, and increased costs[117](index=117&type=chunk) - As an operator of critical internet infrastructure, the company frequently faces sophisticated cyberattacks, including advanced persistent threats and zero-day threats[118](index=118&type=chunk) - Both external and internal threats, including third-party vendors and employees, could lead to security breaches affecting the security of data centers and domain name registration systems[118](index=118&type=chunk) - The company's networks have experienced DDoS attacks, and the increasing scale and sophistication of these attacks could lead to network outages, increased response times, and inability to meet service level agreements[122](index=122&type=chunk) [Changes to the multi-stakeholder model of internet governance could materially and adversely impact our business.](index=28&type=section&id=Changes%20to%20the%20multi-stakeholder%20model%20of%20internet%20governance%20could%20materially%20and%20adversely%20impact%20our%20business.) Changes to the multi-stakeholder model of internet governance, including the transition of DNS coordination from the U.S. government, could materially and adversely impact the company's business - The U.S. government has transitioned its historical role in DNS coordination to the multi-stakeholder community, and this change could materially and adversely impact the company's business[124](index=124&type=chunk)[125](index=125&type=chunk) - ICANN or the Empowered Community may adopt positions unfavorable to the company's strategy or business[124](index=124&type=chunk)[126](index=126&type=chunk) - Some foreign governments and multi-stakeholder community members question ICANN's role in internet governance, potentially seeking multilateral oversight bodies or changes to ICANN's Government Advisory Committee to give governments more control over certain aspects of internet governance[127](index=127&type=chunk) [We face risks from our operation of two root zone servers and performance of the Root Zone Maintainer functions under the RZMA.](index=29&type=section&id=We%20face%20risks%20from%20our%20operation%20of%20two%20root%20zone%20servers%20and%20performance%20of%20the%20Root%20Zone%20Maintainer%20functions%20under%20the%20RZMA.) The company faces risks from operating two root zone servers and performing Root Zone Maintainer functions under the RZMA, including potential claims and security issues from new gTLD deployments - The company operates two of the 13 root zone servers, which are critical for the proper functioning of the internet[128](index=128&type=chunk) - As the Root Zone Maintainer, the company provides and publishes authoritative root zone data under the RZMA agreement, potentially facing significant claims regarding its agreements or performance[128](index=128&type=chunk)[129](index=129&type=chunk) - The deployment of new gTLDs may introduce security and stability issues at the root zone and other DNS levels, such as name collisions, potentially leading to network outages and cyberattacks[130](index=130&type=chunk) [The evolution of internet practices and behaviors, the adoption of substitute technologies, or price increases may impact the demand for domain names.](index=29&type=section&id=The%20evolution%20of%20internet%20practices%20and%20behaviors,%20the%20adoption%20of%20substitute%20technologies,%20or%20price%20increases%20may%20impact%20the%20demand%20for%20domain%20names.) The evolution of internet practices, adoption of substitute technologies, or price increases may impact domain name demand, affecting the company's business - The development of technologies like social media, mobile devices, applications, and search engines has changed how consumers and businesses use the internet, potentially affecting domain name demand[131](index=131&type=chunk) - Domain name demand could decline if significant changes occur in web browsers or internet search technology, or if user preferences shift towards applications, voice recognition technology, or third-party identifiers[132](index=132&type=chunk)[133](index=133&type=chunk) - The emergence of alternative TLDs, such as blockchain naming space systems, if widely adopted, could negatively impact demand for root zone TLDs[134](index=134&type=chunk) - Changes in compensation practices for registrars and registrants by advertisers and ad networks, along with reduced online advertising and marketing spending, could lead to decreased domain name demand and renewal rates[135](index=135&type=chunk) [Many of our markets are evolving, and if these markets fail to develop or if our products and services are not widely accepted in these markets, our business or our prospects could be harmed.](index=30&type=section&id=Many%20of%20our%20markets%20are%20evolving,%20and%20if%20these%20markets%20fail%20to%20develop%20or%20if%20our%20products%20and%20services%20are%20not%20widely%20accepted%20in%20these%20markets,%20our%20business%20or%20our%20prospects%20could%20be%20harmed.) Many of the company's markets are evolving, and failure to develop or widespread acceptance of its products and services could harm its business or prospects - The company seeks to grow its business in many evolving markets, but these markets may fail to develop or its services may not be widely accepted, leading to business harm[137](index=137&type=chunk)[138](index=138&type=chunk) - Factors affecting service acceptance include regional internet infrastructure development, acceptance of alternative products and services, perception of technology security, mobile device usage habits, cyber threats, government regulation, and competition from ccTLDs and new gTLDs[137](index=137&type=chunk) [The business environment is highly competitive and, if we do not compete effectively, we may suffer lower demand for our products, reduced gross margins and loss of market share.](index=30&type=section&id=The%20business%20environment%20is%20highly%20competitive%20and,%20if%20we%20do%20not%20compete%20effectively,%20we%20may%20suffer%20lower%20demand%20for%20our%20products,%20reduced%20gross%20margins%20and%20loss%20of%20market%20share.) The highly competitive business environment means ineffective competition could lead to lower product demand, reduced gross margins, and loss of market share - The internet and communication network services industry is characterized by rapid technological change, requiring the company to continuously improve service performance, functionality, and reliability to remain competitive[139](index=139&type=chunk) - The company faces competition from other gTLD and ccTLD registries, which compete for domain name registrations and online presence[141](index=141&type=chunk) - New gTLDs, particularly IDN gTLDs, may face challenges with widespread acceptance and usability, as existing software may not universally recognize and support them[141](index=141&type=chunk) [We must establish and maintain strong relationships with registrars and their resellers to maintain their focus on marketing our products and services; otherwise, our business could be harmed.](index=32&type=section&id=We%20must%20establish%20and%20maintain%20strong%20relationships%20with%20registrars%20and%20their%20resellers%20to%20maintain%20their%20focus%20on%20marketing%20our%20products%20and%20services;%20otherwise,%20our%20business%20could%20be%20harmed.) The company must maintain strong relationships with registrars and their resellers to ensure their focus on marketing its products and services, as failure to do so could harm its business - All domain name registrations occur through registrars, and the marketing efforts of registrars and their resellers are crucial for domain name demand and renewal rates[143](index=143&type=chunk) - Consolidation or strategic changes in the registrar and reseller industry could lead to reduced marketing efforts, adversely impacting domain name demand and renewal rates[143](index=143&type=chunk) - Registrars and resellers may focus more on selling other competing TLDs or their own services, reducing attention to the company's TLDs, which could adversely affect revenue[144](index=144&type=chunk) [If we encounter system interruptions or failures, we could be exposed to liability and our reputation and business could suffer.](index=32&type=section&id=If%20we%20encounter%20system%20interruptions%20or%20failures,%20we%20could%20be%20exposed%20to%20liability%20and%20our%20reputation%20and%20business%20could%20suffer.) System interruptions or failures could expose the company to liability and harm its reputation and business - The company's business relies on the continuous operation of various systems, secure data centers, and other computer and communication networks, which are vulnerable to damage or interruption from power outages, natural disasters, cyberattacks, software defects, and human error[145](index=145&type=chunk) - The company is transitioning some data center operations to leased facilities and updating its network architecture, and if these facilities or architecture do not perform as expected, service interruptions could occur[146](index=146&type=chunk) - Failures in critical infrastructure like root zone servers, root zone files, and the Shared Registration System could lead to DNS resolution or service interruptions, or even domain name deletion from the internet, resulting in potential liability and harm to the company's reputation and business[148](index=148&type=chunk) [Our operating results may be adversely affected as a result of unfavorable market, economic, social, public health, and political conditions.](index=33&type=section&id=Our%20operating%20results%20may%20be%20adversely%20affected%20as%20a%20result%20of%20unfavorable%20market,%20economic,%20social,%20public%20health,%20and%20political%20conditions.) Unfavorable market, economic, social, public health, and political conditions could adversely affect the company's operating results - Unfavorable global market, economic, social, public health, and political environments could impact customer business growth, demand for company services, price competition, stock price, liquidity, and debt servicing ability[149](index=149&type=chunk)[151](index=151&type=chunk) - If these conditions disproportionately affect specific industries and geographic regions where the company's products and services end-users are concentrated, the business could suffer[149](index=149&type=chunk) [Our international operations subject our business to additional economic, legal, regulatory and political risks that could have an adverse impact on our revenues and business.](index=33&type=section&id=Our%20international%20operations%20subject%20our%20business%20to%20additional%20economic,%20legal,%20regulatory%20and%20political%20risks%20that%20could%20have%20an%20adverse%20impact%20on%20our%20revenues%20and%20business.) The company's international operations expose it to additional economic, legal, regulatory, and political risks that could adversely impact revenues and business - A significant portion of the company's revenue comes from customers outside the U.S., and international operations require substantial management attention and resources, facing risks like local legal and custom differences and employee non-compliance[150](index=150&type=chunk)[152](index=152&type=chunk) - International business risks include competition from foreign companies, legal uncertainties, intergovernmental political and economic tensions, tariffs and trade barriers, difficulties managing foreign operations, exchange rate fluctuations, technology adaptation issues, difficulties verifying end-user information, stricter privacy policies, and threats of terrorism[152](index=152&type=chunk) - Escalating political tensions between the U.S. and China could pose additional risks to the company's operations in China, including tariffs, trade restrictions, and government actions[153](index=153&type=chunk) [We rely on our intellectual property rights to protect our proprietary assets, and any failure by us to protect or enforce, or any misappropriation of, our intellectual property could harm our business.](index=35&type=section&id=We%20rely%20on%20our%20intellectual%20property%20rights%20to%20protect%20our%20proprietary%20assets,%20and%20any%20failure%20by%20us%20to%20protect%20or%20enforce,%20or%20any%20misappropriation%20of,%20our%20intellectual%20property%20could%20harm%20our%20business.) The company relies on intellectual property rights to protect proprietary asset

Q2 2020 Earnings Conference Call July 23, 2020 Safe Harbor Disclosure Statements in this presentation other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding (i) Q2 2020 renewal rate expectations, (ii) Domain Name Base increase expectations, and (iii) our full year 2020 financial guidance fo ...

Verisign, Inc. (NASDAQ:VRSN) Q2 2020 Earnings Conference Call July 23, 2020 4:30 PM ET Company Participants David Atchley - VP & Corporate Treasurer James Bidzos - Founder, Executive Chairman & CEO George Kilguss - EVP & CFO Conference Call Participants Robert Oliver - Robert W. Baird Nicholas Jones - Citigroup Sterling Auty - JPMorgan Operator Good day, everyone. Welcome to VeriSign's Second Quarter 2020 Earnings Call. Today's conference is being recorded. Recording of this call is not permitted unless pre ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) [Filing Details](index=1&type=section&id=Filing%20Details) This document is a Quarterly Report on Form 10-Q for VeriSign, Inc. for the quarterly period ended June 30, 2020, with the company classified as a large accelerated filer - Filing Type: Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934[2](index=2&type=chunk) - Reporting Period: For the quarterly period ended June 30, 2020[2](index=2&type=chunk) - Registrant Status: Large accelerated filer[3](index=3&type=chunk)[4](index=4&type=chunk) Common Stock Information as of July 17, 2020 | Class | Shares Outstanding | | :------------------------- | :----------------------- | | Common stock, $0.001 par value per share | 114,853,683 | [PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents VeriSign, Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive income, stockholders' deficit, and cash flows, along with explanatory notes for the periods ended June 30, 2020 and December 31, 2019 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets and total liabilities from December 31, 2019, to June 30, 2020, with a notable reduction in cash and cash equivalents offset by an increase in marketable securities Condensed Consolidated Balance Sheet Highlights (In thousands) | Item | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $306,701 | $508,196 | | Marketable securities | $887,872 | $709,863 | | Total current assets | $1,249,648 | $1,278,589 | | Total assets | $1,820,126 | $1,854,009 | | Total current liabilities | $1,018,332 | $965,166 | | Total liabilities | $3,220,450 | $3,344,109 | | Total stockholders' deficit | $(1,400,324) | $(1,490,100) | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For the six months ended June 30, 2020, revenues increased by 2% year-over-year, while net income saw a significant increase, primarily driven by a substantial income tax benefit in 2020 Condensed Consolidated Statements of Comprehensive Income Highlights (In thousands, except per share data) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $314,365 | $306,289 | $626,889 | $612,697 | | Operating income | $206,780 | $201,693 | $413,044 | $401,945 | | Income before income taxes | $191,648 | $190,494 | $382,461 | $380,318 | | Income tax (expense) benefit | $(39,169) | $(42,960) | $104,134 | $(70,257) | | Net income | $152,479 | $147,534 | $486,595 | $310,061 | | Basic EPS | $1.32 | $1.24 | $4.20 | $2.60 | | Diluted EPS | $1.32 | $1.24 | $4.19 | $2.59 | - Net income for the six months ended June 30, 2020, significantly increased to **$486.6 million** from **$310.1 million** in the prior year, largely due to a **$104.1 million** income tax benefit in 2020 compared to a **$70.3 million** expense in 2019[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) The company's total stockholders' deficit decreased from the beginning of the period, primarily influenced by net income and share repurchases Condensed Consolidated Statements of Stockholders' Deficit Highlights (In thousands) | Item | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Total stockholders' deficit, beginning of period | $(1,490,100) | $(1,385,474) | | Repurchase of common stock | $(429,826) | $(384,532) | | Net income | $486,595 | $310,061 | | Total stockholders' deficit, end of period | $(1,400,324) | $(1,425,167) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities increased for the six months ended June 30, 2020, while investing activities shifted to a net cash outflow, and financing activities saw increased cash usage due to higher share repurchases Condensed Consolidated Statements of Cash Flows Highlights (In thousands) | Item | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $395,372 | $352,175 | | Net cash (used in) provided by investing activities | $(174,368) | $418,062 | | Net cash used in financing activities | $(421,530) | $(376,279) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(201,491) | $394,201 | | Cash, cash equivalents, and restricted cash at end of period | $316,110 | $760,954 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on the basis of presentation, financial instruments, selected balance sheet items, stockholders' deficit, earnings per share calculation, revenues, stock-based compensation, non-operating income, and income taxes, highlighting key changes and accounting policies [Note 1. Basis of Presentation](index=7&type=section&id=Note%201.%20Basis%20of%20Presentation) The interim financial statements are unaudited and prepared in accordance with Form 10-Q instructions, including normal recurring accruals. Certain prior period reclassifications were made without affecting net income - Interim financial statements are unaudited and prepared in accordance with SEC Form 10-Q instructions[18](index=18&type=chunk) - Reclassifications to prior period amounts were made to conform to current period presentation, with no effect on net income[19](index=19&type=chunk) [Note 2. Financial Instruments](index=7&type=section&id=Note%202.%20Financial%20Instruments) The company's financial instruments primarily consist of cash, cash equivalents, and marketable securities, with a significant portion invested in U.S. Treasury debt securities maturing in less than one year. Senior notes are classified as Level 2 in the fair value hierarchy Cash, Cash Equivalents, and Marketable Securities (In thousands) | Item | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :-------------- | :---------------- | | Cash | $27,046 | $33,238 | | Time deposits | $3,971 | $3,924 | | Money market funds (Level 1) | $155,113 | $149,624 | | Debt securities issued by the U.S. Treasury (Level 1) | $1,017,852 | $1,040,678 | | Total Cash, cash equivalents, and restricted cash | $316,110 | $517,601 | | Marketable securities | $887,872 | $709,863 | - All debt securities held as of June 30, 2020, are scheduled to mature in less than one year[20](index=20&type=chunk) - Fair values of senior notes due 2023, 2025, and 2027 were **$756.6 million**, **$555.0 million**, and **$579.0 million**, respectively, as of June 30, 2020, classified as Level 2[22](index=22&type=chunk) [Note 3. Selected Balance Sheet Items](index=8&type=section&id=Note%203.%20Selected%20Balance%20Sheet%20Items) This note details the composition of other current assets, other long-term assets, accounts payable and accrued liabilities, and long-term tax and other liabilities, highlighting changes such as the receipt of contingent consideration and a significant income tax benefit Other Current Assets (In thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------- | :-------------- | :---------------- | | Prepaid expenses | $24,495 | $19,818 | | Prepaid registry fees | $22,539 | $21,717 | | Accounts receivable, net | $5,338 | $1,524 | | Contingent consideration receivable | — | $14,721 | | Total other current assets | $55,075 | $60,530 | - During the six months ended June 30, 2020, the Company received **$20.4 million** of contingent consideration related to its divested security services business, recognized as a gain in Non-operating income, net[23](index=23&type=chunk) Long-term Tax and Other Liabilities (In thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------- | :-------------- | :---------------- | | Long-term tax liabilities | $126,890 | $308,112 | | Long-term operating lease liability | $4,755 | $4,564 | | Total long-term tax and other liabilities | $131,645 | $312,676 | - A **$167.8 million** income tax benefit was recognized in Q1 2020 due to the remeasurement of previously unrecognized income tax benefits related to a worthless stock deduction[27](index=27&type=chunk) [Note 4. Stockholders' Deficit](index=9&type=section&id=Note%204.%20Stockholders'%20Deficit) The Board authorized an additional $743.0 million for common stock repurchases, bringing the total available to $1.0 billion. The company repurchased 2.0 million shares for $395.0 million during the six months ended June 30, 2020 - Board authorized an additional **$743.0 million** for common stock repurchases, totaling **$1.0 billion** available under the program with no expiration date[28](index=28&type=chunk) - Repurchased **0.7 million** shares for **$150.0 million** during Q2 2020, and **2.0 million** shares for **$395.0 million** during the six months ended June 30, 2020[28](index=28&type=chunk) - Approximately **$675.6 million** remained available for future share repurchases as of June 30, 2020[28](index=28&type=chunk) [Note 5. Calculation of Earnings per Share](index=9&type=section&id=Note%205.%20Calculation%20of%20Earnings%20per%20Share) The weighted-average shares used for basic and diluted EPS calculations decreased year-over-year for both the three and six-month periods ended June 30, 2020 Weighted-Average Shares for EPS Calculation (In thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Weighted-average shares of common stock outstanding | 115,347 | 118,965 | 115,861 | 119,359 | | Shares used to compute diluted earnings per share | 115,544 | 119,361 | 116,137 | 119,837 | [Note 6. Revenues](index=10&type=section&id=Note%206.%20Revenues) Revenues increased across most geographies for the six months ended June 30, 2020, primarily driven by domain name registrations and renewals. Deferred revenues increased due to advance payments for future recognition Revenues Disaggregated by Geography (In thousands) | Region | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. | $199,408 | $191,848 | $396,911 | $384,003 | | EMEA | $52,964 | $51,595 | $105,069 | $103,741 | | China | $29,026 | $29,448 | $59,213 | $57,690 | | Other | $32,967 | $33,398 | $65,696 | $67,263 | | Total | $314,365 | $306,289 | $626,889 | $612,697 | - The increase in deferred revenues for the six months ended June 30, 2020, was primarily due to amounts billed in advance for domain name registrations and renewals[32](index=32&type=chunk) [Note 7. Stock-based Compensation](index=10&type=section&id=Note%207.%20Stock-based%20Compensation) Total stock-based compensation expense decreased for both the three and six-month periods ended June 30, 2020, with RSUs being the largest component Total Stock-based Compensation Expense (In thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $1,555 | $1,741 | $3,203 | $3,339 | | Sales and marketing | $843 | $1,019 | $1,728 | $2,002 | | Research and development | $1,780 | $1,642 | $3,456 | $3,231 | | General and administrative | $7,809 | $8,753 | $15,041 | $17,045 | | Total stock-based compensation expense | $11,987 | $13,155 | $23,428 | $25,617 | Nature of Total Stock-based Compensation (In thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | RSUs | $9,102 | $9,059 | $18,189 | $17,668 | | Performance-based RSUs | $2,327 | $3,294 | $4,044 | $6,332 | | ESPP | $1,085 | $1,270 | $2,215 | $2,441 | [Note 8. Non-operating Income, Net](index=11&type=section&id=Note%208.%20Non-operating%20Income%2C%20Net) Non-operating income, net decreased due to lower interest income and the expiration of transition services income, partially offset by an increased gain on the sale of a business Components of Non-operating Income, Net (In thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $2,274 | $7,228 | $6,695 | $14,588 | | Transition services income | — | $4,050 | $2,100 | $8,100 | | Gain on sale of business | $5,153 | $43 | $5,611 | $753 | | Total non-operating income, net | $7,403 | $11,436 | $14,487 | $23,639 | - Interest income decreased due to a decline in interest rates on debt securities investments[35](index=35&type=chunk) - Transition services income decreased as the agreement for the divested security services business ended in February 2020[35](index=35&type=chunk) [Note 9. Income Taxes](index=11&type=section&id=Note%209.%20Income%20Taxes) The company reported an income tax benefit for the six months ended June 30, 2020, primarily due to a $167.8 million benefit from remeasuring previously unrecognized tax benefits related to a worthless stock deduction Income Tax Expense (Benefit) and Effective Tax Rate (In thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense (benefit) | $39,169 | $42,960 | $(104,134) | $70,257 | | Effective tax rate | 20% | 23% | (27)% | 18% | - A **$167.8 million** income tax benefit was recognized in Q1 2020 from the remeasurement of previously unrecognized income tax benefits related to a worthless stock deduction[36](index=36&type=chunk) - The company's U.S. federal income tax returns for 2010-2014 remain under IRS examination[36](index=36&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=12&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides an overview of VeriSign's business, key highlights, and a detailed analysis of its financial performance for the three and six months ended June 30, 2020, compared to the prior year, also discussing the impact of COVID-19, revenue drivers, and expense trends [Overview](index=12&type=section&id=Overview) VeriSign is a global provider of domain name registry services and internet infrastructure, primarily operating .com and .net TLDs. As of June 30, 2020, the company managed 162.1 million .com and .net registrations - VeriSign is a global provider of domain name registry services and internet infrastructure, operating .com and .net TLDs[40](index=40&type=chunk) - As of June 30, 2020, the company had **162.1 million** .com and .net registrations in the domain name base, a **4%** increase from June 30, 2019[41](index=41&type=chunk)[43](index=43&type=chunk) [Business Highlights and Trends](index=12&type=section&id=Business%20Highlights%20and%20Trends) Key highlights include revenue and operating income growth, an increase in domain name registrations, and a stable renewal rate, with the company also extending its registry price freeze and generating strong operating cash flows Key Business Highlights (In millions) | Metric | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2020 | YoY Change (3 Months) | YoY Change (6 Months) | | :------------------------------------ | :--------------------------- | :--------------------------- | :-------------------- | :-------------------- | | Revenues | $314.4 | $626.9 | 3% | 2% | | Operating income | $206.8 | $413.0 | 3% | 3% | | .com and .net registrations (June 30) | 162.1 | 162.1 | 4% (from June 30, 2019) | 4% (from June 30, 2019) | | New .com and .net registrations (Q2) | 11.1 | N/A | 7.8% | N/A | | Q1 2020 Renewal Rate | 75.4% | N/A | 0.4 pp | N/A | | Cash flows from operating activities | N/A | $395.4 | N/A | 12.3% | - The company extended its freeze on registry prices for all TLDs, including .com and .net, through March 31, 2021, and waived wholesale restore fees for expired domains through the end of 2020[47](index=47&type=chunk) [COVID-19 Update](index=13&type=section&id=COVID-19%20Update) VeriSign has implemented measures to protect employees and maintain critical internet infrastructure during the COVID-19 pandemic. While no material impact has been observed to date, the situation remains uncertain, and future effects on business and financial results are hard to predict - The company has taken actions to protect employees (restricting travel, modifying sick leave, remote work) and maintain critical internet infrastructure[46](index=46&type=chunk) - No material impact from COVID-19 on business, operations, financial condition, cash flows, liquidity, and capital resources has been observed to date, but the situation is uncertain and rapidly changing[46](index=46&type=chunk) - Future growth in the domain name base and financial results may be impacted by the pandemic's duration and severity, with effects potentially reflected in future periods due to advance payment for registrations/renewals[46](index=46&type=chunk) [Results of Operations](index=14&type=section&id=Results%20of%20Operations) Revenues increased due to growth in .com TLD registrations, while operating expenses showed mixed trends. Non-operating income decreased due to lower interest rates and the end of transition services, but was partially offset by a gain on business sale. A significant income tax benefit was recognized [Revenues](index=14&type=section&id=Revenues) Revenues increased by 3% for the three months and 2% for the six months ended June 30, 2020, primarily driven by a 4% increase in the .com domain name base. The company has contractual rights to increase .com and .net prices but has frozen them through March 31, 2021 Revenues Comparison (In thousands) | Period | 2020 | % Change | 2019 | | :-------------------------- | :------- | :------- | :------- | | Three Months Ended June 30, | $314,365 | 3% | $306,289 | | Six Months Ended June 30, | $626,889 | 2% | $612,697 | - Revenue increase was primarily due to a **4%** increase in the .com domain name base, partially offset by the elimination of revenues from a divested security services business[51](index=51&type=chunk) - The annual fee for a .com domain name has been fixed at **$7.85** since 2012. The company has the right to increase .com prices by up to **7%** in four of every six years, and .net prices by up to **10%** annually[49](index=49&type=chunk) - Registry prices for all TLDs, including .com and .net, are frozen through March 31, 2021, as part of the COVID-19 response[49](index=49&type=chunk) [Geographic revenues](index=15&type=section&id=Geographic%20revenues) Revenue growth for the three and six months ended June 30, 2020, was primarily driven by increased sales to registrars based in the U.S., while China and Other regions saw slight decreases or minimal growth Geographic Revenues Comparison (In thousands) | Region | Three Months Ended June 30, 2020 | % Change | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | % Change | Six Months Ended June 30, 2019 | | :------- | :------------------------------- | :------- | :------------------------------- | :----------------------------- | :------- | :----------------------------- | | U.S. | $199,408 | 4% | $191,848 | $396,911 | 3% | $384,003 | | EMEA | $52,964 | 3% | $51,595 | $105,069 | 1% | $103,741 | | China | $29,026 | (1)% | $29,448 | $59,213 | 3% | $57,690 | | Other | $32,967 | (1)% | $33,398 | $65,696 | (2)% | $67,263 | - The majority of revenue growth during the three and six months ended June 30, 2020, came from increased sales to U.S.-based registrars[54](index=54&type=chunk) [Cost of revenues](index=15&type=section&id=Cost%20of%20revenues) Cost of revenues remained consistent year-over-year, as decreases in salary and employee benefits due to headcount realignment were offset by other minor increases. It is expected to remain consistent as a percentage of revenues Cost of Revenues Comparison (In thousands) | Period | 2020 | % Change | 2019 | | :-------------------------- | :------- | :------- | :------- | | Three Months Ended June 30, | $43,608 | (1)% | $44,066 | | Six Months Ended June 30, | $89,181 | 0% | $89,570 | - Decreases in salary and employee benefits expenses (**$1.0 million** for 3 months, **$1.5 million** for 6 months) due to headcount realignment to R&D were offset by other increases, resulting in consistent cost of revenues[56](index=56&type=chunk) - Cost of revenues as a percentage of revenues is expected to remain consistent for the remainder of 2020[58](index=58&type=chunk) [Sales and marketing](index=17&type=section&id=Sales%20and%20marketing) Sales and marketing expenses decreased significantly due to reduced advertising and marketing programs. The company expects these expenses to increase as a percentage of revenues in the latter half of 2020 Sales and Marketing Expenses Comparison (In thousands) | Period | 2020 | % Change | 2019 | | :-------------------------- | :------- | :------- | :------- | | Three Months Ended June 30, | $8,890 | (28)% | $12,399 | | Six Months Ended June 30, | $15,494 | (32)% | $22,918 | - Decreases in advertising and marketing expenses (**$2.4 million** for 3 months, **$5.5 million** for 6 months) were the primary driver for the reduction[60](index=60&type=chunk) - Sales and marketing expenses as a percentage of revenues are expected to increase during the remainder of 2020 due to planned advertising and marketing campaigns[61](index=61&type=chunk) [Research and development](index=17&type=section&id=Research%20and%20development) Research and development expenses increased due to higher salary and employee benefits, including headcount realignment from cost of revenues and expanded paid time off benefits related to COVID-19. These expenses are expected to slightly increase as a percentage of revenues Research and Development Expenses Comparison (In thousands) | Period | 2020 | % Change | 2019 | | :-------------------------- | :------- | :------- | :------- | | Three Months Ended June 30, | $18,202 | 22% | $14,953 | | Six Months Ended June 30, | $35,560 | 14% | $31,085 | - Increases in salary and employee benefits expenses (**$2.7 million** for 3 months, **$3.8 million** for 6 months) were due to headcount realignment, additional headcount, and expanded COVID-19 related employee benefits[62](index=62&type=chunk) - Research and development expenses as a percentage of revenues are expected to increase slightly during the remainder of 2020[63](index=63&type=chunk) [General and administrative](index=17&type=section&id=General%20and%20administrative) General and administrative expenses increased due to higher salary and employee benefits, increased average headcount, and charitable contributions, partially offset by decreased stock-based compensation. These expenses are expected to remain consistent as a percentage of revenues General and Administrative Expenses Comparison (In thousands) | Period | 2020 | % Change | 2019 | | :-------------------------- | :------- | :------- | :------- | | Three Months Ended June 30, | $36,885 | 11% | $33,178 | | Six Months Ended June 30, | $73,610 | 10% | $67,179 | - For the six months, increases were driven by **$4.0 million** in salary and employee benefits and **$3.1 million** in charitable contributions (COVID-19 response, equal justice), partially offset by a **$2.0 million** decrease in stock-based compensation[66](index=66&type=chunk) - General and administrative expenses as a percentage of revenues are expected to remain consistent for the remainder of 2020[67](index=67&type=chunk) [Interest expense](index=19&type=section&id=Interest%20expense) Interest expense remained consistent for the three and six months ended June 30, 2020, compared to the prior year, and is expected to remain consistent for the remainder of 2020 - Interest expense remained consistent for the three and six months ended June 30, 2020, compared to the same periods last year[68](index=68&type=chunk) - Quarterly interest expense is expected to remain consistent for the remainder of 2020[68](index=68&type=chunk) [Non-operating income, net](index=19&type=section&id=Non-operating%20income%2C%20net) Non-operating income, net decreased due to lower interest income from declining rates and the expiration of transition services income, despite an increase in gain on the sale of a business. It is expected to decrease as a percentage of revenues Non-operating Income, Net Comparison (In thousands) | Item | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $2,274 | $7,228 | $6,695 | $14,588 | | Transition services income | — | $4,050 | $2,100 | $8,100 | | Gain on sale of business | $5,153 | $43 | $5,611 | $753 | | Total non-operating income, net | $7,403 | $11,436 | $14,487 | $23,639 | - Interest income decreased due to declining interest rates on debt securities. Transition services income decreased due to the expiration of the agreement in February 2020[69](index=69&type=chunk) - Gain on sale of business increased due to contingent consideration received for the divested security services business[69](index=69&type=chunk) [Income tax expense (benefit)](index=19&type=section&id=Income%20tax%20expense%20%28benefit%29) The company reported a significant income tax benefit for the six months ended June 30, 2020, primarily due to a $167.8 million benefit from remeasuring previously unrecognized tax benefits. The annual effective tax rate for 2020 is projected to be a net benefit of 5% to 2% Income Tax Expense (Benefit) and Effective Tax Rate (In thousands) | Period | 2020 | 2019 | | :-------------------------- | :----------- | :----------- | | Three Months Ended June 30, | $39,169 | $42,960 | | Effective tax rate | 20% | 23% | | Six Months Ended June 30, | $(104,134) | $70,257 | | Effective tax rate | (27)% | 18% | - The six-month period included a **$167.8 million** benefit from remeasuring previously unrecognized income tax benefits related to a worthless stock deduction[71](index=71&type=chunk) - The annual effective tax rate for 2020 is expected to be a net benefit of between **5%** and **2%**[73](index=73&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) VeriSign's liquidity is primarily supported by cash, cash equivalents, and marketable securities, totaling $1.19 billion as of June 30, 2020. Operating cash flows increased, while investing activities shifted to a net outflow, and financing activities saw increased cash usage for share repurchases Liquidity Position (In thousands) | Item | June 30, 2020 | December 31, 2019 | | :-------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $306,701 | $508,196 | | Marketable securities | $887,872 | $709,863 | | Total | $1,194,573 | $1,218,059 | - Net cash provided by operating activities increased to **$395.4 million** for the six months ended June 30, 2020, from **$352.2 million** in the prior year, primarily due to decreased cash paid for income taxes and vendors, and increased cash from customers[78](index=78&type=chunk)[80](index=80&type=chunk) - Net cash used in investing activities was **$(174.4) million** for the six months ended June 30, 2020, a shift from a net inflow of **$418.1 million** in the prior year, mainly due to decreased proceeds from marketable securities[78](index=78&type=chunk)[83](index=83&type=chunk) - Net cash used in financing activities increased to **$(421.5) million**, primarily due to an increase in share repurchases[78](index=78&type=chunk)[84](index=84&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=21&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There have been no significant changes in the company's market risk exposures since December 31, 2019 - No significant changes in market risk exposures since December 31, 2019[85](index=85&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=21&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, and there were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of June 30, 2020[86](index=86&type=chunk) - No material change in internal control over financial reporting during the three months ended June 30, 2020[87](index=87&type=chunk) - Acknowledged inherent limitations of disclosure controls and internal control over financial reporting, which provide reasonable, not absolute, assurance[88](index=88&type=chunk) [PART II—OTHER INFORMATION](index=22&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=22&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, but none are expected to have a material adverse effect on its financial condition, results of operations, or cash flows - Involved in various investigations, claims, and lawsuits arising in the normal course of business[91](index=91&type=chunk) - None of these legal proceedings are expected to have a material adverse effect on financial condition, results of operations, or cash flows[91](index=91&type=chunk) [ITEM 1A. RISK FACTORS](index=22&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines significant risks, including the uncertain impact of the COVID-19 pandemic, risks related to agreements with ICANN and the DOC, governmental regulations, cybersecurity threats, evolving internet practices, competition, reliance on registrars, system failures, and financial risks [COVID-19 Pandemic Risks](index=22&type=section&id=The%20effects%20of%20the%20COVID-19%20pandemic%20could%20adversely%20affect%20our%20business%2C%20operations%2C%20financial%20condition%20and%20results%20of%20operations%2C%20and%20the%20extent%20to%20which%20the%20effects%20of%20the%20pandemic%20will%20impact%20our%20business%2C%20operations%2C%20financial%20condition%20and%20results%20of%20operations%20remains%20uncertain.) The COVID-19 pandemic poses significant, rapidly changing, and uncertain risks to the company's business, operations, financial condition, and results, despite no adverse impact to date. Factors include the pandemic's duration, effectiveness of responsive actions, impact on employees and demand for domain names - The COVID-19 pandemic presents significant volatility, business, and economic disruptions, and uncertainty[93](index=93&type=chunk) - As of the report date, the business, operations, financial condition, and results have not been adversely impacted, but the future extent of impact remains uncertain and rapidly changing[94](index=94&type=chunk) - Potential impacts include effects on employees, ability to maintain critical infrastructure, and demand for new and renewal domain name registrations[93](index=93&type=chunk) [Agreement-Related Risks](index=22&type=section&id=Risks%20arising%20from%20our%20agreements%20governing%20our%20business%20could%20limit%20our%20ability%20to%20maintain%20or%20grow%20our%20business.) The company's business is highly dependent on agreements with the DOC and ICANN, particularly for .com and .net TLDs. Changes to these agreements, including pricing terms, vertical integration restrictions, renewal conditions, and ICANN's unilateral amendment rights for new gTLDs, could materially impact operations and growth - Substantially all revenues are derived from gTLDs, making the business highly dependent on agreements with the DOC and ICANN, especially for .com and .net[95](index=95&type=chunk) - The Third .com Amendment allows for price increases of up to **7%** in four of every six years for .com domain names, with the first such period starting October 26, 2018[97](index=97&type=chunk)[100](index=100&type=chunk) - Restrictions on vertical integration apply solely to the .com TLD, prohibiting greater than **15%** ownership in ICANN-accredited registrars selling .com domain names[103](index=103&type=chunk) - ICANN could adopt unfavorable Consensus Policies or Temporary Policies, such as requiring Thick Whois data, or impose new mandatory obligations on registry operators, increasing costs and legal risks[106](index=106&type=chunk) [Governmental and Regulatory Risks](index=24&type=section&id=Governmental%20regulation%20and%20the%20application%20of%20new%20and%20existing%20laws%20in%20the%20U.S.%20and%20overseas%20may%20slow%20business%20growth%2C%20increase%20our%20costs%20of%20doing%20business%2C%20create%20potential%20liability%20and%20have%20an%20adverse%20effect%20on%20our%20business.) Evolving and conflicting laws and regulations, particularly regarding data privacy (e.g., GDPR) and foreign market restrictions (e.g., China), could increase compliance costs, limit operations, and expose the company to substantial liability and litigation - Unclear and evolving laws and regulations in the U.S. and overseas, especially concerning data privacy (e.g., GDPR), can lead to significant compliance costs and potential liability[109](index=109&type=chunk)[111](index=111&type=chunk) - New regulations in China impose additional costs and risks on registry services, potentially impacting growth or renewal rates of domain names in the region[109](index=109&type=chunk) - Laws restricting domain name registration, online gambling, counterfeit goods, and cybersecurity could impose significant costs or liabilities[110](index=110&type=chunk) [Cybersecurity and System Failure Risks](index=25&type=section&id=Undetected%20or%20unknown%20defects%20in%20our%20systems%20or%20services%2C%20security%20breaches%20including%20from%20vulnerabilities%2C%20defects%20in%20the%20technologies%2C%20components%2C%20and%20services%20in%20our%20supply%20chain%2C%20and%20Distributed%20Denial%20of%20Service%20%28%22DDoS%22%29%20attacks%20could%20expose%20us%20to%20liability%20and%20materially%20harm%20our%20business%20and%20reputation.) The company faces significant risks from system defects, cyber-attacks (including advanced persistent threats and DDoS), and security breaches, which could lead to service outages, data compromise, liability, reputational damage, and increased costs. Reliance on third-party technologies and the RPKI system also introduces vulnerabilities - Services may contain undetected defects or errors, leading to service outages, compromised data, reputational harm, and legal claims[113](index=113&type=chunk) - The company is frequently targeted by sophisticated cyber-attacks (APT, zero-hour threats, insider threats) due to operating critical internet infrastructure[114](index=114&type=chunk) - DDoS attacks are growing in size and sophistication, posing a continuous threat to network disruption, increased response times, and ability to meet service level obligations[118](index=118&type=chunk) [Internet Governance Risks](index=26&type=section&id=Changes%20to%20the%20multi-stakeholder%20model%20of%20internet%20governance%20could%20materially%20and%20adversely%20impact%20our%20business.) Changes in the multi-stakeholder model of internet governance, including the U.S. government's reduced oversight, the role of ICANN and its Empowered Community, and increased influence from foreign governments, could negatively impact the company's strategy and business interests - The U.S. government's transition of DNS coordination to the multi-stakeholder community could negatively impact the business[120](index=120&type=chunk)[121](index=121&type=chunk) - ICANN or its Empowered Community may assert positions that negatively impact the company's strategy or business, or face legal challenges to their authority[120](index=120&type=chunk)[122](index=122&type=chunk) - Increased control by foreign governments over internet governance could materially and adversely impact the business[124](index=124&type=chunk) [Root Zone Operations Risks](index=27&type=section&id=We%20face%20risks%20from%20our%20operation%20of%20two%20root%20zone%20servers%20and%20performance%20of%20the%20Root%20Zone%20Maintainer%20functions%20under%20the%20RZMA.) Operating root zone servers and performing Root Zone Maintainer functions exposes the company to significant claims and potential security/stability issues, particularly with the deployment of new gTLDs and associated domain name collisions - Operating two of the 13 global internet root servers and performing Root Zone Maintainer functions under the RZMA exposes the company to significant claims and potential liabilities[125](index=125&type=chunk)[126](index=126&type=chunk) - The deployment of over **1,200** new gTLDs since 2012, and future rounds, poses potential security and stability issues for the root zone, including domain name collisions and cyber-attacks[127](index=127&type=chunk) [Demand for Domain Names Risks](index=27&type=section&id=The%20evolution%20of%20internet%20practices%20and%20behaviors%2C%20the%20adoption%20of%20substitute%20technologies%2C%20or%20price%20increases%20may%20impact%20the%20demand%20for%20domain%20names.) Evolving internet practices, such as the rise of social media, mobile apps, and search engines, along with alternative TLDs and changes in online advertising compensation, could decrease demand and renewal rates for domain names, adversely affecting revenues - Changes in internet practices and behaviors (e.g., social media, mobile devices, apps, search engines) can negatively impact demand for domain names[128](index=128&type=chunk)[129](index=129&type=chunk) - Alternative TLDs (e.g., blockchain namespace systems) could negatively impact demand for TLDs in the root zone[131](index=131&type=chunk) - Changes in compensation for advertising on websites and search algorithms could decrease demand and renewal rates for certain domain names[132](index=132&type=chunk) [Market Development and Acceptance Risks](index=28&type=section&id=Many%20of%20our%20markets%20are%20evolving%2C%20and%20if%20these%20markets%20fail%20to%20develop%20or%20if%20our%20products%20and%20services%20are%20not%20widely%20accepted%20in%20these%20markets%2C%20our%20business%20or%20our%20prospects%20could%20be%20harmed.) The company's growth strategy relies on new, developing, and emerging markets, which are uncertain. Failure of these markets to develop or lack of wide acceptance for its services due to various factors could materially harm the business - Growth depends on new, developing, and emerging markets in foreign countries, which are rapidly evolving and may not grow as expected[134](index=134&type=chunk) - Factors affecting acceptance include regional internet infrastructure, substitute products (social media, apps), public perception of security, government regulations, and competition from ccTLDs and new gTLDs[134](index=134&type=chunk) [Competitive Environment Risks](index=28&type=section&id=The%20business%20environment%20is%20highly%20competitive%20and%2C%20if%20we%20do%20not%20compete%20effectively%2C%20we%20may%20suffer%20lower%20demand%20for%20our%20products%2C%20reduced%20gross%20margins%20and%20loss%20of%20market%20share.) The internet and communications network services industries are highly competitive and rapidly changing. Failure to continually innovate, adapt to new technologies, and compete effectively against other gTLD and ccTLD registries could lead to reduced demand, lower margins, and market share loss - The industry is characterized by rapid technological change, requiring continuous improvement in services and adaptation to market conditions[136](index=136&type=chunk) - Competition comes from other gTLD and ccTLD registries, with new gTLDs potentially facing universal acceptance and usability challenges[138](index=138&type=chunk) [Registrar Relationship Risks](index=29&type=section&id=We%20must%20establish%20and%20maintain%20strong%20relationships%20with%20registrars%20and%20their%20resellers%20to%20maintain%20their%20focus%20on%20marketing%20our%20products%20and%20services%20otherwise%20our%20business%20could%20be%20harmed.) The company's business relies heavily on registrars and their resellers for domain name registrations. Consolidation, changes in strategy, or a shift in their marketing focus towards new gTLDs or their own services could adversely impact demand and renewal rates for the company's TLDs - All domain name registrations occur through registrars, whose marketing efforts are crucial for demand and renewal rates[140](index=140&type=chunk) - Consolidation or changes in registrar/reseller strategy could lead to reduced marketing efforts for the company's TLDs[140](index=140&type=chunk) - Registrars may shift focus to selling new gTLDs or their own services, potentially harming the company's revenues[141](index=141&type=chunk) [System Interruption and Failure Risks](index=29&type=section&id=If%20we%20encounter%20system%20interruptions%20or%20failures%2C%20we%20could%20be%20exposed%20to%20liability%20and%20our%20reputation%20and%20business%20could%20suffe.) The company's operations are vulnerable to interruptions and failures from various sources, including natural disasters, cyber-attacks, software defects, and third-party service provider issues. Such events could lead to liability, service outages, reputational damage, and financial losses - Operations are vulnerable to damage or interruption from power loss, natural disasters, cyber-attacks, software/hardware defects, and other events beyond control[142](index=142&type=chunk) - Failures in root zone servers, the Shared Registration System, or supporting infrastructure could result in DNS resolution outages, domain name deletions, or misdirection, leading to liability and reputational harm[145](index=145&type=chunk) - Dependence on internet service providers and backbone service providers means their operational problems or outages could harm the business[144](index=144&type=chunk) [Macroeconomic and Geopolitical Risks](index=30&type=section&id=Our%20operating%20results%20may%20be%20adversely%20affected%20as%20a%20result%20of%20unfavorable%20market%2C%20economic%2C%20social%2C%20public%20health%2C%20and%20political%20conditions.) Unfavorable global market, economic, social, public health, and political conditions can adversely impact the company's operating results by affecting customer growth, demand for services, pricing, stock price, liquidity, and debt servicing ability - Unfavorable global conditions can impact customer growth, demand for services, price competition, stock price, liquidity, and ability to service debt[146](index=146&type=chunk) - Concentration of end-users in specific industry or geographic sectors could lead to disproportionate negative impacts during adverse conditions[146](index=146&type=chunk) [International Operations Risks](index=30&type=section&id=Our%20international%20operations%20subject%20our%20business%20to%20additional%20economic%2C%20legal%2C%20regulatory%20and%20political%20risks%20that%20could%20have%20an%20adverse%20impact%20on%20our%20revenues%20and%20business.) International operations, which generate a significant portion of revenues, expose the company to various economic, legal, regulatory, and political risks, including competition from foreign companies, compliance with diverse laws, trade policies, currency fluctuations, and potential scrutiny from foreign governments - A significant portion of revenues is derived from customers outside the U.S., exposing the company to international risks[147](index=147&type=chunk) - Risks include competition from foreign companies, legal uncertainty, economic tensions, tariffs, currency fluctuations, and difficulties in managing foreign operations[148](index=148&type=chunk) - Compliance with diverse foreign laws and regulations, including those on privacy and data localization, can be challenging and costly[148](index=148&type=chunk) [Intellectual Property Risks](index=31&type=section&id=We%20rely%20on%20our%20intellectual%20property%20rights%20to%20protect%20our%20proprietary%20assets%2C%20and%20any%20failure%20by%20us%20to%20protect%20or%20enforce%2C%20or%20any%20misappropriation%20of%2C%20our%20intellectual%20property%20could%20harm%20our%20business.) The company's success depends on protecting its intellectual property (IP), including internally developed technologies and the Verisign brand. Failure to protect or enforce IP, misappropriation by external parties, or challenges to patents could harm the business. Reliance on licensed technology and public domain software also presents risks - Success depends on internally developed technologies and related intellectual property; external parties could copy or use IP without authorization[149](index=149&type=chunk) - Foreign laws may not protect proprietary rights to the same extent as U.S. law[149](index=149&type=chunk) - Litigation to enforce IP rights is unpredictable and costly, and patents considered 'standards essential' may require licensing to competitors[149](index=149&type=chunk) - Reliance on licensed technology means loss or inability to obtain licenses could harm the business, and public domain software is equally available to competitors[150](index=150&type=chunk) [IP Infringement Claims Risks](index=32&type=section&id=We%20could%20become%20subject%20to%20claims%20of%20infringement%20of%20intellectual%20property%20of%20others%2C%20which%20could%20be%20costly%20to%20defend%20and%20could%20harm%20our%20business.) The company faces risks of intellectual property infringement claims from others, which could lead to costly litigation, diversion of resources, delays, damages, or injunctions. The evolving legal standards for internet-related IP rights add to this uncertainty - Risk of infringing intellectual property rights of others, leading to costly litigation, diversion of resources, and potential damages or injunctions[152](index=152&type=chunk) - Legal standards for internet-related intellectual property rights are uncertain and evolving, increasing the likelihood of patent litigation[154](index=154&type=chunk) [Litigation and Investigation Risks](index=32&type=section&id=We%20could%20become%20involved%20in%20claims%2C%20lawsuits%2C%20audits%20or%20investigations%20that%20may%20result%20in%20adverse%20outcomes.) The company may be involved in various claims, lawsuits, audits, and investigations, which are inherently unpredictable. Adverse outcomes could result in significant monetary damages, injunctive relief, and diversion of management attention and resources - Involvement in claims, lawsuits, audits, and investigations is unpredictable, with potential for significant monetary damages or injunctive relief[155](index=155&type=chunk) - Such proceedings could involve significant expense and divert management's attention and resources[155](index=155&type=chunk) [Strategic Initiative Risks](index=32&type=section&id=We%20continue%20to%20explore%20new%20strategic%20initiatives%2C%20the%20pursuit%20of%20any%20of%20which%20may%20pose%20significant%20risks%20and%20could%20have%20a%20material%20adverse%20effect%20on%20our%20business%2C%20financial%20condition%20and%20results%20of%20operations.) Pursuing new strategic initiatives, such as investments in new revenue streams or TLD acquisitions, involves significant risks including diversion of management attention, regulatory scrutiny, adverse financial effects, and potential damage to reputation - New strategic initiatives (e.g., new revenue streams, TLD acquisitions) involve risks like diversion of management attention, regulatory scrutiny, and adverse effects on financial results[157](index=157&type=chunk) - ICANN review or approval may be required for new initiatives, potentially delaying or preventing implementation[158](index=158&type=chunk) [Key Employee Dependence Risks](index=33&type=section&id=We%20depend%20on%20key%20employees%20to%20manage%20our%20business%20effectively%2C%20and%20we%20may%20face%20difficulty%20attracting%20and%20retaining%20qualified%20leaders.) The company's effective management relies on key employees and senior management. Difficulty in attracting, retaining, integrating, and motivating these individuals, especially in a highly technical and competitive environment, could adversely affect the business - Dependence on knowledge, experience, and performance of senior management and other key employees in a unique, competitive, and highly regulated environment[159](index=159&type=chunk) - Difficulty in attracting, integrating, retaining, and motivating key individuals and highly skilled employees could harm the business[159](index=159&type=chunk) [Taxation Risks](index=33&type=section&id=Changes%20in%2C%20or%20interpretations%20of%2C%20tax%20rules%20and%20regulations%20or%20our%20tax%20positions%20may%20adversely%20affect%20our%20income%20taxes.) Changes in tax rules, regulations, or interpretations in the U.S. and foreign jurisdictions, including new digital economy taxation proposals, could lead to significant fluctuations in effective tax rates, increased taxes, and adverse effects on financial results - Subject to income taxes in U.S. and foreign jurisdictions, with significant judgment required in determining tax provision[160](index=160&type=chunk) - Effective tax rates may fluctuate due to changes in earnings mix, tax laws, or audit outcomes[160](index=160&type=chunk) - OECD proposals and independent tax regimes for the digital economy could increase taxes and adversely impact financial condition[161](index=161&type=chunk) [Marketable Securities Risks](index=33&type=section&id=Our%20marketable%20securities%20portfolio%20could%20experience%20a%20decline%20in%20market%20value%2C%20which%20could%20materially%20and%20adversely%20affect%20our%20financial%20results.) The company's significant marketable securities portfolio, primarily U.S. Treasury debt, is exposed to credit, liquidity, market, and interest rate risks. A decline in market value or an impairment charge could materially affect financial results - As of June 30, 2020, **$1.20 billion** in cash, cash equivalents, and marketable securities, with **$887.9 million** in marketable securities (primarily U.S. Treasury debt)[162](index=162&type=chunk) - Investments are subject to general credit, liquidity, market, and interest rate risks[162](index=162&type=chunk) - A decline in market value or an impairment charge could adversely impact results of operations and cash flows[162](index=162&type=chunk) [Real Property Ownership Risks](index=34&type=section&id=We%20are%20subject%20to%20the%20risks%20of%20owning%20real%20property.) Ownership of headquarters and data centers exposes the company to risks such as adverse changes in property value, ongoing maintenance costs, compliance with regulations, environmental issues, and disputes with neighbors - Ownership of headquarters and data centers subjects the company to risks including adverse changes in property value, maintenance expenses, and compliance costs[164](index=164&type=chunk) - Risks also include potential environmental contamination and disputes with neighboring owners or service providers[164](index=164&type=chunk) [Anti-Takeover Protections Risks](index=34&type=section&id=We%20have%20anti-takeover%20protections%20that%20may%20discourage%2C%20delay%20or%20prevent%20a%20change%20in%20control%20that%20could%20benefit%20our%20stockholders.) The company has anti-takeover provisions in its Certificate of Incorporation and Bylaws, along with Delaware's Section 203, which could discourage, delay, or prevent a change in control, potentially limiting stockholder benefits - Anti-takeover provisions in corporate documents include restrictions on stockholder actions, special meetings, Board vacancies, and preferred stock issuance[164](index=164&type=chunk) - Delaware's Section 203 prohibits business combinations with interested stockholders for three years, unless certain conditions are met, potentially discouraging unsolicited offers[165](index=165&type=chunk) [Indebtedness Management Risks](index=34&type=section&id=Our%20financial%20condition%20and%20results%20of%20operations%20could%20be%20adversely%20affected%20if%20we%20do%20not%20effectively%20manage%20our%20indebtedness.) The company's significant outstanding debt requires a substantial portion of cash flow for payments and could limit operational flexibility, increase refinancing difficulty, and heighten vulnerability to adverse economic conditions. Debt covenants may also restrict business activities - Significant outstanding debt requires dedicating a substantial portion of cash flow for principal and interest payments[166](index=166&type=chunk) - Indebtedness could limit flexibility, make refinancing difficult, trigger events of default, and increase vulnerability to adverse economic conditions[166](index=166&type=chunk) - Debt covenants may restrict share repurchases, dividends, acquisitions, and asset disposals if financial ratios are not met[166](index=166&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=35&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased 730 thousand shares of common stock for an aggregate cost of $150.0 million during the three months ended June 30, 2020, under a $1.0 billion authorization Share Repurchase Activity (Three Months Ended June 30, 2020) | Period | Total Number of Shares Purchased (thousands) | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (millions) | | :----------------- | :--------------------------------------- | :--------------------------- | :--------------------------------------------------------------------------------------------- | | April 1 - 30, 2020 | 279 | $197.18 | $770.6 | | May 1 - 31, 2020 | 213 | $211.86 | $725.3 | | June 1 - 30, 2020 | 238 | $209.39 | $675.6 | | **Total** | **730** | | | - The Board authorized a total of **$1.0 billion** for share repurchases, with approximately **$675.6 million** remaining as of June 30, 2020[167](index=167&type=chunk) [ITEM 6. EXHIBITS](index=35&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the report, including certifications from the Principal Executive Officer and Principal Financial Officer, and Interactive Data Files - Includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.01, 31.02, 32.01, 32.02)[168](index=168&type=chunk) - Includes Interactive Data Files (Exhibits 101, 104) formatted as Inline XBRL[168](index=168&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report is signed by D. James Bidzos, Chief Executive Officer, and George E. Kilguss, III, Chief Financial Officer, on July 23, 2020 - Signed by D. James Bidzos, Chief Executive Officer, and George E. Kilguss, III, Chief Financial Officer[172](index=172&type=chunk) - Date of signing: July 23, 2020[172](index=172&type=chunk)

Q1 2020 Earnings Conference Call April 23, 2020 Safe Harbor Disclosure Statements in this presentation other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding (i) Q1 2020 renewal rate expectations, (ii) Domain Name Base increase expectations, and (iii) our full year 2020 financial guidance f ...