Verisign(VRSN) - 2022 Q4 - Annual Report

PART I Item 1. Business Verisign provides global domain name registry services and internet infrastructure, operating .com and .net, ensuring security and stability Overview Verisign is a global provider of domain name registry services and internet infrastructure, enabling internet navigation for recognized domain names like .com and .net - Verisign is a global provider of domain name registry services and internet infrastructure, enabling internet navigation for recognized domain names like .com and .net[11] - The company ensures the security, stability, and resiliency of key internet infrastructure, including Root Zone Maintainer services and operating two of the 13 global internet root servers[11] Services Verisign operates authoritative directories and back-end systems for various domain names, including .com and .net, under agreements with ICANN and the U.S. Department of Commerce - Verisign operates authoritative directories and back-end systems for .com, .net, .cc, .gov, .edu, and .name domain names, providing secure and always-on access[17] - The company is the exclusive registry for .com, .net, and .name gTLDs under agreements with ICANN and the U.S. Department of Commerce, maintaining authoritative directories and providing DNS resolution[18] - Domain name registration prices for .com, .net, and .name are controlled by ICANN agreements, with .com and .name incurring a $0.25 quarterly fee to ICANN per annual registration, and .net a $0.75 fee[21] Operations Infrastructure Verisign's operations infrastructure includes secure global data centers and points of presence, designed for high availability, rapid failover, and robust security - Verisign's main operations infrastructure includes secure data centers in Dulles, Ashburn (Virginia), and New Castle (Delaware), along with over 200 global points of presence[23] - The infrastructure processes hundreds of billions of transactions daily, featuring distributed servers for rapid failover and load balancing, redundant global networking, and robust security measures including firewalls and intrusion detection[23][24] - The company maintains disaster recovery and business continuity capabilities with mirrored services and advanced storage systems to ensure continuous operation and data protection[28] Marketing, Sales and Distribution Verisign aims to expand its domain name base through targeted marketing campaigns, providing tools for registrars and end-users - Verisign aims to expand its business through targeted marketing campaigns to grow the .com and .net domain name base, both domestically and internationally, providing tools for registrars and end-users[29] Research and Development Continuous R&D is crucial for Verisign's competitiveness, focusing on new and enhanced services, monitoring, registry platforms, and security - Timely development of new and enhanced services, including monitoring, registry platforms, and security, is crucial for competitiveness[30] - Future enhancements and new services are expected from internal development, collaboration with vendors and customers, and potential third-party technology acquisitions or licenses[31] Competition Verisign faces competition from other TLD registries and alternative online presence providers, with its agreements imposing pricing and distribution restrictions - Verisign faces competition from other gTLD and ccTLD registries (e.g., CNNIC, DENIC, Google) and from alternative online presence providers like search engines (Google, Baidu), social media (Facebook, WeChat), and e-commerce platforms (Amazon, eBay)[32][33] - The company's agreements with ICANN impose pricing, bundling, and distribution restrictions on .com, .net, and .name, potentially creating a competitive disadvantage compared to other TLDs[32] Industry Regulation The DNS is governed by a multi-stakeholder model with ICANN, and Verisign is subject to various country-level laws and regulations, including data security and privacy - The DNS is governed by a multi-stakeholder model, with ICANN playing a central coordination role, and Verisign is obligated to follow ICANN's Consensus or Temporary Policies[35] - Verisign is subject to country-level laws and regulations, including licensing requirements in China for .com, .net, and .cc, and data security/privacy regulations (e.g., GDPR) in various jurisdictions[36] .com Generic Top-Level Domain Operation of the .com gTLD is governed by a six-year registry agreement with ICANN, renewable by November 30, 2024, and a Cooperative Agreement with the U.S. DOC - Operation of the .com gTLD is governed by a six-year registry agreement with ICANN, renewable by November 30, 2024, with a presumptive right of renewal but subject to termination conditions[37] - Amendment 3 to the .com Registry Agreement allows for annual price increases of up to 7% in the final four years of each six-year period, with the first period starting October 26, 2018[39] - The .com gTLD operation is also subject to a Cooperative Agreement with the U.S. DOC, extended until November 30, 2024, with automatic six-year renewals unless non-renewal notice is given[40] .net Generic Top-Level Domain The .net gTLD is operated under a six-year registry agreement with ICANN, expiring July 1, 2023, with terms similar to .com but allowing annual price increases of up to 10% - The .net gTLD is operated under a six-year registry agreement with ICANN, expiring July 1, 2023, with terms similar to .com but allowing annual price increases of up to 10%[45] Root Operations Verisign operates two of the world's thirteen root servers and performs the Root Zone Maintainer function under an agreement with ICANN expiring October 19, 2024 - Verisign operates two of the world's thirteen root servers and performs the Root Zone Maintainer function, publishing authoritative root zone data under an agreement with ICANN expiring October 19, 2024[46] Human Capital Management As of December 31, 2022, Verisign had 917 employees, focusing on talent attraction, development, and retention, with a commitment to DEI and a hybrid work model - As of December 31, 2022, Verisign had 917 employees (914 full-time), with 93% based in the U.S. and 7% internationally[49] - The company focuses on attracting, developing, and retaining talent, with an average employee tenure of approximately 9 years, and a high engagement rate (85% participation in the October 2022 survey)[49][50] - Verisign is committed to Diversity, Equity, and Inclusion (DEI), with 28% female and 43% ethnically/racially diverse U.S. employees as of December 31, 2022, and is transitioning to a hybrid work model[49][51][55] Employee Headcount by Function (as of December 31) | Function | 2022 | 2021 | 2020 | | :------------------------ | :--- | :--- | :--- | | Cost of revenues | 242 | 235 | 235 | | Research and development | 255 | 250 | 260 | | Selling, general and administrative | 420 | 419 | 414 | | Total | 917 | 904 | 909 | Intellectual Property Verisign protects its proprietary assets through copyrighted software, trademarks, patents, trade secrets, and confidentiality agreements, relying on its brand for differentiation - Verisign protects its proprietary assets through copyrighted software, trademarks, patents, trade secrets, and confidentiality agreements[57] - The company holds numerous U.S. and international patents and actively files new applications, while also relying on its Verisign brand for differentiation[58][59] - Key intellectual property includes proprietary software for its Shared Registration System and ATLAS distributed lookup system, though some software and protocols are public domain or open standards[60] Information About Our Executive Officers Executive Officers (as of February 17, 2023) | Name | Age | Position | | :------------------ | :-- | :------------------------------------------------- | | D. James Bidzos | 67 | Executive Chairman and Chief Executive Officer | | Todd B. Strubbe | 59 | President and Chief Operating Officer | | George E. Kilguss, III | 62 | Executive Vice President, Chief Financial Officer | | Danny R. McPherson | 48 | Executive Vice President, Engineering, Operations and Chief Security Officer | | Thomas C. Indelicarto | 59 | Executive Vice President, General Counsel and Secretary | [Item 1A. Risk Factors](index=10&type=section&id=Item%20