Sign in

    VeriSign, Inc (VRSN)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$182.68Last close (Apr 25, 2024)
    Post-Earnings Price$179.31Open (Apr 26, 2024)
    Price Change
    $-3.37(-1.84%)

    What went well

    • Verisign is introducing new registrar marketing programs in the second half of 2024 to support and improve registration trends, aiming to return the domain name base to growth in 2025.
    • Despite current challenges in the Chinese market and U.S. registrars focusing on ARPU, Verisign believes that its business fundamentals remain strong and expects negative impacts to ease as they move forward.
    • Progress in securing the .web top-level domain is underway, with Verisign filing an application to participate in the second IRP, which could open up significant growth opportunities upon resolution.

    What went wrong

    • Higher retail pricing and reduced promotional offers by registrars in the U.S. market have led to decreased demand for .com domains, resulting in lower registration volumes and renewal rates.
    • Challenges in China are expected to continue to negatively impact domain name base growth throughout 2024, with limited visibility into improvements due to regulatory issues and competition from low-cost TLDs.
    • Increased competition from extremely low-priced TLDs (sub-$1) is negatively affecting .com registration volumes, especially in China, and the company acknowledges that they could have adapted their marketing programs sooner to address these issues.

    Q&A Summary

    1. Outlook for .com Growth
      Q: What conditions are weighing on .com growth, and what programs will drive growth in 2025?
      A: Management noted that registrars' focus on ARPU has led to higher retail pricing and reduced promotions, resulting in lower demand, fewer registrations, and lower renewal rates. They are launching new marketing programs, including one focused on .net already launched and additional programs for .com planned for the second half of the year. These programs aim to offer broader options to accommodate diverse registrar business models and stimulate new customer acquisition.

    2. Impact of China on Sales
      Q: Has visibility in China improved, and what is the outlook?
      A: Management expects China to continue to be a drag through 2024 and noted no substantial change in visibility over the last three months. The market is affected by regulatory differences and sensitivity to costs, including higher dollar costs. China represents about 5% of the domain name base and is moving downward, but negative impacts will ease moving forward.

    3. Registrar Pricing Dynamics
      Q: Why is pricing focus affecting .com more than other TLDs?
      A: In China, other TLDs priced extremely low (sub-$1) are filling some demand. Registrars control retail pricing and are pricing .com and .net in a broad range. The focus on ARPU and reduced marketing spend is a primary factor impacting .com in the U.S.. Management is adapting marketing programs to address these issues.

    4. ICANN Contract Renewal
      Q: Any updates or risks regarding the .com contract renewal?
      A: The .com contract has a presumptive right of renewal, and as long as service levels are met, it shall be renewed. The renewal deadline is at the end of November, and the company is engaged with ICANN in the renewal process. They expect an on-time renewal, similar to the .net renewal last year.

    5. .web TLD Update
      Q: Any developments regarding the .web domain?
      A: Verisign and NDC have filed an application to participate in the second IRP. Last April, ICANN's Board voted to delegate .web to NDC, but UltoNovo filed a second IRP seeking the same relief previously rejected. Management believes these claims are baseless and expects ICANN and the IRP panel to address them swiftly.

    6. Margins and Expenses
      Q: Are there additional expenses associated with new programs affecting margins?
      A: Management stated there are not necessarily direct expenses associated with the new programs. Expenses are already budgeted and reflected in current guidance.

    7. Pricing Power and Wholesale Pricing
      Q: Does registrar pricing focus impact your wholesale pricing strategy?
      A: Registrars make their own pricing decisions, and higher renewal prices reflect the stickiness and high quality of the .com product. Management attributes current dynamics to the cyclical nature of ARPU and is focusing on programs to accommodate different business models and encourage new customer acquisition.

    Related Publications