Q3 2024 Earnings Summary
- VeriSign is actively returning excess cash to shareholders through share repurchases, spending $301 million to repurchase 1.7 million shares in the third quarter, with $1.28 billion remaining under the current share repurchase program.
- New registrar marketing programs are showing promising results, and the company plans to engage more fully with registrars in 2025 to drive domain name base growth.**
- VeriSign has historically benefited from economic growth in China, and as registrars in China adopt new programs, there is potential for positive impacts on the domain name base.**
- VeriSign experienced a decline of 1.1 million domain names in its domain name base during the third quarter, with 850,000 of this decline from the U.S. market, indicating challenges in maintaining growth.
- U.S. registrars are prioritizing higher ARPU over customer acquisition by increasing retail prices, focusing on aftermarket sales, and reducing marketing spend, negatively impacting VeriSign's new registrations and renewal rates.
- Weakness in the Chinese market due to a poor macroeconomic environment and increased regulations continues to impact VeriSign's growth, with no material improvement expected in the near term.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q3 2024 | $1.553B to $1.563B(FY 2024) | 390.6 million | Met |
Operating Income | Q3 2024 | $1.048B to $1.058B(FY 2024) | 269.3 million | Beat |
Interest Expense & Nonoperating Income Net | Q3 2024 | $25M to $35M(FY 2024) | Interest Expense alone: 18.9 million(no separate Nonoperating Income data) | Miss |
Capital Expenditures | Q3 2024 | $30M to $40M(FY 2024) | 5.6 million | Miss |
GAAP Effective Tax Rate | Q3 2024 | 21% to 24%(FY 2024) | Not explicitly reported; implied ≈ 19.6% (derived from figures) | Miss |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Domain name base growth or decline | Q2 2024: Declined by 1.8M names ; Q1 2024: Minor decline of 270K ; Q4 2023: Decrease of 1.2M. | Declined by 1.1M names, driven by U.S. registrars’ ARPU focus and China weakness. | Continued negative with narrowed 2024 guidance; cautious about 2025. |
Weakness in the Chinese market | Q2 2024: Major contributor to overall DNB decline ; Q1 2024: 360K drop in names ; Q4 2023: 2.2M decline for full year. | Ongoing softness with no material improvement. | Persistent challenge due to macro/regulatory hurdles. |
Registrar marketing programs | Q2 2024: Recently launched programs for .net and .com ; Q1 2024: Set to go live in second half of 2024 ; Q4 2023: No mention. | Piloting new programs; adoption slower than hoped. | Developing but slow adoption; expected fuller impact in 2025. |
Competition from new gTLDs | Q2 2024: Low-cost gTLDs gained some market share, especially in China ; Q1 2024: Sub-$1 TLDs discussed in China ; Q4 2023: No mention. | No mention in the current period. | Previously relevant but not currently discussed. |
.com contract renewal and regulatory scrutiny | Q2 2024: Cooperative Agreement with DOC, limited changes expected ; Q1 2024: Presumptive right of renewal ; Q4 2023: Compared to .net renewal, confident outcome. | Draft .com registry agreement posted by ICANN; renewal expected by Nov 30. | Active renewal phase with stable regulatory environment. |
.web TLD | Q2 2024: Still tied up in litigation ; Q1 2024: Second IRP proceeding ; Q4 2023: No new update. | No mention in the current period. | Continued legal delays with no recent progress. |
Returning excess cash to shareholders | Q2 2024: 2.2M shares for $388M; authorization at $1.5B ; Q1 2024: $260M used for buybacks ; Q4 2023: Returned $883M in 2023 with $1.12B authorized. | Repurchased 1.7M shares for $301M; $1.28B remains authorized. | Consistent capital returns through ongoing share repurchases. |
U.S. registrars focusing on higher ARPU | Q2 2024: Price hikes and lower marketing outlays ; Q1 2024: Emphasis on ARPU driving fewer registrations ; Q4 2023: ARPU focus led to 500K decline. | Maintaining higher retail prices, reducing marketing, affecting registrations. | Continued monetization strategy impacting growth. |
Increasing operating expenses | Q2 2024: Expenses stable at $121M ; Q1 2024: Slightly up to $125M ; Q4 2023: 2.2% growth in 2023, 4.6% expected for 2024. | Expect bigger expense growth in 2025, some 2024 investments delayed. | Gradual upward trend tied to planned investments. |
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Growth Outlook
Q: Is returning to growth in 2025 less certain now?
A: Management indicated that registrars are not engaging quickly enough to implement programs, pushing some initiatives from 2024 into 2025, which could impact the goal of returning to growth in the second half of 2025. -
Registrar Strategies
Q: How is the focus on ARPU affecting domain growth?
A: Registrars are prioritizing higher ARPU through increased retail prices, aftermarket sales of premium domain names, and reduced marketing spend. This focus is creating headwinds for domain growth, particularly in the U.S. market, contributing to a decline of 850,000 domains in the U.S.. -
China Outlook
Q: Will you benefit if China's economy rebounds?
A: Historically, the company benefited when China's economy was strong. Currently, the macroeconomic environment and increased regulation in China remain weak. Some registrars piloted programs last quarter with positive results, and the company is engaging with them into 2025 in hopes of benefiting if economic activity rebounds. -
Expense Growth
Q: How will marketing efforts impact costs in 2024 and 2025?
A: Expenses are expected to grow more in 2025 than in 2024. Investments, including hiring 12 people in the quarter, have been pushed into Q4 2024. The company will invest more in marketing programs that are proving accretive and reduce investment in those that are not. -
Capital Allocation
Q: Will you increase leverage to boost buybacks?
A: The company is cautious about financial stability and does not plan to increase leverage. While committed to returning excess cash to shareholders efficiently, leveraging up is not a priority, and they will continue their prudent capital allocation strategy. -
Marketing Initiatives
Q: Can you provide examples of marketing programs?
A: For competitive reasons, specifics were not disclosed, but the company is offering registrars multiple programs to align with different go-to-market strategies. This includes options that appeal to registrars focusing on selling more products or acquiring new customers, aiming for programs that are mutually beneficial.
Research analysts covering VERISIGN INC/CA.