Q4 2024 Earnings Summary
- Verisign's new marketing programs are being adopted by registrars, showing positive impact and expected to improve domain name base trends in 2025. Registrars have provided positive feedback that these programs align with their go-to-market strategies.
- Negative trends impacting the domain name base are cyclical and are easing, with China now representing only 5% of the business. Verisign expects the domain name base to return to growth once these trends are worked through.
- Registrars are refocusing on customer acquisition, with expectations for increased marketing efforts in 2025. Notably, two registrars are running Super Bowl ads reaching around 200 million viewers, indicating a potential boost in new registrations.
- Verisign projects the domain name base to decrease by 2.3% to 0.3% in 2025, following a 2.1% decline in 2024, indicating ongoing challenges in reversing the negative growth trend. ,
- Declines in domain registrations from both U.S. and China-based registrars impacted 2024 results, with expectations that decreases from China will continue in 2025, potentially affecting revenue further. ,
- Uncertainty and delays in the .web TLD arbitration process, with final hearings slated for later 2025, may postpone new growth opportunities in expanding Verisign's domain portfolio.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +4% ($395.4 million) | The increase was primarily driven by price hikes for .com and .net domain registrations, as well as continued growth in U.S. revenues, partially offset by slower growth in some international markets. |
Net Income | -28% ($191.5 million) | Despite higher revenues, increased operating costs (including G&A expenses and marketing) and lower non-operating income contributed to a sizable drop in net income compared to last year. |
EPS (Basic) | -23% ($2.00) | The decline in EPS mirrors the decrease in net income, and was further affected by fewer share repurchases earlier in the prior period—leading to a relatively higher average share count this period. |
Share Repurchases | +443% ($1,225.6 million) | A new or expanded share buyback authorization enabled the company to repurchase significantly more shares than in the prior year, reflecting management’s focus on returning capital to shareholders. |
Stock-Based Compensation | +315% ($61.1 million) | The substantial jump is mainly attributed to new equity grants (including RSUs and performance-based RSUs) and higher fair value of awards, reflecting both expanded employee programs and increased share price. |
Depreciation & Amortization | +255% ($36.9 million) | This spike is likely due to newly capitalized assets (such as IT infrastructure, data centers, or headquarter renovations) coupled with shorter useful lives of certain intangible assets, raising amortization expense. |
Capital Expenditures | +462% ($28.1 million) | The company invested more heavily in infrastructure upgrades and facility expansions, significantly outpacing last year’s lower capex levels and indicating long-term growth initiatives. |
Net Change in Cash | -$33.4 million (vs. +$82.5M prior) | The negative cash flow was driven by large share repurchases, higher capital expenditures, and increased stock-based compensation, outweighing the positive cash generated from operations. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | no prior guidance | $1.615B – $1.635B | no prior guidance |
Operating Income | FY 2025 | no prior guidance | $1.095B – $1.115B | no prior guidance |
Interest Expense and Nonoperating Income (Net) | FY 2025 | no prior guidance | $50M – $60M | no prior guidance |
Capital Expenditures | FY 2025 | no prior guidance | $30M – $40M | no prior guidance |
GAAP Effective Tax Rate | FY 2025 | no prior guidance | 21% – 24% | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Revenue | FY 2024 | $1.554B – $1.559B | $1.5574B (sum of Q1 $384.3M+ Q2 $387.1M+ Q3 $390.6M+ Q4 $395.4M) | Met |
Operating Income | FY 2024 | $1.054B – $1.059B | $1.0582B (sum of Q1 $258.9M+ Q2 $266.2M+ Q3 $269.3M+ Q4 $263.8M) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Domain name base growth and cyclical trends | Previously, the company saw declines driven by U.S. registrars focusing on ARPU and weakness in China, with the domain base decreasing across 2024. | The company expects a slight decline in 2025 but sees improvement vs. 2024, supported by new marketing programs and easing China impacts. | Sentiment improving as they anticipate cyclical recovery. |
Registrar marketing programs and customer acquisition initiatives | Discussed new programs aiming to offset ARPU focus, with slow adoption by registrars and a 2025 timeline for broader engagement. | Showing early success; programs are well received, and registrars refocusing on customer acquisition (e.g., Super Bowl ads). | Growing momentum, with more registrars expected to participate. |
Share repurchases and capital return strategy | Consistently returning cash to shareholders via buybacks (1.3M shares in Q1, 2.2M in Q2, 1.7M in Q3), with ongoing Board authorizations. | Returned $1.2B in 2024 (6.6M shares), leaving $1B authorized and available. | Stable and ongoing repurchase commitment. |
Focus by U.S. registrars on higher ARPU over marketing investments | U.S. registrars raised retail prices, cut marketing, and prioritized aftermarket sales, creating headwinds for new registrations. | Still prioritizing ARPU, but Verisign hopes new programs will reengage registrars in customer acquisition. | Remains a challenge, though programs target a shift back to acquisition. |
Persistent headwinds and regulatory environment in China | Weakness in China weighed on the domain base, with macro/regulatory issues and fewer speculative registrations. | The impact is lessening as China-based registrars now represent a smaller share (about 5%). | Still negative but diminishing effect on overall performance. |
Competition from low-cost new gTLDs | Low-cost gTLDs, especially in China, captured some speculative demand at very low prices, affecting .com/.net. | No mention in the current period. | Faded focus, not highlighted recently. |
Delays and uncertainty in the .web TLD arbitration process | Ongoing delays with ICANN reviews; no substantial resolution reported. | Still in arbitration, with a final hearing slated for later in 2025; Verisign remains interested. | Continued delays, outcome remains uncertain. |
Potential boost from Super Bowl ad campaigns by registrars | Not previously mentioned in earlier calls. | Two registrars plan Super Bowl ads to reach ~200M viewers, potentially aiding new registrations. | Newly introduced catalyst for 2025 growth. |
Expectations for a return to domain name base growth in 2025 | Management aimed for growth by 2025 amid new marketing efforts and easing headwinds. | Still forecasting a slight decline but better than 2024, with hopes of a return to growth once cyclical factors improve. | Ongoing goal, with cautious optimism for an upturn. |
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Domain Name Base Outlook
Q: Why are you more optimistic about the domain name base?
A: Management expects the domain name base to return to growth after current cyclical trends subside. Factors include the lessening impact from China, now only representing 5% of business , and early positive signs from new marketing programs. Renewal rates have also improved. -
Marketing Programs Impact
Q: Can you provide more color on the new marketing programs?
A: The new programs offer more options aligned with registrars' go-to-market strategies. While early, there's positive feedback from registrars. Programs were refined and relaunched late in 2024 and early 2025. Adoption is expected to increase as registrars roll them out in 2025. -
Cyclical Trends vs. Marketing Strategy
Q: Are the marketing programs distinct from the expected cyclical shift?
A: Management views the marketing programs as a strategic response to the evolving registrar channel. The programs provide flexibility to meet diverse registrar needs. They aim to strengthen the channel amid market evolution, complementing the anticipated cyclical shift back to customer acquisition. -
Operating Income Guidance
Q: Is increased spending on marketing programs included in guidance?
A: The shift is primarily strategic; however, if programs are successful, spending may increase but should be accretive over time. Expenses for the programs are included in the guidance. -
Gross New Registrations
Q: Can you discuss the recent increase in gross new registrations?
A: The quarter saw 9.5 million new registrations, up sequentially and year-over-year. Early success of new marketing programs contributed. The domain name base contraction improved to 0.5 million, compared to 1.1 million in Q3 and 1.2 million in Q4 last year , indicating positive trends as we move into 2025. -
New Generic TLDs and .web Update
Q: Are you interested in bidding for new domains, and what's the update on .web?
A: The company is considering participating in upcoming new TLD rounds but has nothing specific to share yet. Regarding .web, VeriSign remains interested in being the registry operator. The process is still with ICANN, with hearings planned for 2025. -
Regulatory Environment and Leadership Changes
Q: How might new leadership in D.C. and ICANN affect your business?
A: Management expects no significant impact, noting longstanding successful policy across administrations. They have good relationships with both NTIA and ICANN, and look forward to working with new leaders. The cooperative agreement emphasizes security and stability, with pricing remaining transparent and capped.