Q4 2023 VeriSign Inc Earnings Call
Yeah.
Operator: Stand by. Good day, everyone. Welcome to Verisign's fourth quarter and full year 2023 earnings call. Today's conference is being recorded. Recording of this call is not permitted unless pre-authorized.
Please standby.
Good day, everyone welcome to <unk> fourth quarter and full year 2023 earnings call. Today's conference is being recorded recording of this call is not permitted unless preauthorized at this time I'd like to turn the conference over to Mr. David Atchley, Vice President of Investor Relations and corporate Treasurer. Please go ahead Sir.
Operator: At this time, I'd like to turn the conference over to Mr. David Atchley, Vice President of Investor Relations and Corporate Treasurer, operator. Welcome to Verisign's fourth quarter and full year 2023 earnings call. Joining me are Jim Bidzos, Executive Chairman and CEO, Todd Strube, President and COO, and George Kilgus, Executive Vice President and CFO.
David Atchley: Thank you operator, welcome to <unk> fourth quarter and full year 2023 earnings call. Joining me are Jim bid dose executive Chairman and CEO, Todd Truby, President and C O O and George Kilgus Executive Vice President and CFO. This call and presentation are being webcast from the Investor Relations website, which is.
David Atchley: This call and presentation are being webcast from the Investor Relations website, which is available under About Verisign on verisign.com. There, you will also find our earnings release. At the end of this call, the presentation will be available on that site, and within a few hours, the replay of the call will be posted. Financial results in our earnings release are unaudited, and our remarks include forward-looking statements that are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent report on Form 10-Q. Verisign does not update financial performance or guidance during the quarter unless it is done through a public disclosure.
David Atchley: Well under about Verisign on Verisign Dot Com. There you will also find our earnings release at the end of this call. The presentation will be available on that site and within a few hours. The replay of the call will be posted.
David Atchley: Financial results in our earnings release are unaudited and our remarks include forward looking statements that are subject to the risks and uncertainties that we discuss in detail in our documents filed with the FCC specifically the most recent report on Form 10-Q, Verisign does not update financial performance or guidance during the quarter.
David Atchley: Unless it is done through a public disclosure.
David Atchley: The financial results in today's call and the matters we will be discussing today include GAAP results and two non-GAAP measures used by Verisign, adjusted EBITDA and free cash flow. GAAP to non-GAAP reconciliation information is appended to the slide presentation, which can be found on the investor relations section of our website, available after this call. Jim and George will provide some prepared remarks, and afterward, we will open the call to your questions. With that, I would like to turn the call over to Jim. Thank you, David. Good afternoon to everyone, and thank you for joining us.
David Atchley: The financial results in today's call and the matters, we will be discussing today include GAAP results and to non-GAAP measures used by Verisign adjusted EBITDA and free cash flow GAAP to non-GAAP reconciliation information is appended to the slide presentation, which can be found on the investor Relations section of our website.
Speaker Change: Well after this call.
Speaker Change: Jim and George will provide some prepared remarks and afterward, we will open the call for your questions with that I would like to turn the call over to Jim.
Jim Bidose: Thank you David good afternoon to everyone and thank you for joining US 2023 marked another solid year of execution delivering consistent financial results, while enhancing our critical internet infrastructure and extending our record of dot com and dot net DNS availability beyond 26 years.
Jim Bidzos: 2023 marked another solid year of execution, delivering consistent financial results while enhancing our critical Internet infrastructure and extending our record of.com and.net DNS availability beyond 26 years. During 2023, revenue grew 4.8% year-over-year, while operating income increased by 6.1%. Shares outstanding at the end of 2023 decreased by 3.7% from the total of outstanding shares at the end of 2022. However, our financial and liquidity position remained stable, with $926 million in cash, cash equivalents, and marketable securities at the end of the year. Over the course of the year, we returned $883 million of capital to shareholders through the repurchase of 4.2 million shares.
Jim Bidose: During 2023 revenues grew four 8% year over year, while operating income increased by six 1%.
Jim Bidose: Shares outstanding at the end of 2023 decreased by three 7% from the total of outstanding shares at the end of 2022.
Jim Bidose: Our financial and liquidity position remains stable with $926 million in cash cash equivalents and marketable securities at the end of the year.
Jim Bidose: Over the course of the year, we returned 883 million of capital to shareholders through the repurchase of $4 2 million shares.
Jim Bidzos: At year end, $1.12 billion remained available and authorized under the current share repurchase program, which has no expiration. At the end of December, the domain name base in.com and.net totaled 172.7 million domain names, down 0.6% from 173.8 million names at the end of 2022. During the fourth quarter, the domain name base decreased by 1.2 million domain names. From a new registration perspective, the fourth quarter ended with 9 million new registrations compared with 9.7 million names for the same quarter last year. For the full year, new registrations were 39.4 million names, down 490,000 names from the 39.9 million names we saw in 2022.
Jim Bidose: At year end 1.12 billion remained available and authorized under the current share repurchase program, which has no expiration.
Jim Bidose: At the end of December the domain name base in Dot Com and net totaled $172 7 million domain names down 0.6% from $173 8 million names at the end of 2022 during the fourth quarter. The domain name base decreased by $1 2 million domain names.
Jim Bidose: From a new registration perspective, the fourth quarter ended with 9 million, new registrations compared with $9 7 million names for the same quarter last year.
Jim Bidose: For the full year, new registrations were $39 4 million names down 490000 names from the $39 9 million names we saw during 2022.
Jim Bidzos: The renewal rate for the fourth quarter of 2023 is expected to be approximately 73.1 percent compared with 73.3 percent a year ago. For the full year 2023, the preliminary renewal rate of 73.9% is below the 74.2% renewal rate of 2022; both first-time and previously-reduced names were lower, and rates were lower year over year. While there are many factors that drive demand for domain names, declining demand from China remains the primary source of drag on the overall domain name base growth. For example, our domain's under-management from China-based registrars declined by 2.2 million names in 2023. China-based registrar demand has been weak as a result of several factors, including challenging economic conditions, a more stringent regulatory environment, and the impact of a weaker local currency combined with retail pricing adjustments.
Jim Bidose: The renewal rate for the fourth quarter of 2023 is expected to be approximately 73, 1% compared with 73, 3% a year ago.
Jim Bidose: Full year 2023.
Jim Bidose: Preliminary renewal rate of 73, 9% is below the 74, 2% renewal rate of 2022.
Jim Bidose: Both first time and previously renewed names, where lower rates were lower year over year.
Jim Bidose: While there are many factors that drive demand for domain names declining demand from China remains the primary source of drag on the overall domain name base growth.
Jim Bidose: <unk> under management from China based registrars declined by 2.2 million names in 2023, China based registrar demand has been weak as a result of several factors, including challenging economic conditions are more stringent regulatory environment and the impact of a weaker local currency combined with retail pricing adjustments.
Jim Bidzos: Excluding registrars based in China, our domain name base grew by 1.2 million names, or 0.8%, during 2023. While the domain name base thus far in 2024 has grown quarter-to-date, we have not yet seen any material changes in the current macroeconomic or regulatory landscape in China. Therefore, we believe it's prudent to expect China to continue to negatively impact revenue and domain base growth during 2024. However, with the Chinese-based portion of our base now at about 5% of our overall domain name base, we see the negative trend in China having a less pronounced effect on our overall business after 2024. For 2024, we're expecting the domain name base to remain flat year over year, with a range of negative one and positive one percent. As announced in today's earnings release, we have given notice of a price increase of 67 cents to the annual wholesale price for.com domain names, which raises the wholesale price from $9.59 to $10.26, effective September 1st, 2024.
Excluding registrars based in China, our domain name base grew by 1.2 million names or <unk>, 8% during 2023.
Jim Bidose: While the domain name base, thus far in 2024 has grown quarter to date, we have not yet seen any material changes in the current macroeconomic or regulatory landscape in China. Therefore, we believe it's prudent to expect China to continue to negatively impact revenue and domain based growth during 2024.
Jim Bidose: However, with a China based portion of our base now at about 5% of our overall domain name base, we see the negative trend in China, having a less pronounced effect on our overall business after 2024.
Jim Bidose: For 2024, we're expecting the domain name base to remain flat year over year with a range of negative one and positive 1%.
Jim Bidose: As announced in today's earnings release, we have given notice of a price increase of 67 cents to the annual wholesale price for Dot com domain names, which raises the wholesale price from $9 59 to $10.26.
Jim Bidose: Effective September one 2024, even after this increase we believe com will be will remain highly competitive with other TLD choices. As a reminder, any of our domains may be registered for terms up to 10 years at the current wholesale price.
Jim Bidzos: Even after this increase, we believe COM will remain highly competitive with other TLD choices. As a reminder, any of our domains may be registered for terms up to 10 years at the current wholesale price. Now, I'd like to turn the call over to George.
Jim Bidose: Now I'd like to turn the call over to George I'll return with Georgia has completed his financial report with closing remarks.
George: I'll return when George has completed his financial report and closing remarks. Thanks, Jim, and good afternoon, everyone. For the year ended December 31, 2023, the company generated revenue of $1,493,000,000, up 4.8%, and delivered operating income of $1,000,000,000, up 6.1% from 2022. Operating expenses totaled $492 million in 2023 and were up 2.2% from the previous year.
George Kilgus: Thanks, Jim and good afternoon, everyone.
George Kilgus: For the year ended December 31, 2023, the company generated revenue of $1 billion of 493 million up four 8% and delivered operating income of 1 billion up six 1% from 2022.
George Kilgus: Operating expense totaled $492 million in 2023 and was up two 2% from the previous year.
George Kilgus: The full year 2023, operating margin was 67% and free cash flow was $808 million.
George: The full-year 2023 operating margin was 67%, and free cash flow was $808 million. For the quarter ended December 31st, 2023, the company generated revenue of $380 million, up 3% from the same quarter of 2022, and delivered operating income of $256 million, an increase of 4.4% from the same quarter a year ago. Operating expense in Q4 totaled $124 million, compared to $122 million last quarter, and it was flat from a year earlier.
George Kilgus: For the quarter ended December 31, 2023, the company generated revenue of $380 million up 3% from the same quarter of 2022 and delivered operating income of $256 million, an increase of four 4% from the same quarter a year ago.
George Kilgus: Operating expense in Q4 totaled $124 million compared to $122 million last quarter and it was flat from a year earlier.
George: Net income in the fourth quarter totaled $265 million, compared to $179 million a year earlier, which produced diluted earnings per share of $2.60 for the fourth quarter of 2023, compared to $1.70 for the same quarter of 2022. As stated in today's earnings release, net income for the fourth quarter of 2023 included the recognition of income tax benefits related to the items noted in our release. Cumulatively, these income tax benefits increased net income by $69.3 million and increased diluted earnings per share by $0.68. Operating cash flow for the fourth quarter of 2023 was $204 million, and free cash flow was $199 million compared with $217 million and $209 million, respectively, in the year-ago quarter. Operating cash flow and free cash flow for the full year 2023 totaled $854 million and $808 million, respectively.
George Kilgus: Net income in the fourth quarter totaled $265 million compared to $179 million a year earlier, which produced diluted earnings per share of $2 60 for the fourth quarter of 2023 compared to $1 70 for the same quarter of 2022.
George Kilgus: As stated in today's earnings release net income for the fourth quarter of 2023 included the recognition of income tax benefits related to the items noted in our release cumulatively. These income tax benefits increased net income by $69 3 million and increased diluted earnings per share by 68 sets.
George Kilgus: Operating cash flow for the fourth quarter of 2023 was $204 million and free cash flow was $199 million compared with $217 million and $209 million, respectively in the year ago quarter.
George Kilgus: Operating cash flow and free cash flow for the full year, 2023 totaled $854 million and $808 million respectively.
I will now discuss our full year 2020 for guidance.
George: I'll now discuss our full year 2024 guidance. Revenue is expected to be in the range of $1,560,000,000 to $1,580,000,000. Operating income is expected to be between $1,045,000,000 and $1,065,000,000. Interest expense and non-operating income net, which includes interest income estimates, is expected to be an expense of between $30 million to $40 million. Capital expenditures are expected to be between $35 million to $45 million.
George Kilgus: Revenue is expected to be in the range of $1.560 billion to $1 billion $580 million.
George Kilgus: Operating income is expected to be between $1.045 billion and $1 billion at $65 million.
George Kilgus: Interest expense and non operating income net which includes interest income estimates is expected to be an expense of between 30 million to $40 million.
George Kilgus: Capital expenditures are expected to be between 35 million to $45 million.
Jim Bidzos: And the gap effective tax rate is expected to be between 21% and 24%. Overall, Verisign has continued to demonstrate sound financial performance during the last quarter and throughout 2023, and we look forward to building on our strengths and our mission in the coming year. I'll now turn the call back to Jim for his closing remarks. Thank you, George.
George Kilgus: And the GAAP effective tax rate is expected to be between 21% and 24%.
George Kilgus: Overall Verisign has continued to demonstrate sound financial performance during the last quarter and throughout 2023.
George Kilgus: And we look forward to building on our strengths and our mission in the coming year.
George Kilgus: I'll now turn the call back to Jim for his closing remarks.
Jim Bidose: Thank you George <unk>.
Jim Bidzos: While demand from our registrars in China is expected to continue to remain soft in 2024, the fundamentals of our business remain strong. We firmly believe our responsible and disciplined management of our business and capital continue to serve us well, allowing us to report another solid year, which, in our view, is one in which we fulfill our stewardship mission of providing secure and reliable infrastructure services, manage our business responsibly and efficiently, and return capital to our shareholders. These goals remain unchanged and support our commitment to deliver strong financial results, including steady growth in revenue, operating income, and EPS.
Jim Bidose: While demand from our registrars in China is expected to continue to remain soft in 2020 for the fundamentals of our business remains strong. We firmly believe are responsible and disciplined management of our business and capital continue to service well, allowing us to report another solid year, which in our view is one in which we fulfill our stewardship mission of providing secure.
Jim Bidose: Reliable infrastructure services manage our business responsibly and efficiently and return capital to our shareholders. These goals remain unchanged and support our commitment to deliver strong financial results, including steady growth in revenue operating income and EPS. Thanks.
Operator: Thanks for your attention today. This concludes our prepared remarks. Now we'll open the call for your questions. Operator, we're ready for the first question. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach us. Once your question has been stated, please mute your line.
Speaker Change: Thanks for your attention today. This concludes our prepared remarks now we will open the call for your questions. Operator, we're ready for the first question.
Speaker Change: If you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow the signal to reach our equipment. Once your question has been stated. Please mute your line again press Star one to ask a question, we'll pause for just a moment to assemble the queue.
Operator: Again, press star 1 to ask a question. We'll pause for just a moment to assemble www.verisigninc.com. We will take our first question from Rob Oliver with Baird. Please go ahead. Great. Thank you. Good afternoon, everyone.
Speaker Change: Yeah.
Speaker Change: We will take our first question from Rob Oliver with Baird. Please go ahead.
Rob Oliver: Great. Thank you good afternoon, everyone.
Jim Bidzos: Jim, you pointed out China, you know, conversation, obviously, that's on everybody's mind. And so I would be curious to start, just to get a sense from you what, if anything has changed in China. You alluded to the more stringent regulatory environment, but I would love to get a thought from you on that. And then I had a couple of follow-ups.
Rob Oliver: Jim you pointed out China.
Rob Oliver: Compensation, obviously, that's on everybody's mind, and so just would be curious to start just to get a sense from you. What if anything has changed in China, you alluded to the more stringent regulatory environment.
Rob Oliver: To get.
Rob Oliver: Thoughts from you on that and then I had a couple of follow ups. Thanks.
Speaker Change: Okay. Thanks, Yeah definitely China is the main focus of.
Jim Bidzos: Okay, thanks. Yeah, definitely China is the main focus of the results that we had. I mentioned in my remarks that we saw a 2.2 million unit decline from Chinese registrars and that we had 1.2 million growth from registrars outside of China. So the issues for us are definitely concentrated in China. And as I've said today and have for several quarters, there are a variety of factors in China that are hard to predict. The challenging economic climate there; very difficult to predict what impact it's having, how long that will last. The regulatory environment is one in which the process of obtaining domain names is a little bit more challenging, a lot more processes, a lot more identification, confirmation, authentication of the person registering, et cetera, processes basically that make it a little bit more difficult.
Speaker Change: The results that we had I mentioned in my remarks that we saw $2 2 million unit decline from China, Registrars and debt that we had $1 2 million growth from registrars outside of China.
Speaker Change: The issues for us are definitely concentrated.
Speaker Change: In China, and as I've said.
Speaker Change: Today, and and have for several quarters, it's a variety of factors in China. Those those are hard to predict.
Speaker Change: The challenging economic climate, there very difficult to predict what impact it's having.
Speaker Change: How long that will last.
Speaker Change: The regulatory environment is one in which the process of obtaining domain names is a little bit more challenging a lot more process a lot more identification confirmation authentication of the person registering et cetera process basically that makes it a little bit more difficult and.
Jim Bidzos: And as we've mentioned for a couple of quarters now, foreign exchange is an issue as well. It increases the cost of goods, obviously, for registrars selling domain names. So all of those things are contributing. It's really hard to say. It's an opaque market to try to understand. It's very fluid.
Speaker Change: As we've mentioned for a couple of quarters now foreign exchange is an issue as well that increases cost of goods, obviously for our registrar selling domain names. So all of those things are contributing it's it's really hard to say, it's an opaque market to try to understand it's very fluid. There is a lot going on there some of the things that are going on migration and other ship stuff.
Jim Bidzos: There's a lot going on there. Some of the things that are going on, migration and other stuff, our shifts are making it difficult to really assess the impact. Is it at the bottom? Is it bouncing along the bottom?
Speaker Change: Alright things are shifts are.
Speaker Change: Making it difficult to really assess the impact is it is it at the bottom is it bouncing along the bottom when will it change those are really hard to see inside of a very opaque market and so I know the abundance of caution. We we just find it prudent to really be careful about guidance concerning China and where it might go.
Jim Bidzos: When will it change? Those are really hard to see inside of a very opaque market. And so, in an abundance of caution, we just find it prudent to really be careful about guidance concerning China and where it might go. So those are certainly the influence regarding a flattish DNB domain name base as a result. And it's just really difficult to predict.
Speaker Change: Those are certainly the influence.
Speaker Change: We're guiding to a flattish DN dnb domain name base as a result, and it's just really difficult to do.
Speaker Change: To predict.
Jim Bidzos: But, as I mentioned, we are reaching a point here where the China-based registrars represent about 5% of our zone. So I guess if the negative impact continues at whatever rate, it should be less pronounced, as I mentioned.
Speaker Change: But as I mentioned, we were reaching a point here where the.
Speaker Change: The China based registrars represented about 5% of our zones. So.
Speaker Change: I guess Sam.
Speaker Change: The impact negative if the navigator of impact continues at whatever rate yet.
Speaker Change: It should be less pronounced as I mentioned.
Speaker Change: Got it okay very helpful. Thanks, Jim and George if I may.
George: Okay. Very helpful. Thanks, Jim. And George, if I may, on that domain-based guide of, you know, negative one to plus one, how should we think about the impact of China within that? Can you give us a sense of how we might fall back apart from that? In other words, you know, is China moving beyond China in terms of the forecast, or is it starting to moderate? I know Jim just rightfully said this was hard to predict, but you know, I guess you have made some predictions, so just curious how we can ballpark that.
Speaker Change: On that domain based guide.
Speaker Change: Negative one to plus one.
Speaker Change: How should we think about the impact.
Speaker Change: Within that if you give us a sense of how we might fall back that mark that in other words.
Speaker Change: Okay.
Speaker Change: I just tried to coming out of the numbers.
Speaker Change: I know it is.
Speaker Change: Yes.
Moving beyond China in terms of the forecast or is it starting to moderate I know Jim just rightfully said this is hard to predict but.
Speaker Change: I guess you have made some predictions so just curious how we can ballpark that.
George: Uh, yeah, Rob, as Jim mentioned, you know, in 2023, China clearly was a drag, down about 2.2 million units. And from a revenue perspective, which you'll see when we file our Q, our revenue from China was down about 14.4 million. As we think about the guidance that we've provided, both from a revenue perspective and a domain name-based perspective, we're assuming that the impact that we saw here in 2023 is going to have a similar impact in 2024. And as a result of that, that's factoring into kind of the midpoint of our guidance for revenue and also factoring into the midpoint of our guidance for domain name-based revenue. I got it.
Jim Bidose: Yeah, Rob.
Jim Bidose: As Jim mentioned in.
Rob Oliver: In 2023, China, clearly was a drag down about $2 2 million units.
Speaker Change: And from a revenue perspective, which you'll see when we file our Q.
Speaker Change: Our revenue from China was down about $14 4 million as we think about the guidance that we've provided both from a revenue perspective in the domain name base perspective, we're assuming that the impact that we saw here in 2023 is going to have a similar impact in 2024.
Speaker Change: As a result of that.
Speaker Change: Factoring into kind of the midpoint of our guidance of revenue and also factoring into the midpoint of our guidance of the domain name base.
Speaker Change: Got it.
Jim Bidzos: Okay, very helpful. Thanks. And then, last one for me, and then I'll pass the baton, Jim, just wanted to see if there was any update that you guys had heard about dot web that we should be aware of. I think we had that communication in late August, and you guys commented on the last call about where things stood, but just wanted to see if we could get a refresher on that or if there's anything we should be aware of coming up. Yeah, thanks for that question, too. So there's not been a new update on.web.
Speaker Change: Very helpful. Thanks, and then.
Speaker Change: Last one for me and then I'll pass the Baton Jim.
Speaker Change: Just wanted to see if there was any update.
Jim Bidose: Guys have heard that we should be aware of about del Webb.
Speaker Change: How does that communication in late August and you guys commented on the last call.
Speaker Change: Just about where things stood but just wanted to see if we could get a refresher on that or if there's anything we should be aware of coming up. Thank you.
Speaker Change: Yeah. Thanks for that question too so there is not.
Speaker Change: A new update on Dot web I'll, just reiterate what I said last time, which hasnt changed which is that I cant publish their response to the latest.
Jim Bidzos: I'll just reiterate what I said last time, which hasn't changed, which is that ICANN published their response to the latest IRP, and they were very dismissive of it. They described in detail, again, their process that they employed in determining that.web was handled properly and that there were no issues. And so what we're seeing, what we've seen so far, is basically process and procedure delays, and we are confident that that's going to come to an end, that those will run out eventually. I just don't think that anything is going to change in the meticulous process that ICANN, again, concluded with a board vote without objection to instruct staff to proceed with processing the.web application. Those were the last official communications of the board in writing to the community and to staff.
Speaker Change: And they were very dismissive of it.
Speaker Change: Described in detail again their process that they employed and determining the dark web.
Speaker Change: Well, it's handled properly and that there are no issues and so what we're seeing what we've seen so far as.
Speaker Change: Is basically process and procedure delays and.
Speaker Change: We are confident that that's going to come to an end.
Speaker Change: Those will run out eventually.
Speaker Change: Just don't think that anything is going to change in the <unk>.
Speaker Change: Meticulous process that I can again, concluding with a board vote without objection to instruct staff to proceed with processing. The dot web application that was where the last official communications of the board and writing to due to the community and to staff. So we're waiting for some of these <unk>.
Jim Bidzos: So we're waiting for some of these process things to clear up. We're watching the website. So, nothing new from the last time.
Speaker Change: <unk> things to clear up we're watching the website. So nothing new from the last time I'll, just reiterate our confidence in and what the outcome will be and reiterate our strong desire and exciting anticipation of bringing dot web to market to our extended channel and to their millions of customers.
Jim Bidzos: I'll just reiterate our confidence in what the outcome will be and reiterate our strong desire and exciting anticipation of bringing.web to market to our extended channel and to their millions of customers. Great. Thanks for that, Jim. Thanks, guys.
Speaker Change: Great. Thanks for that Jim Thanks, guys I appreciate it thank.
Speaker Change: Thank you.
Operator: Thank you. We will take our last question from Igor Arunian with Citi, please go ahead. Hey, good afternoon, guys. Maybe. I'm assuming there's probably not a lot you can comment on the upcoming dot-com renewal, but... If there is any chance there is something you could say or something you want to comment on, just figure it out and ask about that.
Speaker Change: Yes.
Speaker Change: We'll take our last question from Yigal <unk> with Citi. Please go ahead.
Yigal: Hey, good afternoon guys.
Yigal: Maybe.
Yigal: To start Uh huh.
Yigal: I'm, assuming that's probably not a lot you can comment on the upcoming dotcom renewal, but.
Yigal: If theres any chance or something that you could say or something you want to comment on just figured I'd ask about that first.
Speaker Change: I'll, just say that the dotcom renewals based on a presumptive right of renewal of the Dot net renewal last year was similar and executed smoothly.
Jim Bidzos: I'll just say that the dot-com renewal is based on a presumptive right of renewal. The dot-net renewal last year was similar and executed smoothly. Onto.com, Great.
Speaker Change: On to Dot com.
Speaker Change: Okay, Great that's what I figured for for the for the global trend.
George: That's what I figured, for the global trend. Understanding what's going on in China. You talk about the 1 million growth in domains outside of China. Can you frame that a little bit more? Is that typical?
Speaker Change: Understanding what's going on in China, and you can talk about the 1 million growth in domains outside of China.
Speaker Change: You frame that a little bit more is that is that typical or is it still not what you would call kind of normal historical levels understanding there's some fluctuations over time, what are the trends you're seeing globally that give you confidence or not.
George: Still not, you know, at what you would call kind of a normal historical level, understanding there's some fluctuations over time. What are the trends you're seeing globally that give you confidence or not? And if there's anything in particular that you could point to maybe the US or the US and Europe to be helping. Yeah, sure. This is George.
Speaker Change: And if there's anything in particular that you can point on maybe the U S or the U S and in Europe, It would be helpful.
Speaker Change: Yeah sure John This is George.
George: So, yeah, as you just articulated, we did grow about 1.2 million domain names in our base outside of China. You know, when we look at that growth, that primarily came from both EMEA and our All Others segment. Both of those were up. The U.S. was a little flat.
George Kilgus: So yeah as you just articulated we did grow about one.
George Kilgus: $1 2 million.
George Kilgus: Domain names in our base outside of China.
George Kilgus: When we look at that growth primarily came from both EMEA and our all other segment both of those were up.
Speaker Change: The U S was a little flat it was down by about 500000 units in the domain names base year over year, but as a reminder, many of our U S. Registrars are global in their reach so I wouldn't necessarily attribute.
George: It was down by about 500,000 units in the domain name base year over year. But as a reminder, many of our U.S. registrars are global in their reach, so I wouldn't necessarily attribute all of that weakness here to U.S. registrants. But we do notice that U.S. registrants have been focused more on ARPU this year and in 2023, so we think that can be a factor as well. But we did see good growth in EMEA as well as in our All Others segment. Got it. And then, I guess, following down the line, I want to maybe dig into the margin outlook for next year and costs. You know, less margin expansion, at least to start here on the expectation for next year than we saw this year. Can you just talk about investments? where you're looking to spend next year, and then maybe tie in with expectations around buybacks for next year as well.
Speaker Change: All of that weakness here to U S registrants.
But we do notice that U S registrants have been focused more on <unk>.
Speaker Change: This year in 2023.
Speaker Change: So we think that can be a factor as well, but we did see good growth in EMEA as well as in our other all.
Speaker Change: All other segment.
Speaker Change: Got it and then just I guess following down the line wanted to maybe dig into the margin outlook for next year in costs.
Speaker Change: Less margin expansion.
At least to start here on the expectation for next year than what we saw this year can you just talk about the <unk>.
Speaker Change: <unk> and <unk>.
Speaker Change:
Where are you looking to spend next year and then.
Speaker Change: And maybe tie in with that expectations around buybacks for next year as well.
George: Yeah, I can help you a little bit with that. First, you know, in 2023, our expenses grew by 2.2%, but I will point out that that was favorably impacted by a $5 million reduction in fees paid to the government of Tuvalu that went away here in 2023 as that contract transitioned at the end of 2022. So on a normalized basis, if you were to adjust for that, we would have been closer to a 3.3% expense growth rate here in 2023, which is still, I think, a good job by the teams in managing the expenses that they're responsible for. If you look at the midpoint of our guidance, that would imply about a 4.6% expense growth rate, which would be very similar to the growth rate we had back in 2022.
Speaker Change: Yeah, I can help you a little bit with that.
First in 2023, our expenses grew by two 2%, but I will point out that that was favorably impacted.
Speaker Change: By a $5 million reduction in fees paid to the government of Tuvalu.
Speaker Change: That went away here in 2023 is that contract transitioned at the end of 2022. So on a normalized basis. If you were to adjust for that we would have been closer to a three 3% expense.
Speaker Change: Expense growth rate here in 2023, which is still I think a good job by the teams and managing the expenses.
Speaker Change: That there are responsible for if you look at the midpoint of our guidance that would imply about a four 6%.
Speaker Change: Expense growth rate, which would be very similar to the growth rate we had back in 2022.
Speaker Change: So hopefully that gives you some idea on the expense front, we were always investing with our strategic framework in mind.
George: So hopefully, that gives you some idea on the expense front. We're always investing with our strategic framework in mind, making sure we're obviously protecting unconditionally, growing responsibly, and obviously managing continuously. And so we'll continue to focus on that framework that has served us well over the past several years. As far as buybacks go, we really don't guide to buybacks for a variety of reasons that we've talked about, but I think you can expect us to continue to be responsible for returning excess capital to shareholders, as we have done for many, many years here in the past.
Speaker Change: Sure, we're obviously protecting unconditionally growing responsibly and obviously managing continuously.
Speaker Change: And so we will continue to focus on that framework that has served us well over the past several years.
Speaker Change: As far as buybacks.
Speaker Change: We don't guide to buybacks for a variety of reasons as we've talked about but I think you can.
Speaker Change: Expect us to continue to.
Speaker Change:
Be responsible and returning excess capital to shareholders.
Speaker Change: As we have done for many many years here in the past.
George: Okay, great. Thanks. And then the last one, a bigger picture.
Speaker Change: Okay, great. Thanks, and then last one.
Speaker Change: A bigger picture Godaddy had an interesting announcement earlier this week, our partnership with our theory of named Servicer E&S and some.
Operator: GoDaddy had an interesting announcement earlier this week, a partnership with Ethereum Name Service, or ENS. Some of this stuff, still on the crypto side, goes a little over my head, but I just wanted to get your thoughts on that, particularly because there was some commentary about some of the challenges with integration there and just thinking about the kind of broader future of domains and how blockchain can impact, maybe have some. Oh, that's a good question.
Speaker Change: Some of this stuff.
Speaker Change: Still on the crypto side goes a little over my head, but just wanted to get your thoughts on that particularly because there was some commentary about.
Speaker Change: The DNS and some.
Speaker Change: Some of the challenges with integration there and just thinking about the kind of broader future of domains and how blockchain can impact that.
Speaker Change: Maybe have some views there.
Jim Bidzos: Thanks, Egal. Yeah, well, this is really a positive development for the DNS. First of all, I don't want to speak for either ENS, of course, or Go Daddy, but what they did is make it easier to link a domain name to a blockchain address. So it's a very positive development for the DNS, and it reinforces the utility of a domain name and the already strong value proposition of a domain name. We've spoken here for years about domain names as a stable global identifier, a unique stable global identifier, that that is the role they can play. And the reason we think a domain name is the best way to obtain such a unique identifier is because of the reliability, the maturity of the underlying infrastructure, like the part that we operate, the well-governed, well-regulated space that determines, you know, registrars That's all part of our contract.
Speaker Change: Oh good question, Thanks <unk> yeah.
Speaker Change: Well this is really a positive development for the DNS first of all I don't want to speak for either E&S of course, our go Daddy, but what they did is make it easier to link.
Speaker Change: Domain name to a blockchain address so it's a very positive development for the DNS.
Speaker Change: And it reinforces the utility of a domain name and the already strong value proposition of a domain name.
Speaker Change: We've spoken here for years about domain names as a stable global identifier a unique stable global identifier that thats. The role it can play in the reason we think a domain name is the right.
Speaker Change: The best way.
Speaker Change: To obtain such a unique identifiers because of the reliability the maturity of the underlying infrastructure like the part that we operate the well governed well regulated space.
Speaker Change: That determines that.
Speaker Change: Our registrars and registries are well regulated and how they behave how they serve up IP addresses what they have to do that's all part of our contract. That's part of our requirement to perform 24 seven without fail. So they announced the domain names can be easily link the E&S identifiers E&S identifiers are typically linked the wallets holding crypto currencies their usual.
Jim Bidzos: That's part of our requirement to perform 24-7 without fail. So they announced that domain names can be easily linked to ENS identifiers. ENS identifiers are typically linked to wallets holding cryptocurrencies. They're usually a difficult, unintelligible string of characters.
Speaker Change: Difficult unintelligible string of characters.
Speaker Change: And there are other uses of E&S identifiers, but cryptocurrency wallets are a very common one there.
Jim Bidzos: And there are other uses of ENS identifiers, but cryptocurrency wallets are a very common one. So basically, being able to link your domain name to it is basically using this domain name and tapping the DNS space with its globally unique and stable identifier, all the benefits and the security that's associated with it, linking the blockchain spaces, I think is a smart move and really good. It adds more utility and, I think, significantly more value to domain names. And the linkage itself benefits from the cryptographic strength of the DNS, like DNSSEC, the Domain Name System Security Extensions. So the ownership, the provenance, and the resolution of a domain name all benefit from the underlying DNSSEC cryptographic protections of these strong public key infrastructure-based things.
Speaker Change: So basically being able to link your domain name to it.
Speaker Change: Is is basically using this domain name is.
Speaker Change: And tapping the DNS space with its global unique and stable identifier all the benefits and the security that's associated with it linking the blockchain blockchain spaces. I think is a smart move and really good at it adds more utility and so I think significantly more value to domain names and the linkage itself benefits from a cryptographic strengths of.
Speaker Change: The DNS like DNS SEC the domain name system security extensions. So the ownership the provenance the resolution of a domain name all benefit from the underlying DNS cryptographic protection. So that your strong public key infrastructure base things. We you don't see a lot of this work that we do and I think many of you probably know that Mike.
Jim Bidzos: You don't see a lot of this work that we do, and I think many of you probably know that my previous company, RSA, basically invented a form of public key cryptography and built out the infrastructure that was VeriSign 1.0. And so this underlying secure, reliable infrastructure, along with a well-governed space, is why people are navigating with DNS. It's reliable. You're going to get where you want to go.
Speaker Change: Previous company RSA basically invented a form of public key cryptography and build out infrastructure that was verified one dano and so this underlying secure reliable infrastructure along with a well governed space is why before are navigating with the DNS, it's reliable youre going to get where you want to go and the ability to.
Jim Bidzos: And the ability to get a domain name, register it, and have it activated and have it resolved is also well-regulated. So having, basically, a unique, strong global identifier that you can use for all of the coming services and applications as we get more connected and more active is a tremendous benefit. I mean, it's almost like that magical single password you can use everywhere in the world. Wouldn't that be a dream come true for a lot of Internet users?
Speaker Change: Get a domain name registry it and have it activated and have it resolved is also well regulated so having basically a unique strong global identifier that you can use for all of it coming services and applications as we get more connected.
Speaker Change: <unk> is a tremendous benefit I mean it.
Speaker Change: It's almost like that magical.
Speaker Change: Single password you can use everywhere in the world wasn't that'd be a dream come true for a lot of internet users in a way a global unique stable identifier gives you that and so this is actually.
Jim Bidzos: In a way, a global, unique, stable identifier gives you that. So this is actually a new Web 3.0 type of application, realizing that there's a stable and secure base out there that you can link to and get all the advantages of it and let people use those identifiers they already have. So we think this is really good news. Super, much more thoughtful answer than I expected to be honest, but very interesting in the future of all that. We appreciate the time guys. Well, Yigal, just to add, I mean the reason for that is that what we don't publicize a lot of the things that we do, but for years we've been working on what we call responsible integration of alternate namespaces with the DNS for the very reason that we believe that at some point the secure, well regulated underlying DNS is going to be a better basis for a global identifier for folks and that rather than, you can't recreate 35 years of innovation, building, weaving all kinds of high-value applications into the DNS.
Speaker Change: Our new web three type of application realizing that there is a stable and secure base out there that you can link to and get all the advantages of it and let people use those identifiers. They already have so we think this is really good news.
Speaker Change: Zebra much more thoughtful answer then I expect them to be honest, but a very interesting feature of all that.
Speaker Change: I appreciate the time guys.
Speaker Change: Just to add I mean, the reason for that is that what we don't we don't publicize a lot of the things that we do but for years, we've been working on what we call responsible integration of alternate names spaces with the DNS for the very reason that we believe that that at some point.
Speaker Change: The secure well regulated underlying DNS is going to be a better basis for a global identifier for folks and that rather than you can't recreate 35 years of innovation building weaving all kinds of high value applications into the DNS. This is that part of the plumbing that people don't see that.
Jim Bidzos: This is the part of the plumbing that people don't see when we talk about operating and maintaining critical infrastructure that we do. So I jumped on your question because it's a great opportunity to point to something we've been quietly working on for a while that's, I think now, adding real value. For sure, and maybe some underappreciation of the innovation, very helpful. Yeah.
Speaker Change: When we talk about operating in.
Speaker Change: And maintaining critical infrastructure that we do side.
Speaker Change: I jumped on your question because it is a great opportunity to point to something we've been quietly working on for a while.
Speaker Change: I think now.
Speaker Change: Adding real value.
Speaker Change: For sure and maybe some under appreciation of the innovation in this space so very helpful.
Jim Bidzos: Thank you, guys. Great, thanks. Thank you. This concludes today's question and answer session. I will now turn the conference back over to David Atchley for any additional or closing remarks. Thank you, Operator. Please call the Investor Relations Department with any follow-up questions from this call. Thank you for your participation. This concludes our call. Have a good evening. Once again, this concludes today's call. Thank you for your participation, and you may now go. Go to Beadaholique.com for all of your beading supplies needs!
Speaker Change: Yes.
Speaker Change: Thank you guys.
Speaker Change: Great. Thanks, Thank you.
Speaker Change: This concludes today's question and answer session I will now turn the conference back over to David Atchley for any additional or closing remarks.
David Atchley: Thank you operator, please call the Investor Relations Department with any follow up questions from this call. Thank you for your participation. This concludes our call have a good evening.
David Atchley: Once again this concludes today's call. Thank you for your participation and you may now disconnect.
Operator: Title Microsoft Office Word Document MSWordDoc Word. Document.8, The Bulletproof Executive 2013 transcript Emily Beynon, Thank you. Thank you. Thank you. Copyright 2020, New Thinking Allowed Foundation
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