Q1 2024 VeriSign Inc Earnings Call
Please standby.
Operator: Good day, everyone. Welcome to Verisign's first quarter 2024 earnings call. Today's conference is being recorded. Recording of this call is not permitted unless pre-authorized. 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.
David Atchley: Welcome to Verisign's first quarter 2024 earnings call. Joining me are Jim Bidzos, Executive Chairman, President, and CEO, and George Kilguss, Executive Vice President and CFO.
David Atchley: Thank you operator welcome to various signs first quarter 2024 earnings call. Joining me are Jim bids Us executive Chairman, President and CEO, and George Kilgus Executive Vice President and CFO. This call and presentation are being webcast from the Investor Relations website, which is available under about Verisign.
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-K. Verisign does not update financial performance or guidance during the quarter unless it is done through a public disclosure.
David Atchley: 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 finding.
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-K, they're saying does not update financial performance or guidance during the quarter unless.
David Atchley: It is done through a public disclosure 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.
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 for your questions. With that, I would like to turn the call over to Jim.
Jim: Section of our website available after this call.
David Atchley: 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 Bidzos: Thank you, David. Good afternoon to everyone, and thank you for joining us.
Jim: Thank you David good afternoon to everyone and thank you for joining US in addition to continuing to deliver on our mission as a critical internet infrastructure provider, we delivered solid and consistent financial results during the first quarter.
Jim Bidzos: In addition to continuing to deliver on our mission as a critical internet infrastructure provider, we delivered solid and consistent financial results during the first quarter that show the continued financial strength of our business model. For the first quarter, revenues grew 5.5% year-over-year, operating income grew 7.3% year-over-year, and earnings per share grew 12.9% year-over-year.
Jim Bidzos: These results show the continued financial strength of our business model for the first quarter revenues grew five 5% year over year operating income grew seven 3% year over year and earnings per share grew 12, 9% year over year at.
Jim Bidzos: At the end of March, the domain name basin.com and.net totaled 172.5 million domain names, down 270,000 names from year-end 2023. From a new registration perspective, the first quarter ended with 9.5 million new registrations compared with 10.3 million names for the same quarter last year. The renewal rate for the first quarter of 2024 is expected to be approximately 74% compared to 75.5% a year ago. As we discussed last quarter, we expect our domains under management from our China-based registrars to contract in 2024. In the first quarter, this segment declined by 360,000 names.
Jim Bidzos: At the end of March the domain name base in Dot Com and Dot net totaled $172 5 million domain names down 270000 names from year end 2023.
Jim Bidzos: From a new registration perspective, the first quarter ended with $9 5 million, new registrations compared with $10 3 million names for the same quarter last year.
Jim Bidzos: The renewal rate for the first quarter of 2024 is expected to be approximately 74% compared to 75, 5% a year ago.
Jim Bidzos: As we discussed last quarter, we expect our domains under management from our China based registrars to contract in 2024 in the first quarter. This segment declined by 360000 names for the reasons noted in prior quarters. This regional softness has been the primary source of the recent drag on the overall domain name base growth.
Jim Bidzos: For the reasons noted in prior quarters, this regional softness has been the primary source of the recent drag on overall domain name-based growth. We're also seeing some softness from our U.S.-based registrars, primarily due to their increased focus on ARPU through higher retail pricing levels, which is impacting new registrations and renewal rates. While we had expected these same factors to gradually subside in 2024, based on our first quarter results and current channel feedback, we now expect these conditions to persist through most of 2024.
Jim Bidzos: We're also seeing some softness from our U S based registrars, primarily due to their increased focus on Arco.
Jim Bidzos: Through higher retail pricing levels, which is impacting new registrations that renewal rates.
Jim Bidzos: While we had expected these same factors to gradually subside in 2024 based on our first quarter results and current channel feedback. We now expect these conditions to persist through most of 2024.
Jim Bidzos: That being said, we're in the process of rolling out new registrar marketing programs to support and improve registration trends for the second half of this year to achieve our goal of returning the domain name base to growth in 2025. We're now expecting the change in the domain name base to be between positive 0.25% and a negative 1.75% for the full year 2024. As a modeling note, the decrease in the domain name base is expected to be most pronounced during the second quarter of 2024 due to a seasonally larger expiring base of domains during the first half of the year.
Jim Bidzos: That being said, we're in the process of rolling out new registrar marketing programs to support and improve registration trends for the second half of this year to achieve our goal of returning the domain name base to growth in 2025.
Jim Bidzos: We're now expecting the change in the domain name base to be between positive two 5% to a negative 175% for the full year 2024.
Jim Bidzos: As a modeling note the decrease in domain name base is expected to be most pronounced during the second quarter of 2024 due to a seasonally larger expiring base of domains. During the first half of the year.
Jim Bidzos: Our financial and liquidity position continues to remain stable with $925 million in cash, cash equivalents, and marketable securities at the end of the quarter. During the first quarter, we repurchased 1.3 million shares for $260 million. At quarter end, $860 million remained available and authorized under the current share repurchase program. Now I'd like to turn the call over to George. I'll return when George has completed his financial report and closing remarks.
Jim Bidzos: Our financial and liquidity position continues to remain stable with $925 million in cash cash equivalents in marketable securities at the end of the quarter. During the first quarter, we repurchased one 3 million shares for $260 million at quarter end 860 million remained available and authorized under the current share repurchase.
George: <unk> program.
Jim Bidzos: 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 E. Kilguss: Thanks, Jim, and good afternoon, everyone. For the quarter ended March 31st, 2024, the company generated revenue of $384 million, up 5.5% from the same quarter of 2023, and delivered operating income of $259 million, an increase of 7.3% from the same quarter a year ago. Operating expense in the first quarter totaled $125 million, compared to $124 million last quarter and $123 million in the year-ago quarter. Net income in the first quarter totaled $194 million, compared to $179 million a year earlier, which produced diluted earnings per share of $1.92 for the first quarter of 2024, compared to $1.70 for the same quarter of 2023.
George: Thanks, Jim and good afternoon, everyone.
George E. Kilguss: For the quarter ended March 31, 2024, the company generated revenue of 384 million up five 5% from the same quarter of 2023 and delivered operating income of $259 million, an increase of seven 3% from the same quarter a year ago.
George E. Kilguss: Operating expense in the first quarter totaled $125 million compared to $124 million last quarter and $123 million in the year ago quarter.
George E. Kilguss: Net income in the first quarter totaled $194 million compared to $179 million a year earlier, which produced diluted earnings per share of $1.92 for the first quarter of 2024 compared to $1 70 for the same quarter of 2023.
George E. Kilguss: Operating cash flow for the first quarter of 2024 was $257 million, and Free Cash Flow was $254 million, compared with $259 million and $253 million, respectively, in the year-ago quarter. I'll now discuss our updated full-year 2024 guidance.
George E. Kilguss: Operating cash flow for the first quarter of 2024 was 257 million.
George E. Kilguss: And free cash flow was $254 million compared with $259 million and $253 million, respectively in the year ago quarter.
George E. Kilguss: I'll now discuss our updated full year 2020 for guidance.
George E. Kilguss: Revenue is now expected to be in the range of $1,555,000,000 to $1,570,000,000. Our operating income is now expected to be between $1,047,000,000 and $1,062,000,000. Interest expense and non-operating income net, which includes interest income estimates, is now expected to be an expense of between $25 million and $35 million. Capital expenditures are now expected to be between $30 million and $40 million, and the gap effective tax rate is still expected to be between 21% and 24%. Overall, Verisign continued to demonstrate sound financial performance during the quarter. I'll turn the call back to Jim for his closing remarks.
George E. Kilguss: Revenue is now expected to be in the range of $1.555 billion to $1.570 billion.
Jim Bidzos: Our operating income is now expected to be between $1 billion $47 million and $1.062 billion.
George E. Kilguss: Interest expense and non operating income net which includes interest income estimates is now expected to be an expense of between 25 million to $35 million.
Jim Bidzos: Capital expenditures are now expected to be between 30 million to $40 million.
Jim Bidzos: The GAAP effective tax rate is still expected to be between 21% and 24%.
George E. Kilguss: Overall, Verisign continued to demonstrate sound financial performance during the quarter.
George E. Kilguss: I will turn the call back to Jim for his closing remarks.
Jim Bidzos: Thank you, George. While we expect that the change in the domain name base for 2024 will be below historic levels for the reasons we've discussed, we continue to believe our business fundamentals remain strong. As I mentioned earlier, we're introducing additional registrar marketing programs to target quality growth in the domain name base. These programs will become active during the second half of 2024. We expect these programs to begin improving registration trends during 2024 and to contribute to a return to growth in 2025.
Jim Bidzos: Thank you George while we expect that to change in the domain name base for 2024 will be below historic levels for the reasons. We've discussed we continue to believe our business fundamentals remained strong as I mentioned earlier, we're introducing additional registrar marketing programs to target quality growth in the domain name base. These programs will become active during the.
Jim Bidzos: Second half of 2024, we expect these programs to begin improving registration of trends during 2024 and to contribute to a return to growth in 2025.
Jim Bidzos: Our goal is to fulfill our stewardship mission of providing secure and reliable infrastructure services, managing our secure and reliable infrastructure services and our business responsibly and efficiently returning capital to our shareholders. These remain unchanged and support our commitment to deliver strong financial results, including Steady Growth in Revenue, Operating Income, and EPS.
Jim Bidzos: Our goal is to fulfill our stewardship mission of providing secure and reliable infrastructure services.
Jim Bidzos: Managing our secure and reliable.
Jim Bidzos: Infrastructure services, and our business responsibly and efficiently returning capital to our shareholders remain unchanged and support our commitment to deliver strong financial results.
Jim Bidzos: Including steady growth in revenue operating income and EPS.
Jim Bidzos: Thank you for your attention today. This concludes our prepared remarks. Now we'll open the call to your questions. Operator, we're ready for the first question.
Speaker Change: Thank you 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.
Operator: Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you are using a speakerphone, please make sure your mute function is off to allow your signal to reach our... Once your question has been stated, please mute your line. Again, that is star 1 if you would like to signal with questions.
Speaker Change: Thank you.
Speaker Change: The signal with questions. Please press star.
Operator: On your Touchtone telephone.
Operator: Speaker phone. Please make sure your mute function is off to allow your signal.
Operator: Witness once your question has been stated please mute your line.
Operator: Again that is star one if you would like to signal with questions Star One and our first question comes from.
Robert Cooney Oliver: Rob Oliver with Baird.
Robert Cooney Oliver: Great. Good afternoon, guys. Thank you for taking my question. Jim, the first one is for you.
Speaker Change: Great. Good afternoon, guys. Thank you for taking my question Jim first one is for you.
Jim Bidzos: Could you just put a finer point on some of those conditions that you discussed, which are weighing on U.S.-based, domestic-based dot-com growth within the registrars? And as a follow-up to that, I don't know how much detail you can provide, but maybe you could give us any color around what sorts of programs we can expect, which could help drive that return to growth in 2025. I know you guys clearly have a long operational history of working well with your registrars and would be curious to get a little sense of what it is that you have in mind. And then I had a couple of follow-ups. Thanks.
Speaker Change: Could you just put a finer point on some of those conditions that you discussed which are way.
Jim Bidzos: Going on.
Jim Bidzos: U S a.
Jim Bidzos: Based domestic based dotcom growth within the registrars and as a follow up to that.
Jim Bidzos: I don't know how much detail you can provide but maybe if you could give us any color around.
Jim Bidzos: What sorts of programs, we can expect which could help drive that return to growth in 'twenty five I know you guys.
Jim Bidzos: Clearly have long operational history of working well with your registrars and would be curious to know.
Jim Bidzos: I'll get a little sense of what it is that you had in mind and then I had a couple of follow ups. Thanks.
Jim Bidzos: Sure. Let's see. Your first question was about the U.S. market. So basically, as we discussed, what we see is the recent registrar focus on ARPU has led to some higher retail pricing and a reduction of their promotional offers. And of course, just as a reminder, we don't control the retail pricing; the registrars do. And when you combine that with decreased marketing and advertising outlays from the channel, we think this is a factor leading to less demand for products at present, as well as some lower registration volumes and lower renewal rates.
Speaker Change: Sure, Let's say your first question was on the U S market. So basically as we discussed we what we see is the recent register our focus on our Poo has led to some higher retail pricing and a reduction of their promotional offers and of course, just as a reminder, we don't control the retail pricing the registrars do.
Jim Bidzos: And when you combine that with decreased marketing and advertising outlays from the channel. We think this is a factor leading to less demand for our products at present as well as some lower registration volumes and lower renewal rates.
Jim Bidzos: As to the marketing programs, obviously, I can't really go into a lot of detail, but I can say that, in addition to the existing programs that we have, we've got some new ones coming to market. We have one currently launched that is focused on.NET, and we plan to launch additional programs focused on COM in the second half of the year. So basically, what I can generally say about these programs and what's different, I think it helps to just understand that our channel is greatly varied.
Jim Bidzos: After the marketing programs.
Jim Bidzos: Obviously, I can't really go into a lot of detail, but I can say that in addition to the existing programs that we have we've got some new ones coming to market.
Jim Bidzos: We have one currently launched that are focused on dot net and we plan to launch additional programs focused on comm in the second half of the year. So basically what I can generally say about these program whats different programs and what's different I think it helps to just to understand that our channel is greatly varied first of all through Covid and afterwards.
Jim Bidzos: First of all, through COVID and afterwards, they've all gone through changes as we have, but we also have a channel that's evolved to include people like website builders and wholesale registrars who are selling to others. So our strategy is to broaden the options that are available to this sort of diverse group with diverse business models, geographic footprints, and different installed bases. So, by offering a broader selection, our goal is to increase engagement with our TLDs by registrars and their customers.
Jim Bidzos: <unk> all gone through changes as we have but we also have a channel that has evolved to include people like website builders and wholesale.
Jim Bidzos: Wholesale.
Jim Bidzos: Registrars, who are who are selling to others. So our strategy is to broaden the options. That's available to this sort of diverse group with diverse business models geographic footprints different install basis, so by offering a broader selection. Our goal is to increase engagement with our <unk> for the registrars and their customers clear.
Jim Bidzos: Clearly, one size doesn't fit all like it did in the past, and these programs are really designed to address that diversity, and they're also designed with feedback that we've received from the community, and multiple options are clearly desirable. So that's the good generalization I can offer you.
Jim Bidzos: Clearly one size doesn't fit all like it has in the past many years ago that work better.
Jim Bidzos: So these programs are really designed to address that diversity and they also they're also designed.
Jim Bidzos: With feedback that we've received from the community.
Jim Bidzos: Multiple options is clearly desirable so that's that's good.
Jim Bidzos: Good generalization I can offer you.
Speaker Change: Great. That's really helpful color and then just as a corollary to that George for you.
George E. Kilguss: Great, that's really helpful, Culler. And then I just have a corollary to that, George, for you. We're still running through the model here, and obviously, the margin or profit coming down a little bit, that could be a result of the revenue, but are there any additional expenses in that second half associated with this program to restart that jump in dot-com growth for 2025? Any additional expenses captured in that change?
George E. Kilguss: Yes.
George: I'll run through the model here.
George E. Kilguss: Obviously the <unk>.
George: Margin or profit coming down a little bit that could be a result of the revenue, but it is that is there are there any additional expenses in that second half associated with this program that.
George E. Kilguss: To drive to restart that jump in dot com growth for 'twenty five any additional expenses captured in that change.
George E. Kilguss: Yeah, Rob, thanks for the question. I would say not necessarily direct expenses associated with those programs. We do have expenses already budgeted, and that is reflected in the current guidance that we're already putting out there for you.
George: Yeah, Rob Thanks for the question I would say not necessarily direct expense associated with those programs we do have.
George: Expense already budgeted and that is reflected in the current guidance that we're already.
George: Putting out there for you.
Robert Cooney Oliver: Okay, great. Very helpful.
George E. Kilguss: Okay. Great helpful. Last question for me and then I'll turn it over to you all on China.
Jim Bidzos: Last question for me, and then I'll turn it over to Ygal. On China, Jim, last quarter you mentioned that the situation was, I think you used the word, opaque, and that there were just so many moving parts, and you guys have been a strong partner and provider in China for so many years. I'm curious how, if at all, that visibility has changed from three months ago. Is there a chance we'll see a bottom here? Has there been any evolution in your view in any color around what's happening in China? It would be helpful. Thank you.
Jim Bidzos: Jim last quarter, you mentioned.
Jim Bidzos: Is that right.
Jim Bidzos: The situation with <unk> was I think he used the word opaque.
Jim Bidzos: And that there were just so many moving parts and you you you you guys have been.
Jim Bidzos: Strong partner and provider in China for so many years I'm curious how if at all that visibility has changed.
Jim Bidzos: From three months ago.
Jim Bidzos: It.
Jim Bidzos: Is there a chance we see a bottom here has there been any evolution in your view and any color around what's happening in China would be helpful. Thank you.
Jim Bidzos: Sure, well, I guess first of all I would just remind you that in my prepared remarks, at least I mentioned that we do expect China to continue to be a drag through 2024, so that's the first thing, better visibility, less opacity. I'm Not really, there's nothing really substantial that I think I can point to that gives us better insights. I just think that that is a different market for all the reasons that we typically mention.
Speaker Change: Sure well I guess first of all I would just just remind you that in my prepared remarks at least I mentioned that we do expect China to continue to be a drag through 2024. So thats. The first thing in terms of.
Jim Bidzos: Better visibility less opacity.
Jim Bidzos: Not really there is nothing really substantial that I think I can point to that gives us better insights I just think that.
Jim Bidzos: That is a different market for all the reasons that we typically mention the regulatory environment is a little bit different they are much more adversely affected.
Jim Bidzos: The regulatory environment is a little bit different. They are much more adversely affected in terms of the cost of goods, not just by price increases but also by the cost of buying dollars to pay for those domain names. So that market is just sort of feeling a lot of different impacts. I don't have any big, detailed insights into it, no. I think our view of China is that, of course, at about 5% of our overall domain name base and moving downward, the negative impacts will, of course, ease as we move forward.
Jim Bidzos: In terms of cost of goods not just by price increases, but also by the cost to buy dollars to pay for those domains. So Dave Webb.
Jim Bidzos: Market is just sort of feeling a lot of different impacts.
Jim Bidzos: Specific detailed insights into it no I think our view of China is that of course that at about 5% of our overall domain name base and moving downward D. The negative impacts will of course ease as we move forward. That's one factor that will help us through 2024. The other obviously is.
Jim Bidzos: That's one factor that will help us through 2024. The other, obviously, is two things, really. It's our programs that we're targeting at the registrars to help them focus on new customer acquisition and the fact that we think that their ARPU is sort of cyclical. We've seen that before, but specifically in China, certainly not in the last three months. There's nothing I can point to that says we have a clearer and better understanding.
Jim Bidzos: Two things really it's our programs that we're targeting at the registrars to help them focus on new customer acquisition.
Jim Bidzos: And.
Jim Bidzos: The fact that we think that there are sort of cyclical we've seen that before but specifically to China.
Jim Bidzos: Certainly not in the last three months, there's nothing I can point to that says we have a clearer and better understanding I think it's just simply effect that as being a market that's more regulated and more sensitive.
Jim Bidzos: I think it's just simply affected because it's a market that's more regulated and more sensitive. There are probably other factors that we don't fully understand. We study it closely, but that's the best answer I can give you right now.
Jim Bidzos: There are.
Jim Bidzos: There are probably other factors that we don't fully understand we study it closely but thats. The best answer I can give you right now.
Speaker Change: Okay very helpful. I appreciate it guys. Thank you I'll hop back in the queue may have another one thanks again.
Robert Cooney Oliver: Okay. Very helpful. I appreciate it, guys. Thank you. I'll hop back in the queue. May have another one. Thanks again. Jai.
Robert Cooney Oliver: Okay.
Robert Cooney Oliver: And we'll take our last question from Yigal Iranian with Citi.
Robert Cooney Oliver: Oh.
Speaker Change: Hey, good afternoon guys.
Speaker Change: If we could dig into it.
Ygal Arounian: And we'll take our last question from Ygal Arounian with Citi.
Robert Cooney Oliver: The the registrars and the focus on pricing and the impact that's having just a little bit more.
Ygal Arounian: Hey, good afternoon guys. I think if we could dig into the the registrars and the focus on pricing and the impact that's having just a little bit more, is, is there anything within the pricing that's specific to dot com that you're seeing, meaning if we look at kind of total domains beyond dot com, David Atchley, Ygal Arounian, David Atchley, Verisign Inc, more than they are dot com, just to understand that a little bit better.
Ygal Arounian: Art is is there anything within the pricing thats specific to dotcom that youre seeing.
Ygal Arounian: Meaning if you look at kind of total domains beyond dot com.
Ygal Arounian: The softness isn't necessarily as earn outs so.
Ygal Arounian: What are the dynamics why is it having a bigger impact on on.
Ygal Arounian: <unk> Com <unk>.
Ygal Arounian: Versus.
Ygal Arounian: Are they promoting some of the other.
Ygal Arounian: T L needs.
Ygal Arounian: More than they are dot com, just understand that a little bit better.
Jim Bidzos: Well, it's certainly true that one thing I guess maybe I could have added that I didn't, so I'm glad you asked this question to Rob's last question about China is that, you know, that's where we're seeing other TLDs filling some of the demand there. These are TLDs that are priced extremely low.
Ygal Arounian: Okay.
Ygal Arounian: Jim.
Ygal Arounian: It's certainly true that the one thing I guess, maybe I could have added I didn't so I'm glad you asked this question drops last question about China is that.
Jim Bidzos: That's where we're seeing.
Jim Bidzos: T <unk> filling some of the demand. There. These are <unk> that are priced extremely low.
Jim Bidzos: We're talking about sub $1 in many cases so that that's certainly a factor. Again we don't control the retail pricing. The channel is pricing ourproducts.com.net sort of in a broad range. Some are pricing renewals above $20 and others are selling registrations and renewals much closer to the wholesale price. It varies. I think that focus on ARPU is probably a primary and a factor in the U.S. along with the reduced spend on marketing and I guess if I wanted to point to anything that we maybe could have done sooner or recognize a little better would be adapting these marketing programs sooner but we're getting them into market now so I think that will address some of the issues but I think the place where you're seeing others make a huge dent is definitely in China.
Jim Bidzos: We're talking about sub one dollar in many cases, so that that's certainly a factor.
Jim Bidzos: Again, we don't control the retail pricing the channel is pricing our products dot com dot net.
Jim Bidzos: Sort of in a broad range some are pricing renewals above $20 and others are selling registration is that renewal is much closer to the Holt wholesale price it varies.
Jim Bidzos: I think that focus on ARPA is probably a primary.
Jim Bidzos: A factor in the U S along with the reduced spend on marketing and.
Jim Bidzos: I guess, if I wanted to point to anything that we maybe could have done sooner or recognize a little better would be adapting these marketing program sooner but.
Jim Bidzos: We're getting them into market now so I think that will address some of the issues.
Jim Bidzos: But I think the place where you are saying.
Jim Bidzos: Others make a huge dent is definitely in China. They are there are.
Jim Bidzos: There are literally sub-dollar TLDs that are being sold there that are experiencing some growth that's gone on on and off over the years with different TLDs spiking way up and way down. You can see that in our D&IB report.
Jim Bidzos: There are literally sub dollar <unk> that are being sold there that are experiencing some growth that's gone on on and off over the years with different Tld's spiking way up the way down you can see that in our <unk> report.
George E. Kilguss: Ygal, it's George. We don't have the flexibility, as much flexibility as new GTLDs in certain markets, so we treat all our customers the same, and so sometimes when we have differences in exchange rates overseas, that can also be a factor in demand.
Speaker Change: <unk>, George we don't have the flexibility.
George E. Kilguss: As much flexibility as we would say new <unk> in certain markets. So.
George E. Kilguss: We treat all our customers the same and so sometimes when we have differences in exchange rates overseas that can also be a factor in.
Ygal Arounian: Got it. So just to follow up on that then, you know, with pricing, focus on 9 to 35 and do you think that there's maybe less? Pricing power and in the domain. I mean, I would still think at retail $20 a year, you know, it's not the highest consideration purchase. Does that give you any pause or thoughts on how you think about pricing at a wholesale level? I know you don't control the retail level, but how does that filter into how you think about wholesale?
Ygal Arounian: And demand.
Ygal Arounian: Got it so just a follow up on that then with pricing.
Ygal Arounian: Yeah, let's focus with amendment 35 and <unk>.
Ygal Arounian: The structure of the current contracts.
Ygal Arounian: Do you think that there's maybe less pricing.
Ygal Arounian: Pricing power in.
Ygal Arounian: And the demand I mean, I would think.
Ygal Arounian: We still are not retail $20 a year.
Ygal Arounian: It's not the highest consideration.
Ygal Arounian: Yes.
Ygal Arounian: Does that give you any pause or thoughts on how you think about pricing at a wholesale level I know you don't control the retail level, but how does that flow through and how you think about.
Jim Bidzos: Well, I think the registrars have to make their own decisions on pricing. I think some of the higher renewal prices are, in my opinion, a testament to the stickiness and the high quality of the comm product and that the largest segment we have is people who brand themselves on it, and those enjoy particularly high renewal rates. So I think it's just easy. If you have a product, a subscription product, that has strong stickiness like this, a functional TLD that's supported with a 26-year uptime record and all the other benefits that come with it, I think that's not particularly surprising. I'd attribute it more to the cyclical nature of ARPU and new customer acquisition, and some of our programs are designed to accommodate the different business models that will get them more focused on new customer acquisition.
Ygal Arounian: Well I think the registrars have to make their own decisions on pricing I think some of the higher renewal prices prices are in my opinion, a testament to the stickiness and the high quality of the com product in that.
Jim Bidzos: The largest segment, we have is people who brand themselves on it than those enjoyed particularly high renewal rate. So I think it's just easy if you have a product a subscription product.
Jim Bidzos: Strong stickiness like this.
Jim Bidzos: Our functional TLD that supported with the 26 year uptime record and all the other benefits that come with it I think that's not particularly surprising.
Jim Bidzos: Attribute it more to the cyclical nature of <unk> and <unk>.
Jim Bidzos: New customer acquisition and some of our programs are designed to accommodate the.
Jim Bidzos: Different.
Jim Bidzos: Our business models that we will get them more focused on new customer acquisition.
Ygal Arounian: Okay, helpful. And last one for me:
Ygal Arounian: Okay helpful and last one for me.
Ygal Arounian: Maybe we got a lot of questions as we get closer to the date on the dot-com renewal, and I'm assuming there's nothing new per se to say about it, but maybe just help us walk through the timeline of the renewal, what are some of the key timing things to think about, or what the timeline might look like. And understanding, I think you've gone through the idea that you have the presumptive right of renewal here, and how the contract works, you're keeping the details the same, but any risks or other things for investors to think about as we get closer to that renewal date? Thank you, guys.
Ygal Arounian: Maybe we get a lot of questions as we get closer to the date on the dotcom renewal.
Ygal Arounian: I'm, assuming there's nothing new per se to say about it but.
Ygal Arounian: Maybe just help us walk through the timeline of the renewal what are some of the key.
Ygal Arounian: Yes, timing things to think about or what the timeline might look like.
Ygal Arounian: And understanding.
Ygal Arounian: Understanding I think you've been through the.
Ygal Arounian: You know that you have.
Ygal Arounian: So Brian rule here and how the contract works you are keeping detailed in saying but.
Ygal Arounian: And any risks or other things for our investors to think about as we get closer to that renewal date. Thank you.
Jim Bidzos: I don't know what you mean by risk. I mean, the contract has a presumptive right of renewal, and as long as we're meeting all SLAs, the contract says it shall be renewed, but the contract is not due for actual, or the deadline date is the end of November, so it's a ways out, but we are now engaged with ICANN in the process of exchanging drafts to the COM renewal, so it's early in that process, and COM isn't, like I said, not due until the end of November, so, and the presumptive right of renewal, of course, was used with .NET, and we had an on-time, we anticipate an on-time renewal, as we had last year for .NET, so.
Jim Bidzos: I don't know what you mean by risks I mean, the contract is a presumptive right of renewal and as long as we're meeting our SLA as the contract says that shall be renewed but the.
Jim Bidzos: Contract that is not due for actual ROE. The deadline date is the end of November so it's a ways out, but where we are now engaged with ICANN are in the process of exchanging drafts to the comment renewal. So it's early in that process and cognizant like I said not due until the end of November so and.
Jim Bidzos: The presumptive right of renewal of course was used with dot net and we have an on time, we anticipate them on time renewal as we had last year for dot net so.
Jim Bidzos: I think this, ICANN has this in all of their thousands of DLD contracts; there's a constant exercise of this presumptive right of renewal, and we expect COM, just like NET and just like all the other GTLDs, to renew.
Jim Bidzos: I think these ICANN has this in all of their thousands of DLP L. D contracts. There is a rolling constant exercise of this presumptive right of renewal and we expect com just.
Jim Bidzos: Just like net and just like all the other <unk> to to renew.
Robert Cooney Oliver: And we'll take an additional question from Rob Oliver with Baird.
Speaker Change: Alright, thank you.
Robert Cooney Oliver: And we will take an additional question from Rob Oliver with Baird.
Robert Cooney Oliver: Great, I'm pulling out a Sterling Audi here to hop in for another question, an honorary question. Jim, last quarter you got a question on dot web, so I think we'll ask it again. I'm not sure that there's been, I know this doesn't seem like there's been any official update, but anything you guys have heard or seen or anything we should be aware of that constitutes, you know, any change, and could you just provide us with your updated perspective on what you see as the possible timeline or evolution of dot web here? Thank you.
Robert Cooney Oliver: Great I'm pulling is sterling auty here.
Sterling Audi: I'll hop in for another question.
Robert Cooney Oliver: Honorary.
Robert Cooney Oliver: Jim last quarter, you got a question on Dod web so I think well I'll ask it again.
Robert Cooney Oliver: Not sure that there's been I know this doesn't seem like does that about any official update but anything you guys have heard or seen or anything we should be aware of that constitutes.
Robert Cooney Oliver: Any change it could you just provide us your updated perspective on what you see as the.
Robert Cooney Oliver: Possible timeline or evolution without web here. Thank you.
Jim Bidzos: Thanks, Sterling. Just kidding, Rob. Feel free at any time to jump in for another question. You're quite welcome.
Jim Bidzos: Thanks, Sterling just getting robbed.
Jim Bidzos: I feel free any time to jump in for another question you are quite welcome. Good question. There I guess I would call. It an update you said movement I guess this could qualify as that as well. So the one update I have is that Verisign and N. D. C have just filed an application to participate in this second IRB like we did the first one as you know we <unk>.
Jim Bidzos: Good question. I guess I would call it an update. You said movement. I guess this could qualify as that as well. So the one update I have is that Verisign and NDC have just filed an application to participate in this second IRP like we did the first one, as you know.
Jim Bidzos: For context, we have this process, where last April I cans board of directors voted without objection to delegate Dot web and D C.
Jim Bidzos: We had this process where, last April, ICANN's Board of Directors voted without objection to delegate.web to NDC. Altenovo then filed this second IRP complaint against ICANN. This second IRP is looking for the same relief to award.web to Altenovo that the first IRP panel rejected twice, sanctioning them the second time. And it's exactly what ICANN's board committee and full board also rejected last April. So we continue to believe that ICANN and the IRP panel should dispense with what we believe to be baseless claims against ICANN as quickly as possible.
Jim Bidzos: All to Novo then filed the second IRB complaint against ICANN. The second ERP is looking for the same relief to award Dot web to alter novo that the first IRB panel rejected twice sanctioning them. The second time and it's exactly what I cans Board Committee and full Board also rejected last April so we continue.
Jim Bidzos: To believe that I can in the RP panels to dispense as quickly as possible with what we believe to be baseless claims against ICANN and by the way out to Novo has no existing registry business and as far as we can tell whoever actually owns and has funding. This litigation remains a secret. So the update is that we filed an application and then we'll see where the second.
Jim Bidzos: And by the way, Altenovo has no existing registry business, and as far as we can tell, whoever actually owns and is funding this litigation remains a secret. So the update is that we filed an application, and we'll see where the second IRP goes.
Jim Bidzos: Hey, guys.
Robert Cooney Oliver: Great, that's helpful. I'll have to go back to the record to look at that again, but very helpful. Thanks, Jim. Thanks, everyone. I appreciate it.
Speaker Change: Great. That's helpful. I'll have to go back to the record to look at that again, but very helpful. Thanks, Jim Thanks, everyone. Appreciate it.
Speaker Change: Thank you.
Speaker Change: And that does conclude the question and answers.
David Atchley: And that does it. Now I turn the conference back over to Mr. David Atchley for the final...
David Atchley: Now I'll turn the conference back over to Mr. David Atchley for final comments.
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: 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.
Operator: Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.
Speaker Change: Thank you that does conclude today's conference. We do thank you for your participation have an excellent day.
Operator: Yeah.
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Operator: Okay.
Operator: Yeah.
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