Q2 2025 VeriSign Inc Earnings Call
Good day, everyone. Welcome to various signs, second quarter 2025 earnings call. Today's conference is being recorded.
recording of this call is not permitted unless pre-authorized
Speaker Change: Thank you, operator, welcome to verisign second quarter 2025 earnings call joining me are Jim bizos executive chairman, president, and CEO and John Callas Executive, Vice President and CFO 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 un audited, 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 SC spec SEC. Specifically, the most recent reports on form 10K and 10q.
Speaker Change: Bear sign does not update financial performance or guidance during the quarter unless it is done through a public disclosure.
Speaker Change: Section of our website available after this call.
Speaker Change: Jim and John will provide some prepared remarks and afterward, we will open the call for your questions with that. I'd like to turn the call over to Jim.
Speaker Change: Thank you, David, good afternoon to everyone, and thank you for joining us last week. Vera signed, Mark, 28 years of 100%, availability of the.com, and dotnet domain name, resolution system and unparalleled record of reliability, delivering on our mission of providing stability, and security of the critical internet infrastructure. We operate
Speaker Change: Turning to our results Vera science performance in the second quarter reflects sequentially improving Trends and the soundness of our business model at the end of June, the domain name, base for.com, and.net totaled, 170.5 million domain names up 660,000 from last quarter. New registrations for the second quarter, total 10.4 million. Compared with 10.1 million for last quarter and 9.2 million for the same quarter a year ago.
Speaker Change: The renewal rate for the second quarter of 2025 is expected to be 75.5% compared to 72.7% a year ago. Given these improving domain name based Trends. We now expect the change in the domain name base to be between positive, 1.2 and positive 2% for 2025.
Speaker Change: Improving Trends. Which began at the end of last year, have continued throughout the first half of 2025. Each of our geographic regions have shown Improvement year-over-year in both new registrations and renewal rates with particular, new registration strength from Asia PAC.
Speaker Change: We are seeing registrars focus more on customer acquisition. And many of them are engaging more fully with our marketing programs.
Speaker Change: Our updated guidance reflects this positive momentum, but continues to reflect some conservatism as economic and geopolitical uncertainty exists. And as we monitor the continuing strength of the trends noted
Speaker Change: Our financial and liquidity position remains stable with 594 million in cash, cash equivalents and marketable, securities at the end of the quarter during the second quarter, we retain we return. 235 million dollars to stockholders of which 72 million was through dividend payments and 163 million through repurchase of 0.6 million shares.
Speaker Change: Effective today. The board of directors has increased the amount authorized for share repurchases of verifying common stock by 913 million, for a total of 1.5 billion available under the current share repurchase program, which has no expiration
As announced in today's earnings release Vera science, board of directors, declared a cash dividend of 77 cents per share of Vera science outstanding, common stock to stockholders of record as of the close of business on August 19th. 2025 payable on August 27th. 2025 Fair sign intends to continue to pay cash dividend on a quarterly basis subject to market conditions and approval by Vera science board of directors
John Callas: Now I'd like to turn the call over to John. I'll return When John's completed his financial report with closing remarks
John Callas: Thank you, Jim and good afternoon everyone for the quarter ended June, 30 2025 The company, generated, 410 million of Revenue up, 5.9% from the same quarter a year ago.
John Callas: Operating expense in Q2 2025 totaled, 129 million which compares to 131 Million last quarter, and 121 million for the second quarter of last year.
Net income for this second quarter total, 207 million compared to 199 million, both last quarter and a year ago, same quarter.
John Callas: Second quarter diluted earnings per share was $2.21 compared to $2.10 last quarter and $2.01 for the same quarter of 2024.
Operating cash flow for the second quarter of 2025 was 202 million. Free cash flow was 195, million compared with 160 million and 151 million respectively in the quarter year, in the year ago quarter,
John Callas: I will now discuss our updated full year guidance for 2025.
John Callas: Revenue is now expected to be between 1 billion, 645 million and 1 billion 655 million.
Operating income is now expected to be between 1 billion, $117 million, and 1 billion, 127 million.
John Callas: Interest expense and non-operating income net, which includes interest income estimates is still expected to be an expense of between 50 and 60 million.
John Callas: The Gap effective tax rate is still expected to be between 21 and 24%.
John Callas: In summary verisign continued to to demonstrate sound financial discipline during the quarter. Now, I will turn the call back to Jim for his closing remarks.
Speaker Change: Thank you, John. We're pleased to see the approving Channel Trends we're reporting today. Which are the registar refocus on customer acquisition, and their engagement with our programs. We're also pleased to see that these Trends are broad-based across all regions globally, particularly in Asia Pac, our 2025 programs of deepened, our engagement with our Channel and we're using what we're learning to improve our 2026 programs which are currently under development. I think it's important to remember that offering marketing programs to our registar Channel isn't new for the company. What's new is that as our channel is Diversified with many different business. Models represented. We're specifically adapting our programs for broader engagement.
Speaker Change: Today, the focus of our reporting is, of course, Q2 earnings however our announcement of a dividend. Last April has drawn the interest of many investors new to verify. So for any of those who may be on today's call, I'd like to take the opportunity for a minute or 2 to offer some perspective beyond the financial results.
Speaker Change: There are signs primary mission is to operate critical Global infrastructure, not only do but also, including essential components of Internet. Navigation itself, such as operating, route service and Pub root servers and the root Zone within stringent availability and performance requirements. The endpoint mission is in a challenging cyber threat. Environment to answer DNS queries with 100% availability, accuracy, and millisecond level performance around the world. 24/7. There are now over 460 billion such queries on average per day or well over 5 million queries per second every second of every day.
Speaker Change: By developing a unique, highly resilient architecture with physical points of presence in over 60 countries, avoiding Reliance on any public cloud service where outages are not uncommon and designing over capacity measured in multiple orders of magnitude over current and anticipated traffic volumes. Their sign has delivered this performance for 28. Continuous years without failure and unparalleled record.
Speaker Change: Reliance on its mostly. Invisible infrastructure has grown as internet usage and Reliance has grown. And the broad dependencies on this infrastructure by other critical infrastructures cannot be overstated.
Speaker Change: 2 contracts that Cooperative agreement, with the Department of Commerce and the dotcom registry agreement with Ian. Under live aeroscience operation.com, both have seen multiple renewals and most recently, both were renewed in November 2024 for another 6 years.
Speaker Change: Thanks for your attention today. This concludes our prepared remarks, and that will open a call for your questions. Operator, we're ready for the first question.
Speaker Change: You are using a speaker-phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once your question has been stated, please mute your line.
Speaker Change: We will take our first question from Rob Oliver with beard.
Great, good afternoon. Um, Jim nice to speak with you. John official welcome to you. Um, first question for you guys, is just around the obvious domain, uh, strengths which you guys are seeing, uh, which is very encouraging and Jim, um, I I would love to get your perspective on kind of what some of the drivers are for the domain strength. I know you called out broad-based, um, uh, drivers in terms of geography. But if there's anything to call out there, and then you did mention the marketing programs and I appreciate that color. And I'd also love to hear a little bit on where you're seeing traction with those marketing programs and then I had a quick follow-up. Thank you.
Okay, uh, well, uh, first of all, the things that, uh, we mentioned, uh, earlier are, are the main drivers number 1. It's a refocus on, new customer acquisition by registrars versus the arpu that we saw for a period of time. So that cyclical turn is a Tailwind that we were, uh, anticipating and hoping we didn't know exactly when it would come. But that certainly here. Um, and then, uh, register our engagement with our marketing programs. Our marketing programs are seem to be accelerating, the improving Trends, uh, in demand for our domain names.
Speaker Change: Um the midpoint of the DNB guidance that we gave today reflects a what we expect to be a continuation of the trends. Uh, we think it's prudent not to know, the not to ignore the variables here. So there's a little bit of caution baked in there as well. We'll certainly update you, uh, next quarter. But I'd say to sum it up, we're pretty pleased with the improvements that we're seeing. Uh, we're going to keep doing what we're doing with the programs improve them um help accelerate the the trends that we're seeing now across all the regions.
Speaker Change: Great and then just a quick follow up. Uh you called out Asia pack in particular, Jim, as a as a driver. And I guess to to to parts to that question 1 is that also a combination of just better economy and marketing programs getting better for you guys. Um, or is it 1 of the other? And then uh, to is, uh, have you seen any uh movement 1 way or another in China? Um uh uh relative to to domain Activity? Thank you guys very much.
Jim Bizos: Sure. Thanks. John. Yes. Hey Rob it's John. Um, you know, so certainly we've seen year-over-year growth in new registration across all of our main regions. Asia pack was the strongest of those 3 regions. Um, and and China is now a part reported as a part of our Asia Pac regions. Um, you know, registrars in that Region C are are seeing solid demand. Um, and, and we think some of that demand is being accelerated, uh, by our marketing programs.
Speaker Change: Uh, but over the years, uh, as, as, you know, uh, we have seen volatility out of China. And so while we're pleased right now with the Improvement, um, and, and the trend that we see, um, we continue to monitor the strength and the duration of the positive Trends. And as Jim mentioned, uh, you know, we've baked a little bit of conservatism into our our forecast for the rest of the year.
Okay, that's helpful caller. John uh thank you guys. Both very much I appreciate it.
Speaker Change: Take our last question from egala renien with City grip.
Hey uh good afternoon guys. Um maybe first um a clarification, um it it sounds like you're you're talking about the marketing programs and the um kind of
Speaker Change: Uh, registrars moving back, uh, towards broadening the funnel versus on on our arpus separate things. Um, do do you see the marketing program driving the the way the registrars are are changing on that, you know, our poo versus, uh, funnel approach or or or both things kind of happening. Concurrently at the same time but separately
I I think it's kind of the latter there that you're describing. Um, there is, you know, clearly I mentioned last quarter, uh, that early in the year 2 registers advertised in the Super Bowl. That's a bit of an extreme example. But, but, uh, there's a much, much activity similar to that, that we see that. Um, they're focusing on on, trying to find new customers, uh, our programs. We think are contributing and accelerating. And so there's a bit of synergy there between the 2. Uh, the other component here is that you know, the diverse channel that we mentioned, they all have different Mis business models and by offering them uh a range of programs that allow all of them to to engage. I think that's very welcome. Uh, we get a lot of feedback, we visit all of our Channel Partners, we speak to them frequently. And uh I I would say not only are we learning but they're they're the feedback that we're getting also is is uh very much informing what we'll do with the programs that we're putting together right now for 2026
Speaker Change: Okay very helpful. And so maybe a follow up on the, the 2026 programs.
Speaker Change: Uh as well. So the the program is helping you get uh, you know, or at least kind of Envision the 2% growth at the high end for for this year. Um, you know, if I look back historically, there's always been a range in where kind of the domain name base,
Speaker Change: Grows but certainly an opportunity to get back above 2%. And I know, you know, I'm not going to ask you to forecast for for 2026, but um, if the marketing programs are working and you can kind of continue to tweak them, uh, maybe you see a path towards greater than that. Um, uh, moving forward Beyond this year just you know, any more caller, you can give on on the marketing programs next year and you know where where you think that can take things.
Speaker Change: Improved. Our teams are meeting more frequently. We're getting more specific suggestions ideas and requests about how we can help the channel perform better. So, all of that activity, certainly would be indicative of continued Improvement. Uh, uh, we'll keep you posted. We'll talk to you again in another quarter and may maybe, we'll, we'll have more, but, but I see it now as, uh, an opportunity to take everything that we're learning, which is significant and apply it to designing more effective programs and perhaps even get broader engagement by the channel. Remember, we have a very large number of registers and so uh bit early that to, to to talk too much about 2026. But uh, we we're, we're, we're, we're pleased with what we're seeing in hearing. John, do you want to add anything? Uh, know, I, you know, we're obviously in our planning process. We're looking at how we can refine and adjust the programs. Uh, I I think it's more of an evolution Than A revolution is as we look forward, but in the right direction. Yeah.
Speaker Change: Okay. And oh sorry 2 more. If you don't mind 1 1 1.
Speaker Change: The bigger picture longer term 1. I mean, uh, gen Ai and and, and Trends and the impact to the open internet is the topic that comes up these days in almost every conversation with investors, um, and potent in particular, the the impact to the kind of made a long tail of, of the internet over time. Um, and just wanted to get your thoughts on how you see. Um, you know, that impact playing out over time and and your thoughts on, uh, how how traffic to the open internet might change and how that might change the trajectory or, you know, importance of domain growth and websites. Uh, you know, given where you sit love to get your thoughts on that. Thanks.
All right, thanks, 3 or 4, good essay questions in there. I, I will try to answer all of them but uh, try to be a little bit, a little bit. Brief know, there's a good question. Uh, uh, first of all, I think you were referring to the new gtld program that I can is planning to launch next year. Uh, the target availability of the window of new applications to open is in Q2 of next year. Um, so, uh, we're looking at that, we're we're, we're, we're, we're been evolved in aspects of the program. You mentioned auctions. Um, I I think I can, uh, it pretty sure that this is sort of, uh, decided at this point that uh, there's a lot of a lot of uh uh indication that there will not be auctions. That there'll be some other mechanism that would resolve, what are called contention sets when multiple applicants for the same. Uh,
Pld apply. Uh, so um yeah we're looking at that for any opportunities for anything that we might apply for too early to really talk about anything. There, uh, you also mentioned that web, there is a, there are some update there. Um, so let's see what we've had here. Just recently since the previous update, um, the IRP panel, which is essentially the arbitration panel as you recall, we made a request again to participate in the IRP. Um, which uh, was granted. So, uh, we'll be participating. Um, briefs have been submitted, uh, the uh, uh, Altan, Novo the plaintiff. So, to speak, in this case made their brief in June and, uh, our response and Ians response is, are due in August. Very few days here and uh, the final hearing, um, is currently scheduled for Mid November 2025. So, um, maybe we're getting close to the end here. So and just to reiterate, we intend to become the registry operator for.web, we intend to bring this TLD to our customers soon as we can and we believe all to know those. All to know.
Speaker Change: Those use of Ian's processes to keep this from happening is an abuse of process and is being pursued in bad, faith to keep that web, um, off the market.
And with um, respect to AI. This is a really interesting. We like, like, as I'm sure you are get a lot of questions, a lot of interest. Um, it's it's really the focus for everybody. Uh, we don't see it as a negative. I think there are at least 2 areas where AI can be positive for domain names. Uh, first AI model scrape their data for websites. And we think the AI optimization will become more important for creating websites with more content. Um, uh, I, I like to think that there is, you know, no, static data in the world today, even if an AI had a had an llm that consisted of, uh,
Tools can also be powerful for domain. Name suggestions, really powerful. And we've learned over the years that multiple keyword, coms are good, you know, uh, uh, good domain names to have and, uh, we're using this building it into our name suggestion tools. Now, as it relates to our own use of AI internal and our infrastructure as uh, I think you may not be surprised to hear, we are taking a very cautious, a very low-risk approach. We're moving very carefully and thoughtfully before we fully Implement any AI tools for our own business, um, it's all about security and stability and avoiding the unknown and avoiding single points of failure. So we are drawing very, very careful fences around our use of aeaea AI and being extremely cautious about it.
Speaker Change: so uh anyways, a lot there, I don't know if that answered your questions but
Speaker Change: It does, uh, very interesting and very helpful. Thank you.
Thank you.
Thank you. This does conclude today's question and answer session, I would now like to turn the call back to David actually for final comments.
Speaker Change: 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.
This does conclude today's conference, thank you for your participation. You may now disconnect