01—Abstract
Summary
Summary of the 10-K filed February 15, 2024. Cited figures are marked; the original filing is the authoritative source.
VeriSign, Inc. (Nasdaq: VRSN) describes itself as a global provider of critical internet infrastructure and domain name registry services, operating the .com and .net top-level domains, two of the thirteen global root servers, and performing the Root Zone Maintainer function.
In 2023 revenues rose to $1,493.1 milliona from $1,424.9 million, and operating income increased to $1,000.6 million from $943.1 million. Net income was $817.6 million, or $7.90 diluted earnings per share, compared with $673.8 million in 2022. Cash flow from operations was $853.8 million.
The company ended 2023 with 172.7 million .com and .net registrations in the domain name base, a decline from 173.8 million at the end of 2022, and the filing attributes weaker demand in China to the decline. Capital allocation remained focused on shareholder returns. The company repurchased 4.2 million shares for $882.8 millionb in 2023, and $1.12 billion remained available under the repurchase program after the board added $1.14 billion of authorization in July 2023.
Cash and marketable securities totaled $926.4 millionc at year end, while senior notes were $1,790.2 million net of issuance costs. The stockholders' deficit was $1,581.0 million. Income tax expense fell to $158.9 million, reflecting $69.3 million of tax benefits recognized in 2023, including a $118.0 million deferred tax asset tied to non-U.S. intellectual property.
Key forward-looking items include the .com Registry Agreement and Cooperative Agreement, both due for renewal by November 30, 2024, with presumptive renewal rights. The filing also discusses the pending .web gTLD matter, in which the company has paid a $145.0 milliond deposit while Afilias continues to challenge the auction through a second Independent Review Process. On February 8, 2024, the company announced a .com wholesale fee increase from $9.59 to $10.26, effective September 1, 2024.
02—Key points
Key Highlights
- Revenues were $1,493.1 million in 2023, up 5% from $1,424.9 million in 2022, driven by .com price increases effective September 1, 2022 and 2023 and a .net price increase effective February 1, 2023.
- Operating income was $1,000.6 million, up from $943.1 million, and net income was $817.6 million, or $7.90 per diluted share, versus $673.8 million, or $6.24, in 2022.
- The .com and .net domain name base fell to 172.7 million registrations at December 31, 2023, from 173.8 million a year earlier, with softness in demand primarily in China.
- Cash flow from operating activities was $853.8 million, and the company repurchased $882.8 million of stock in 2023, leaving $1.12 billion available under the program.
- Income tax expense was $158.9 million, against an effective tax rate of 16%, after $69.3 million of income tax benefits recognized in 2023.
- The .com Registry Agreement and Cooperative Agreement both expire November 30, 2024, and the .net Registry Agreement runs through June 30, 2029; the filing notes that the .com and .net agreements carry presumptive renewal rights.
- The company announced on February 8, 2024 that the .com registry-level wholesale fee will rise from $9.59 to $10.26 effective September 1, 2024, and the .net fee rose to $10.91 effective February 1, 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Verisign kept $0.55.
- Revenue$1.49B100.0%
- Cost of revenue−$197.3M13.2%
- Gross profit$1.30B86.8%
- Operating costs−$295.2M19.8%
- Operating income$1.00B67.0%
- Interest, other & tax−$183.0M12.3%
- Net income$817.6M54.8%
Where FY2023 revenue went
$1.49B- Net income: $817.6M, 55% of revenue
- SG&A: $204.2M, 14% of revenue
- Cost of revenue: $197.3M, 13% of revenue
- Interest, other & tax: $183.0M, 12% of revenue
- R&D: $91.0M, 6.1% of revenue
Kept 55% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 15, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $1.49B$1.42B | +4.8% |
| Cost of Revenue | $197.30M$200.70M | −1.7% |
| Gross Profit | $1.30B$1.22B | +5.8% |
| R&D Expenses | $91.00M$85.70M | +6.2% |
| SG&A Expenses | $204.20M$195.40M | +4.5% |
| Operating Expenses | $492.50M$481.80M | +2.2% |
| Operating Income | $1.00B$943.10M | +6.1% |
| Interest Expense | $75.30M$75.30M | 0.0% |
| Net Income | $817.60M$673.80M | +21.3% |
| EPS (Basic) | $7.91$6.24 | +26.8% |
| EPS (Diluted) | $7.90$6.24 | +26.6% |
| Shares Outstanding (Basic) | 103.40M107.90M | −4.2% |
| Shares Outstanding (Diluted) | 103.50M108.00M | −4.2% |
05—Questions
Frequently Asked Questions
How much of VeriSign's revenue depends on the .com and .net registries?
The filing states that substantially all of the company's revenues are derived from operating the .com gTLD under the Cooperative Agreement with the DOC and the .com Registry Agreement, as well as the .net gTLD under the .net Registry Agreement. The company also states that its largest customer accounted for approximately 32% of revenues in 2023 and 2022.
What happens when the .com Registry Agreement comes up for renewal?
The .com Registry Agreement and the Cooperative Agreement both have terms ending November 30, 2024. The filing says the agreements contain presumptive renewal rights, but ICANN could refuse renewal or terminate in prescribed circumstances, such as an uncured fundamental and material breach. Standard renewals do not require further DOC approval, but changes to pricing and certain other terms do.
How is the company returning capital to shareholders?
In 2023 the company repurchased 4.2 million shares for an aggregate $882.8 million. In July 2023 the board authorized an additional $1.14 billion, bringing the total authorization to $1.50 billion, and $1.12 billion remained available at December 31, 2023. The company also reports a stockholders' deficit of $1,581.0 million at year end.
What is the .web matter, and what is the status?
The company paid a $145.0 million deposit for the future assignment of the .web gTLD contractual rights, pending resolution of objections and ICANN approval. Afilias filed a second Independent Review Process on July 14, 2023, and ICANN's processing of NDC's .web application remains paused. The company believes Afilias' challenges are improper and without merit.
What drove the decline in China revenue and domain registrations?
The filing states that China revenue fell 14% to $91.6 million in 2023. It attributes this to softness in demand in China, worsening economic conditions there, and Chinese regulatory mandates that make it more difficult to register a domain name or establish an online presence using a domain name.
06—Continue