VeriSign, Inc.

Welcome to VeriSign Second Quarter 2022 Earnings Call. Today's conference is being recorded. Recording of this call is not permitted unless pre-authorized. At this time, I would like to hand the conference over to Mr. David Ashley, Vice President of Investor Relations and Corporate Treasurer. Please go ahead, sir.

Thank you, Operator. Welcome to VeriSign Second Quarter 2022 Earnings Call. Joining me are Jim Bidzos, Executive Chairman and CEO of Todd Strube, President and COO, 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 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. 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. Thank you, David.

Good afternoon to everyone, and thank you for joining us. As global reliance on online services continues to increase, so does the importance of delivering uninterrupted and accurate DNS resolution. Last week, we crossed a significant milestone by marking 25 years of uninterrupted uptime for the .com.net domain name resolution system. Reaching this quarter century mark is a testament to the ongoing investments made in our platforms, processes, and people. During the second quarter, we grew our revenues by 6.8% year-over-year and our EPS by 17% year-over-year. At the end of June, the domain name base in .com and .net totaled 174.3 million domain names, consisting of 161.1 million names for .com and 13.2 million names for .net, with a year-over-year growth rate of 2.2% and a sequential decrease of 354,000 domain names. The final renewal rate for the first quarter of 2022 was 75.9% compared to 76.0% for the same quarter of 2021. Although renewal rates are not fully measurable until 45 days after the end of the quarter, we believe that the renewal rate for the second quarter of 2022 will be approximately 73.6%. This preliminary renewal rate compares to 75.4% achieved in the second quarter of 2021 and 75.9 percent last quarter. The decline in a second quarter preliminary renewal rate is primarily related to the proportion of names renewing from China registered in the year-ago quarter, which weighed on first-time renewal rates. We do see continued strength in the renewal rates of previously renewed names. In the second quarter, we processed 10.1 million new registrations compared to 10.2 million last quarter and 11.7 million in the year-ago quarter. While there are many factors that drive demand for domain names, we have seen lower new units in the first half of this year as a result of a few factors that I will now mention. These include a pandemic-driven acceleration of domain name registrations in 2020 and 2021, which has subsided, recent global macroeconomic headwinds, and relative weakness in 2022 registrations from China. While we're still early in Q3, we do see some signs that new registrations are stabilizing, and we continue to see strong renewal rates. However, we agree with the consensus view that the current economic conditions are likely to prevail through 2022 and possibly beyond. Therefore, we're adjusting our 2022 domain guidance and now expect a domain name-based growth rate of between 0.5% and 1.5%. This range reflects our expectations that new registrations in Q3 and Q4 will be roughly similar to the levels we saw in the first half of 2022 and which are similar to pre-pandemic levels. This range also reflects our expectations for an improving renewal rate from the preliminary renewal rate we are seeing in Q2. As announced in today's earnings release, we have given notice of a price increase of $0.90 to the annual wholesale price for .NET domain names. which will raise the price from $9.02 to $90.92, effective February 1, 2023. Our financial and liquidity position remains stable, with $997 million in cash, cash equivalents, and marketable securities at the end of the quarter. During the second quarter, we repurchased 2 million shares for $349 million. At quarter end, $543 million remained available and authorized under the current share repurchase program, which has no expiration. We continually evaluate the overall liquidity and investing needs of the business and consider the best uses for our cash, including potential share repurchases. Turning to .web, as we noted in our last call, ICANN's board directed one of its standing committees to review the independent review process panel's final decision and provide the board with its findings. The committee then asked the parties to submit written summaries of their claims by July 29th, that's tomorrow, and then to submit responses by August 29th. We expect that the committee will conduct its review based on these submissions and will then provide its findings to the ICANN Board. Now I'd like to turn the call over to George. I will return when George has completed his financial report with closing remarks, including more about our areas of focus going forward. George?