VeriSign, Inc.

Recording of this conference is not permitted unless pre-authorized. At this time, I'd like to turn 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's third quarter 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. 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 gap results and two non-gap measures used by VeriSign, adjusted EBITDA and free cash flow. Gap to non-gap 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. We delivered another solid quarter by focusing on our mission as a critical Internet infrastructure operator. In addition to delivering on our mission during the third quarter, I'm pleased with the financial results, which show the continued strength of our business model during this uncertain macroeconomic period. For the third quarter, revenues grew 5.4% year-over-year, while EPS grew 15.8% year-over-year. At the end of September, the domain name base in .com and .net totaled 173.9 million domain names, up slightly from 173.8 million names at the end of 2022. During the third quarter, the domain name base decreased by 0.5 million domain names. From a new registration perspective, the third quarter ended with 9.9 million new registrations, flat with the same quarter last year. We believe that the renewal rate for the third quarter of 2023 will be approximately 73.4% compared to 73.7% a year ago. While there are many factors that drive demand for domain names, the core value proposition for domain names remains strong, and we're seeing broad-based engagement from our registrar channel. However, even with those fundamentals intact, low demand from China remains the primary source of drag on the overall domain name base growth. Excluding registrars based in China, both our domain name base and new registrations are up year over year through Q3. With this current trend, we now expect the change in the domain name base for full year 2023 to be between negative 0.4% and positive 0.4%. This updated range reflects continued uncertainty, primarily due to the weakness we're seeing from China. Our financial and liquidity position remains stable, with $943 million in cash, cash equivalents, and marketable securities at the end of the quarter. During the third quarter, we repurchased 1.1 million shares for $220 million. At quarter end, $1.34 billion remained available and authorized under the current share repurchase program. Regarding .web, today ICANN posted Altonovo's IRP complaint and ICANN's answer to its website. I urge anyone interested in this issue to read it, as I believe it will help you understand our current and past statements on .web. We think ICANN's answer is informative, and I'd like to read the concluding paragraph from ICANN's documents. First, I just want to clarify that the reference to NDC here is a company, New.co, which is VeriSign's partner in the .web application. The conclusion reads as follows, quote, after an exhaustive first .web IRP and an extremely thorough evaluation process following that IRP, ICANN determined that NDC did not violate the guidebook or the auction rules. ICANN fully complied with its articles, bylaws, and internal policies and procedures when it made that determination. and the board's resolution is entitled to deference under the bylaws' enshrinement of the business judgment rule. Accordingly, Altonovo's IRP request should be denied. We agree with ICANN. We continue to believe that this IRP, filed by Altonovo and its backers, has been filed for the purpose of delay. I will also repeat our intention, which is to bring .web to market by this company that has operated .com and .net with reliability and confidence for nearly 30 years. With its newly available namespace, .web will add more choice of registrations for our global channel of thousands of registrars and their millions of potential customers in a new generic top-level domain. Now I'd like to turn a call over to George. I will return when George has completed his financial report with closing remarks. George?