The operator introduces the participants of VeriSign's Second Quarter 2024 Earnings Call and hands the call over to David Atchley, Vice President of Investor Relations and Corporate Treasurer. Atchley provides information about the webcast and where to find the earnings release. He also mentions that the financial results are unaudited and includes a disclaimer about forward-looking statements. Atchley then introduces Jim Bidzos, Executive Chairman, President, and CEO, who will provide prepared remarks along with George Kilguss, Executive Vice President and CFO. The call will end with a Q&A session.

The article discusses the recent milestone of 27 years of uninterrupted availability for the .com and .net domain name resolution system. The company has successfully operated and evolved the infrastructure, answering an average of 328 billion queries per day. In terms of financial results, revenues, operating income, and earnings per share have all seen year-over-year growth. However, the domain name base decreased by 1.8 million names and new registrations have also decreased compared to the same quarter last year. The company attributes this to U.S. registrars focusing on ARPU over customer acquisition through higher retail pricing and reduced marketing spend.

In the third paragraph, the speaker discusses how various factors are impacting new registrations and renewal rates, leading to weaker trends in 2024. They mention a decline in the U.S. region and ongoing weaknesses in China, but note a slight increase in the EMEA region. They also mention efforts to support registrars and return to growth in the second half of 2025. They then discuss the company's financial position and the Board of Directors' decision to increase the amount authorized for share repurchase. The speaker then hands over the call to George, who reports on the company's revenue and operating income for the second quarter of 2024.

In the second quarter of 2024, VeriSign reported a total operating expense of $121 million for the 3 months and $246 million for the 6 months ended June 30. Net income for the quarter was $199 million, resulting in diluted earnings per share of $2.01. The company also reported strong operating and free cash flows. Their full-year 2024 guidance has been updated, with revenue expected to be between $1.553 billion and $1.563 billion. VeriSign remains confident in their business fundamentals and is implementing new registrar marketing programs to improve new registration trends.

The primary factor in the weakness in ARPU in the U.S. is the focus on ARPU and reduced marketing spend by registrars. This is having a bigger and longer-lasting impact than expected. Some registrars have increased prices significantly, while also reducing marketing expenditures. While there may be some impact from limited price increases on comp, the wholesale price impact is small compared to overall price increases and other actions taken by the unregulated retail channel. Low-cost new gTLDs are also gaining market share, particularly in China.

The speaker mentions that there is a thriving market for CCTLDs and new gTLDs, but they tend to have lower renewal rates and lower lifetime values. They also mention that new gTLDs operate under different contracts and can offer special deals and sell premiums anytime, making them less transparent. The speaker also notes that some registries outsource their operations and can sell TLDs at low prices while still being profitable. They mention a recent congressional letter asking for a review of the .com contract, but the speaker believes there is no legal ground for this request.

The speaker cannot speak for NTIA, but they believe that the questions raised in the letter about the .com registry agreement are typical and occur every 6 years. They mention that the wholesale .com price has only increased by $1.74 since 2018 and that the benefit from the capped wholesale prices is not always passed on to consumers. They also bring up the issue of high prices in the secondary market, where some businesses have warehoused millions of .com domains for resale at high prices. The speaker acknowledges that there may be questions about wholesale prices, but they believe that the issue of retail and secondary market pricing needs to be addressed more thoroughly. When asked about the risk of the .com contract, the speaker states that they cannot comment on that but that they will do their best to assist NTIA.

Jim Bidzos clarifies that there is no provision in the cooperative agreement to rebid .com and that Amendment 35 states that VeriSign would continue to operate the com Registry under the ICANN contract if the DOC decides to sunset the cooperative agreement. The two contracts are separate and the Cooperative Agreement is between VeriSign and the NTI Department of Commerce, while the ICANN contract oversees the conditions of renewal for the registry agreement. There is confusion around where the pricing part of the contract sits, but it is not affected by the potential sunset of the cooperative agreement.

The Cooperative Agreement between the Department of Commerce and Verisign for the management of the .com registry has a provision for automatic renewal unless the Department of Commerce chooses to sunset it. In order for the contract to be sunset, the Department of Commerce must give notice by August 2nd, otherwise it will automatically renew for another 6 years with all provisions intact. The contract was amended in 2018 to allow for limited price increases, but the termination provisions and performance requirements cannot be changed.

The paragraph explains that the outcomes of the cooperative agreement between VeriSign and ICANN cannot be changed unless mutually agreed upon. The wholesale pricing component was negotiated with the Department of Commerce and cannot be altered in negotiations with ICANN. The performance requirements and termination provisions also cannot be changed. There is currently ongoing work to prepare for the renewal of the .com registry agreement. The marketing efforts with registrars in the U.S. are also mentioned.

The company has rolled out new marketing programs for .net and .com, and initial feedback from registrars has been positive. However, it will take some time for these programs to be fully integrated into their strategies. The company will continue to modify and enhance these programs in the fourth quarter. The updated guidance of a 3% decrease in gains suggests that current trends may worsen.

George Kilguss and Jim Bidzos discuss the current trends in the first half of the year and how they are expected to continue in the second half. They mention potential positive and negative factors that could impact the trend, such as marketing programs, registrar aggressiveness, and government stimulus in China. They also mention a restriction in the Cooperative Agreement that prevents them from becoming their own registrar for .com.

The speaker clarifies the requirements for the "who is" function and mentions some technical changes in Amendment 35. They then discuss the important aspects for investors, such as pricing, service level agreements, and performance. The speaker also mentions that they have no plans to change any other aspects of the cooperative agreement. The speaker declines to comment on potential changes to their capital allocation strategy.

The speaker believes that adding a new TLD and giving customers more options was a good growth plan. However, their primary mission is still delivering 328 billion queries a day and meeting SLAs. They have the flexibility to become a registrar for .web, but have no intention of doing so. Their track record of capital allocation has served them well. The operator concludes the call and thanks participants for their participation.

This summary was generated with AI and may contain some inaccuracies.