What changed in this filing

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Item 1. Financial Statements

2020-10-22 compared with 2020-07-23 · 52 added, 41 removed, 281 unchanged (25% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

2020 December 31,

29 unchanged sentences

Issued shares:

353,637 at June 30, 2020 and 353,157 at December 31, 2019;

353,730 at September 30, 2020 and 353,157 at December 31, 2019;

Outstanding shares:

115,011 at June 30, 2020 and 116,715 at December 31, 2019

114,262 at September 30, 2020 and 116,715 at December 31, 2019

14,436,409 14,990,011

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

25 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

19 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

16 unchanged sentences

Proceeds received (payments made) related to sale of business 20,009 ( 8,530 )

Net cash (used in) provided by investing activities ( 174,368 ) 418,062

Net cash used in investing activities ( 305,820 ) ( 237,827 )

Cash flows from financing activities:

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 506 ) ( 208 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 201,491 ) 394,201

Net decrease in cash, cash equivalents, and restricted cash ( 362,492 ) ( 248,074 )

Cash, cash equivalents, and restricted cash at beginning of period 517,601 366,753

19 unchanged sentences

The following table summarizes the Company’s cash, cash equivalents, and marketable securities and the fair value categorization of the financial instruments measured at fair value on a recurring basis:

June 30, December 31,

September 30, December 31,

(In thousands)

10 unchanged sentences

$ 1,159,767 $ 1,227,464

The fair value of the debt securities held as of June 30, 2020 was $ 1.02 billion, including $ 0.4 million of gross and net unrealized gains.

All of the debt securities held as of June 30, 2020 are scheduled to mature in less than one year.

The fair value of the debt securities held as of September 30, 2020 was $ 1.00 billion, including less than $ 0.1 million of gross and net unrealized gains.

All of the debt securities held as of September 30, 2020 are scheduled to mature in less than one year.

Fair Value Measurements

6 unchanged sentences

The Company’s other financial instruments include cash, accounts receivable, restricted cash, and accounts payable.

As of June 30, 2020, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2023, 2025, and 2027 were $ 756.6 million, $ 555.0 million, and $ 579.0 million, respectively, as of June 30, 2020.

As of September 30, 2020, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2023, 2025, and 2027 were $ 757.9 million, $ 554.9 million, and $ 585.9 million, respectively, as of September 30, 2020.

The fair values of these debt instruments are based on available market information from public data sources and are classified as Level 2.

2 unchanged sentences

Other current assets consist of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

5 unchanged sentences

Total other current assets $ 55,767 $ 60,530

During the six months ended June 30, 2020 the Company received $ 20.4 million of contingent consideration related to its divested security services business.

During the nine months ended September 30, 2020, the Company received $ 20.4 million of contingent consideration related to its divested security services business.

The excess of the proceeds received over the balance of the receivable was recognized as a gain and included in Non-operating income, net.

1 unchanged sentence

Other long-term assets consist of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

7 unchanged sentences

com domain name registrations and renewals which are deferred and amortized over the domain name registration term.

The amount of prepaid registry fees as of June 30, 2020 reflects amortization of $ 9.0 million and $ 17.9 million during the three and six months ended June 30, 2020 which was recorded in Cost of Revenues.

The amount of prepaid registry fees as of September 30, 2020 reflects amortization of $ 9.1 million and $ 27.0 million during the three and nine months ended September 30, 2020 which was recorded in Cost of Revenues.

Other tax receivables as of December 31, 2019 included indirect benefits related to the previously unrecognized tax benefits that were remeasured during the three months ended September 30, 2020, as discussed in Note 9.

Income Taxes.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

9 unchanged sentences

Taxes payable and other tax liabilities reflect amounts accrued for the income tax provision and payments made during the period.

The Company deferred its U.S.

federal tax payments to the third quarter of 2020 as permitted by IRS guidance.

Customer deposits primarily relate to advance payments to cover domain name registration activity by registrars.

Accrued employee compensation primarily consists of liabilities for employee leave, salaries, payroll taxes, employee contributions to the employee stock purchase plan, and incentive compensation.

Accrued employee incentive compensation as of December 31, 2019, was paid during the six months ended June 30, 2020.

Accrued employee incentive compensation as of December 31, 2019, was paid during the nine months ended September 30, 2020.

Interest payable varies at each period-end based on the payment due dates for each Senior Note issuance.

2 unchanged sentences

Long-term tax and other liabilities

June 30, December 31,

September 30, December 31,

(In thousands)

2 unchanged sentences

Long-term tax and other liabilities $ 101,206 $ 312,676

During the six months ended June 30, 2020, the Company remeasured its previously unrecognized income tax benefits relating to the worthless stock deduction taken in 2013.

The remeasurement resulted in the recognition of a $ 167.8 million benefit in the first quarter of 2020.

During the nine months ended September 30, 2020, the Company remeasured certain previously unrecognized income tax benefits, including those relating to the worthless stock deduction taken in 2013.

These remeasurements resulted in the recognition of $ 191.8 million of income tax benefits in the nine months ended September 30, 2020, as discussed in Note 9.

Income Taxes.

Stockholders’ Deficit

2 unchanged sentences

Purchases made under the program could be effected through open market transactions, block purchases, accelerated share repurchase agreements or other negotiated transactions.

During the three and six months ended June 30, 2020, the Company repurchased 0.7 million and 2.0 million shares of its common stock, respectively, at an average stock price of $ 205.45 and $ 195.68 , respectively.

The aggregate cost of the repurchases in the three and six months ended June 30, 2020 was $ 150.0 million and $ 395.0 million, respectively.

As of June 30, 2020, there was approximately $ 675.6 million remaining available for future share repurchases under the share repurchase program.

During the six months ended June 30, 2020, the Company placed 0.2 million shares, at an average stock price of $ 210.23 , and for an aggregate cost of $ 34.9 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

During the three and nine months ended September 30, 2020, the Company repurchased 0.8 million and 2.8 million shares of its common stock, respectively, at an average stock price of $ 206.61 and $ 198.84 , respectively.

The aggregate cost of the repurchases in the three and nine months ended September 30, 2020 was $ 170.0 million and $ 564.9 million, respectively.

As of September 30, 2020, there was approximately $ 505.6 million remaining available for future share repurchases under the share repurchase program.

During the nine months ended September 30, 2020, the Company placed 0.2 million shares, at an average stock price of $ 209.90 , and for an aggregate cost of $ 38.8 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

Since inception, the Company has repurchased 239.5 million shares of its common stock for an aggregate cost of $ 10.81 billion, which is presented as a reduction of Additional paid-in capital.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

11 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

11 unchanged sentences

As payment for domain name registrations and renewals are due in advance of our performance, we record these amounts as deferred revenues.

The increase in the deferred revenues balance for the six months ended June 30, 2020 was primarily driven by amounts billed in the first half of 2020 for domain name registrations and renewals to be recognized as revenues in future periods, offset by refunds for domain name renewals deleted during the 45-day grace period, and $ 493.7 million of revenues recognized that were included in the deferred revenues balance at the beginning of the period.

The balance of deferred revenues as of June 30, 2020 represents our aggregate remaining performance obligations.

The increase in the deferred revenues balance for the nine months ended September 30, 2020 was primarily driven by amounts billed in the first nine months of 2020 for domain name registrations and renewals to be recognized as revenues in future periods, offset by refunds for domain name renewals deleted during the 45-day grace period, and $ 644.0 million of revenues recognized that were included in the deferred revenues balance at the beginning of the period.

The balance of deferred revenues as of September 30, 2020 represents our aggregate remaining performance obligations.

Amounts included in current deferred revenues are all expected to be recognized in revenues within 12 months, except for a portion of deferred revenues that relates to domain name renewals that are deleted in the 45-day grace period following the transaction.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

5 unchanged sentences

Total non-operating income, net $ 775 $ 10,498 $ 15,262 $ 34,137

The lower interest income during the three and six months ended June 30, 2020 reflects a decline in interest rates on our investments in debt securities.

The lower interest income during the three and nine months ended September 30, 2020 reflects a decline in interest rates on our investments in debt securities.

The transition services income relates to the divested security services business.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

4 unchanged sentences

taxes on foreign earnings, net of foreign tax credits.

Additionally, during the six months ended June 30, 2020, the Company remeasured its previously unrecognized income tax benefits relating to the worthless stock deduction taken in 2013.

The remeasurement, which resulted in the recognition of a $ 167.8 million benefit in the first quarter, was based on Internal Revenue Service (“IRS”) written confirmation indicating no examination adjustment would be proposed.

Notwithstanding this written confirmation, the Company’s U.S.

federal income tax returns remain under examination by the IRS for 2010 through 2014.

The timing of completion and ultimate outcome of the audits remains uncertain and it is reasonably possible that during the next 12 months, the Company’s unrecognized tax benefits may change further as a result of IRS audits.

Additionally, the Company remeasured certain previously unrecognized income tax benefits, which resulted in the recognition of $24.0 million and $ 191.8 million of income tax benefits in the three and nine months ended September 30, 2020, respectively.

The most significant portion of these tax benefits related to the worthless stock deduction taken in 2013, which resulted in the recognition of a $ 167.8 million benefit in the first quarter of 2020.

These remeasurements were based on written confirmations from Internal Revenue Service (“IRS”), received in the first and third quarters of 2020, indicating no examination adjustments would be proposed related to the worthless stock deduction or certain other matters reviewed as part of the audit of the Company’s federal income tax returns for 2010 through 2014.

Notwithstanding these written confirmations, the Company’s U.S.

federal income tax returns for those years remain under examination by the IRS.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements