What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-07-22 · 70 added, 48 removed, 268 unchanged (31% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

2021 December 31,

29 unchanged sentences

Issued shares:

354,071 at June 30, 2021 and 353,789 at December 31, 2020;

354,154 at September 30, 2021 and 353,789 at December 31, 2020;

Outstanding shares:

112,001 at June 30, 2021 and 113,470 at December 31, 2020

111,283 at September 30, 2021 and 113,470 at December 31, 2020

13,793,049 14,275,160

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

8 unchanged sentences

Interest expense ( 18,829 ) ( 22,537 ) ( 64,427 ) ( 67,607 )

Non-operating (loss) income, net ( 2,041 ) 7,403 ( 1,597 ) 14,487

Non-operating income (loss), net 164 775 ( 1,433 ) 15,262

Income before income taxes 202,640 184,887 578,831 567,348

1 unchanged sentence

Net income 156,622 170,979 454,748 657,574

Other comprehensive (loss) income ( 87 ) ( 2,000 ) ( 78 ) 263

Other comprehensive income (loss) 61 ( 383 ) ( 17 ) ( 120 )

Comprehensive income $ 156,683 $ 170,596 $ 454,731 $ 657,454

9 unchanged sentences

(In thousands)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

12 unchanged sentences

Beginning balance ( 2,834 ) ( 2,358 ) ( 2,756 ) ( 2,621 )

Other comprehensive income ( 87 ) ( 2,000 ) ( 78 ) 263

Other comprehensive income (loss) 61 ( 383 ) ( 17 ) ( 120 )

Balance, end of period ( 2,773 ) ( 2,741 ) ( 2,773 ) ( 2,741 )

4 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended

September 30,

Cash flows from operating activities:

42 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

$ 1,204,051 $ 1,176,314

The fair value of the debt securities held as of June 30, 2021, included less than $ 0.1 million of gross and net unrealized losses.

All of the debt securities held as of June 30, 2021 are scheduled to mature in less than one year.

The fair value of the debt securities held as of September 30, 2021, included less than $ 0.1 million of gross and net unrealized gains.

All of the debt securities held as of September 30, 2021 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, 2021, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2025, 2027, and 2031 were $ 568.2 million, $ 586.5 million, and $ 761.6 million, respectively, as of June 30, 2021.

As of September 30, 2021, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2025, 2027, and 2031 were $ 563.6 million, $ 580.0 million, and $ 763.5 million, respectively, as of September 30, 2021.

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)

7 unchanged sentences

Other long-term assets consist of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

1 unchanged sentence

Operating lease right-of-use asset 9,625 11,277

Restricted cash 8,931 9,407

Long-term prepaid registry fees 8,990 7,997

Restricted cash 5,630 9,407

Other 2,019 2,172

Total other long-term assets $ 38,514 $ 37,958

The prepaid expenses included in Other current assets and Other long-term assets as of June 30, 2021 are primarily related to prepaid hardware and software maintenance expenses.

The prepaid expenses included in Other current assets and Other long-term assets as of September 30, 2021 are primarily related to prepaid hardware and software maintenance expenses.

The current and long-term prepaid registry fees in the tables above relate to the fees the Company pays to Internet Corporation for Assigned Names and Numbers (“ICANN”) for each annual increment of .

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, 2021 reflects amortization of $ 9.5 million and $ 18.8 million during the three and six months ended June 30, 2021 which was recorded in Cost of Revenues.

The amount of prepaid registry fees as of September 30, 2021 reflects amortization of $ 9.7 million and $ 28.5 million during the three and nine months ended September 30, 2021 which was recorded in Cost of Revenues.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

10 unchanged sentences

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, 2020, was paid during the six months ended June 30, 2021.

Accrued employee incentive compensation as of December 31, 2020, was paid during the nine months ended September 30, 2021.

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

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

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

Customer incentives payable includes amounts related to rebates and marketing programs payable to registrars.

2 unchanged sentences

Long-term tax and other liabilities consist of the following:

June 30, December 31,

September 30, December 31,

(In thousands)

2 unchanged sentences

Long-term tax and other liabilities $ 84,869 $ 95,494

Long-term tax liabilities as of June 30, 2021 reflects a $ 7.7 million reclassification of a portion of the transition tax liability on accumulated foreign earnings from non-current to current as of June 30, 2021.

Long-term tax liabilities as of September 30, 2021 reflects a $ 7.7 million reclassification of a portion of the transition tax liability on accumulated foreign earnings from non-current to current as of September 30, 2021.

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, 2021, the Company repurchased 0.8 million and 1.7 million shares of its common stock, respectively, at an average stock price of $ 216.48 and $ 206.29 , respectively.

The aggregate cost of the repurchases in the three and six months ended June 30, 2021 was $ 172.5 million and $ 345.1 million, respectively.

As of June 30, 2021, there was approximately $ 737.5 million remaining available for future share repurchases under the share repurchase program.

During the six months ended June 30, 2021, the Company placed 0.1 million shares, at an average stock price of $ 203.95 , and for an aggregate cost of $ 16.1 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, 2021, the Company repurchased 0.8 million and 2.5 million shares of its common stock, respectively, at an average stock price of $ 219.62 and $ 210.55 , respectively.

The aggregate cost of the repurchases in the three and nine months ended September 30, 2021 was $ 172.4 million and $ 517.6 million, respectively.

As of September 30, 2021, there was approximately $ 565.1 million remaining available for future share repurchases under the share repurchase program.

During the nine months ended September 30, 2021, the Company placed 0.1 million shares, at an average stock price of $ 205.10 , and for an aggregate cost of $ 19.3 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

Since inception, the Company has repurchased 242.9 million shares of its common stock for an aggregate cost of $ 11.52 billion, which is presented as a reduction of Additional paid-in capital.

1 unchanged sentence

The following table presents the computation of weighted-average shares used in the calculation of basic and diluted earnings per share:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

10 unchanged sentences

The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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, 2021 was primarily driven by amounts billed in the first half of 2021 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 $ 510.5 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, 2021 represents our aggregate remaining performance obligations.

The increase in the deferred revenues balance for the nine months ended September 30, 2021 was primarily driven by amounts billed in the nine months ended September 30, 2021 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 $ 665.1 million of revenues recognized that were included in the deferred revenues balance at the beginning of the period.

The higher deferred revenue balance as of September 30, 2021 also reflects an increase in the volume of early renewal transactions that occurred before the .

com price increase became effective on September 1, 2021.

The balance of deferred revenues as of September 30, 2021 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.

3 unchanged sentences

The following table presents the classification of stock-based compensation:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

6 unchanged sentences

The following table presents the nature of the Company’s total stock-based compensation:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

10 unchanged sentences

On June 23, 2021, the Company used the net proceeds from the 2031 Notes and cash on hand, to redeem all of its $ 750.0 million aggregate principal amount of outstanding 4.625 % senior notes due 2023 (“2023 Notes”).

The redemption of the 2023 Notes resulted in a loss on debt extinguishment of $ 2.1 million related to the unamortized debt issuance costs on the notes.

The loss on extinguishment is included in Non-operating (loss) income during the three and six months ended June 30, 2021.

Non-operating (Loss) Income, Net

The following table presents the components of Non-operating income, net:

Three Months Ended June 30, Six Months Ended June 30,

The redemption of the 2023 Notes resulted in a loss on debt extinguishment of $ 2.1 million related to the unamortized debt issuance costs on the notes in the second quarter of 2021.

The loss on extinguishment is included in Non-operating income (loss) during the nine months ended September 30, 2021.

Non-operating Income (Loss), Net

The following table presents the components of Non-operating income (loss), net:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In thousands)

Loss on extinguishment of debt $ ( 2,149 ) $ — $ ( 2,149 ) $ —

Interest income $ 111 $ 805 $ 438 $ 7,500

Loss on extinguishment of debt — — ( 2,149 ) —

Gain on sale of business — ( 9 ) — 5,602

1 unchanged sentence

Other, net 53 ( 21 ) 278 60

Total non-operating (loss) income, net $ ( 2,041 ) $ 7,403 $ ( 1,597 ) $ 14,487

The lower interest income during the three and six months ended June 30, 2021 reflects a decline in interest rates on our investments in debt securities.

Total non-operating income (loss), net $ 164 $ 775 $ ( 1,433 ) $ 15,262

The lower interest income during the three and nine months ended September 30, 2021 reflects a decline in interest rates on our investments in debt securities.

The gain on sale of business in 2020 represents the excess of the contingent consideration received related to the divested security services business compared to the estimated receivable.

2 unchanged sentences

The following table presents Income tax expense (benefit) and the effective tax rate:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

2 unchanged sentences

Effective tax rate 23 % 8 % 21 % ( 16 ) %

When compared to the statutory federal rate of 21 %, the effective tax rates above reflect a lower effective tax rate on foreign income and excess tax benefits related to stock-based compensation, which are offset by state income taxes.

The effective tax rate for the six months ended June 30, 2020 also reflected the remeasurement of unrecognized tax benefits discussed below.

During the three months ended March 31, 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 of 2020, 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.

taxes on foreign earnings, net of foreign tax credits.

The effective tax rate for the three and nine months ended September 30, 2020 also reflected the remeasurement of unrecognized tax benefits discussed below.

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 the 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