What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-28 compared with 2021-10-28 · 87 added, 168 removed, 102 unchanged (71% of the section changed)

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This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These forward-looking statements are based on current expectations and assumptions and involve risks and uncertainties, including, among other things, statements regarding our expectations about (i) the impact from the effects of the COVID-19 pandemic, (ii) the growth in revenues for the remainder of 2021, (iii) Cost of revenues, Sales and marketing expenses, Research and development expenses, General and administrative expenses, quarterly Interest expense, and quarterly Non-operating income (loss), net, for the remainder of 2021, (iv) our annual effective tax rate for 2021, and (v) the sufficiency of our existing cash, cash equivalents and marketable securities, and funds generated from operations, together with our borrowing capacity under the unsecured revolving credit facility.

Forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language.

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net top-level domains (“TLDs”), which support the majority of global e-commerce.

As of September 30, 2021, we had 172.1 million .com and .net registrations in the domain name base.

As of March 31, 2022, we had 174.7 million .com and .net registrations in the domain name base.

The number of domain names registered is largely driven by continued growth in online advertising, e-commerce, and the number of internet users, which is partially driven by greater availability of internet access, as well as marketing activities carried out by us and our registrars.

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Business Highlights and Trends

• We recorded revenues of $334.2 million and $987.3 million during the three and nine months ended September 30, 2021, an increase of 5% and 4%, respectively, compared to the same periods in 2020.

• We recorded operating income of $221.3 million and $644.7 million during the three and nine months ended September 30, 2021, an increase of 7% and 4%, respectively, compared to the same periods in 2020.

• As of September 30, 2021, we had 172.1 million .com and .net registrations in the domain name base, which represents a 5% increase from September 30, 2020, and a net increase of 1.5 million domain name registrations from June 30, 2021.

• During the three months ended September 30, 2021, we processed 10.7 million new domain name registrations for .com and .net compared to 10.9 million for the same period in 2020.

• We recorded revenues of $346.9 million during the three months ended March 31, 2022, an increase of 7% compared to the same period in 2021.

• We recorded operating income of $224.8 million during the three months ended March 31, 2022, an increase of 7% compared to the same period in 2021.

• As of March 31, 2022, we had 174.7 million .com and .net registrations in the domain name base, which represents a 4% increase from March 31, 2021, and a net increase of 1.2 million domain name registrations from December 31, 2021.

• During the three months ended March 31, 2022, we processed 10.2 million new domain name registrations for .com and .net compared to 11.6 million for the same period in 2021.

• The final .

net renewal rate for the second quarter of 2021 was 75.4% compared to 72.8% for the second quarter of 2020.

net renewal rate for the fourth quarter of 2021 was 74.8% compared to 73.5% for the fourth quarter of 2020.

Renewal rates are not fully measurable until 45 days after the end of the quarter.

• During the three months ended September 30, 2021, we repurchased 0.8 million shares of our common stock for an aggregate cost of $172.4 million.

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

• We generated cash flows from operating activities of $600.9 million during the nine months ended September 30, 2021, compared to $535.0 million for the same period in 2020.

• During the three months ended March 31, 2022, we repurchased 0.9 million shares of our common stock for an aggregate cost of $195.5 million.

As of March 31, 2022, there was approximately $892.6 million remaining available for future share repurchases under our share repurchase program.

• We generated cash flows from operating activities of $207.1 million during the three months ended March 31, 2022, compared to $198.3 million for the same period in 2021.

• On February 10, 2022, we announced that we will increase the annual registry-level wholesale fee for each new and renewal .

com domain name registration from $8.39 to $8.97, effective September 1, 2022.

Pursuant to our agreements with the Internet Corporation for Assigned Names and Numbers (“ICANN”), we make available files containing all active domain names registered in the .com and .net registries.

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The domain name base may also reflect compensated or uncompensated judicial or administrative actions to add or remove from the active zone an immaterial number of domain names.

These files and the related summary data are updated at least once per day.

These files and the related summary data are updated daily.

The update times may vary each day.

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COVID-19 Update

The United States and the global community we serve are facing unprecedented challenges posed by the COVID-19 pandemic.

In response to the pandemic, we have established a task force to monitor the pandemic and have taken a number of actions to protect our employees, including restricting travel, modifying our sick leave policy to encourage quarantine and isolation when warranted, and directing most of our employees to work from home.

We have implemented our readiness plans, which include the ability to maintain critical internet infrastructure with most employees working remotely.

We believe that the effects of the pandemic to date have led to an increase in the demand for domain names, particularly as businesses and entrepreneurs have been seeking to establish or expand their presence online in response to the pandemic.

Our revenues continued to grow during 2020 and the nine months ended September 30, 2021 primarily driven by an increase in the domain name base for the .

however, the situation remains uncertain and hard to predict.

The broader implications of the pandemic on our business and operations and our financial results, including the extent to which the effects of the pandemic will impact future growth in the domain name base, remain uncertain.

The duration and severity of the economic disruptions from the pandemic may ultimately result in negative impacts on our business and operations, results of operations, financial condition, cash flows, liquidity and capital and financial resources.

For further discussion, see “Risk Factors – The effects of the COVID-19 pandemic have impacted how we operate our business, and the extent to which the effects of the pandemic will impact our business, operations, financial condition and results of operations remains uncertain” in Part 1, Item 1A of the 2020 Form 10-K.

The United States and the global community we serve continue to face unprecedented challenges posed by the COVID-19 pandemic.

In response to the pandemic, we established a task force to monitor the pandemic and took a number of actions to protect our employees, including restricting travel, modifying our sick leave policy to encourage quarantine and isolation when warranted, and directing most of our employees to work from home.

We implemented our readiness plans, which include the ability to maintain critical internet infrastructure with most employees working remotely.

We believe that, initially, the effects of the pandemic led to an incremental increase in the demand for domain names, particularly as businesses and entrepreneurs sought to establish or expand their presence online in the beginning of the pandemic.

This incremental demand experienced earlier in the pandemic appears to have subsided.

Results of Operations

The following table presents information regarding our results of operations as a percentage of revenues:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Revenues 100.0 % 100.0 %

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Cost of revenues 14.6 14.5

Sales and marketing 2.8 2.6 2.9 2.5

Research and development 6.6 6.3

General and administrative 10.8 12.0 11.4 11.8

Selling, general and administrative 14.0 14.2

Total costs and expenses 35.2 35.0

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Interest expense (5.4) (7.0)

Non-operating income (loss), net — 0.3 (0.2) 1.6

Non-operating income, net 0.1 0.2

Income before income taxes 59.5 58.2

Income tax (expense) benefit (13.7) (4.4) (12.5) 9.6

Income tax expense (14.1) (11.7)

Net income 45.4 % 46.5 %

Our revenues are primarily derived from registrations for domain names in the .com and .net domain name registries.

We also derive revenues from operating domain name registries for several other TLDs and from providing back-end registry services to a number of TLD registry operators, all of which are not significant in relation to our consolidated revenues.

We also derive revenues from operating domain name registries and technical systems for several other TLDs, all of which are not significant in relation to our consolidated revenues.

For domain names registered in the .

net registries we receive a fee from registrars per annual registration that is determined pursuant to our agreements with ICANN.

Individual customers, called registrants, contract directly with registrars or their resellers, and the registrars in turn register the domain names with Verisign.

Individual customers, called registrants, contract directly with registrars or their resellers, and the registrars, who are our direct customers, in turn register the domain names with Verisign.

Changes in revenues are driven largely by changes in the number of new domain name registrations and the renewal rate for existing registrations as well as the impact of new and prior price increases, to the extent permitted by ICANN and the Department of Commerce (“DOC”).

New registrations and the renewal rate for existing registrations are impacted by continued growth in online advertising, e-commerce, and the number of internet users, as well as marketing activities carried out by us and our registrars.

New registrations and the renewal rate for existing registrations are impacted by continued growth in online advertising, e-commerce, and the number of internet users, as well as

marketing activities carried out by us and our registrars.

We also offer promotional incentive-based discount programs to registrars based upon market conditions and the business environment in which the registrars operate.

On October 26, 2018, Verisign and the DOC amended the Cooperative Agreement.

The amendment, among other items, extends the term of the Cooperative Agreement until November 30, 2024 and permits the price of a .com domain name to be increased, subject to appropriate changes to the .com Registry Agreement, without further DOC approval, by up to 7% in each of the final four years of each six-year period beginning on October 26, 2018.

On March 27, 2020, Verisign and ICANN amended the .com Registry Agreement that, among other items, incorporates these changes agreed to with the DOC to the pricing terms.

com Registry Agreement, we are permitted to increase the price of a .com domain name by up to 7% in each of the final four years of each six-year period beginning on October 26, 2018.

Effective September 1, 2021, we increased the annual registry-level wholesale fee for each new and renewal .

com domain name registration from $7.85 to $8.39.

On February 10, 2022, we announced that we will increase the annual registry-level wholesale fee for each new and renewal .

com domain name registration from $8.39 to $8.97, effective September 1, 2022.

We have the contractual right to increase the fees for .

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A comparison of revenues is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 % Change 2020 2021 % Change 2020

(Dollars in thousands)

Three Months Ended March 31,

2022 % Change 2021

(Dollars in millions)

Revenues $ 346.9 7% $ 323.6

The following table compares the .com and .net domain name registrations in the domain name base:

September 30, 2021 % Change September 30, 2020

March 31, 2022 % Change March 31, 2021

.com and .net domain name registrations in the domain name base

174.7 million 4% 168.0 million

Revenues increased by $16.4 million and $42.5 million during the three and nine months ended September 30, 2021, respectively, as compared to the same periods last year, primarily due to an increase in revenues from the operation of the registry for the .

Revenues increased by $23.3 million during the three months ended March 31, 2022 as compared to the same period last year, primarily due to an increase in revenues from the operation of the registry for the .

com TLD driven by a 4% increase in the domain name base for .

com and the price increase which became effective September 1, 2021.

Growth in the domain name base has been primarily driven by continued internet growth and marketing activities carried out by us and our registrars.

However, competitive pressure from ccTLDs, other gTLDs, services that offer alternatives for an online presence, such as social media, ongoing changes in internet practices and behaviors of consumers and business, as well as the motivation of existing domain name registrants managing their investment in domain names, and historical global economic uncertainty, has limited the rate of growth of the domain name base in recent years and may do so in the remainder of 2021 and beyond.

We expect quarterly revenues will continue to grow during the fourth quarter of 2021 compared to each of the first three quarters of 2021, as a result of continued growth in the aggregate number of .

com domain names and the impact of the price increase for .com domain names which became effective September 1, 2021.

However, competitive pressure from ccTLDs, other gTLDs, services that offer alternatives for an online presence, such as social media, ongoing changes in internet practices and behaviors of consumers and business, as well as the motivation of existing domain name registrants managing their investment in domain names, such as for resale at increased prices or for revenue generation through website advertising, and historical global economic uncertainty, has limited the rate of growth of the domain name base in recent years and may do so in the remainder of 2022 and beyond.

Geographic revenues

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The following table presents a comparison of our geographic revenues:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 % Change 2020 2021 % Change 2020

(Dollars in thousands)

Three Months Ended March 31,

2022 % Change 2021

(Dollars in millions)

$ 224.6 8% $ 207.1

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Revenue growth for each region may also be impacted by registrars domiciled in one region, registering domain names in another region.

During the three and nine months ended September 30, 2021, revenues increased in all regions except China.

Revenues from registrars based in China declined during the three and nine months ended September 30, 2021 as a result of lower new registrations and renewal rates in the country.

During the three months ended March 31, 2022, revenues increased in all regions except China.

Revenues from registrars based in China declined during the three months ended March 31, 2022 as a result of lower new registrations and renewal rates in the country.

Cost of revenues

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A comparison of Cost of revenues is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 % Change 2020 2021 % Change 2020

(Dollars in thousands)

Three Months Ended March 31,

2022 % Change 2021

(Dollars in millions)

Cost of revenues $ 50.7 8% $ 47.0

Cost of revenues increased by $2.8 million during the three months ended September 30, 2021, compared to the same period last year, due to a combination of individually insignificant factors.

Cost of revenues increased by $8.4 million during the nine months ended September 30, 2021, compared to the same period last year, primarily due to a $4.4 million increase in registry fees payable to ICANN in connection with the operation of the registry for the .com TLD.

Allocated overhead expenses also increased by $1.9 million due to an increase in total allocable expenses.

We expect Cost of revenues as a percentage of revenues to remain consistent during the remainder of 2021 compared to the nine months ended September 30, 2021.

Sales and marketing

Sales and marketing expenses consist primarily of salaries and other personnel-related expenses, travel and related expenses, trade shows, costs of computer and communications equipment and support services, facilities costs, consulting fees, costs of marketing programs, such as online, television, radio, print and direct mail advertising costs, and allocations of indirect costs such as corporate overhead.

A comparison of Sales and marketing expenses is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 % Change 2020 2021 % Change 2020

(Dollars in thousands) (Dollars in thousands)

Sales and marketing $ 9,410 12% $ 8,389 $ 28,115 18% $ 23,883

Sales and marketing expenses increased by $1.0 million during the three months ended September 30, 2021, compared to the same period last year, due to a combination of individually insignificant factors.

Sales and marketing expenses increased by $4.2 million during the nine months ended September 30, 2021, compared to the same period last year, primarily due to an increase in salary and employee benefits expenses, including stock-based compensation, and a combination of individually insignificant factors.

Salary and employee benefits expenses, including stock-based compensation, increased by $2.5 million due to an increase in average headcount and higher expenses for salaries and certain employee related benefits.

We expect Sales and marketing expenses as a percentage of revenues to increase slightly during the remainder of 2021, compared to the nine months ended September 30, 2021.

Cost of revenues increased by $3.7 million during the three months ended March 31, 2022, compared to the same period last year, due to a combination of individually insignificant factors.

Research and development

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A comparison of Research and development expenses is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 % Change 2020 2021 % Change 2020

(Dollars in thousands)

Three Months Ended March 31,

2022 % Change 2021

(Dollars in millions)

Research and development $ 22.9 13% $ 20.3

Research and development expenses remained consistent during the three months ended September 30, 2021, compared to the same period last year.

Research and development expenses increased by $4.4 million during the nine months ended September 30, 2021, compared to the same period last year, primarily due to an increase in salary and employee benefits expenses, including stock-based compensation, and a combination of individually insignificant factors.

Salary and employee benefits expenses, including stock-based compensation, increased by $2.5 million due to a slight increase in average headcount and higher expenses for salaries and certain employee related benefits.

We expect Research and development expenses as a percentage of revenues to remain consistent during the remainder of 2021 compared to the nine months ended September 30, 2021.

General and administrative

General and administrative expenses consist primarily of salaries and other personnel-related expenses for our executive, administrative, legal, finance, information technology and human resources personnel, costs of facilities, computer and communications equipment, management information systems, support services, professional services fees, and certain tax and license fees, offset by allocations of indirect costs such as facilities and shared services expenses to other cost types.

A comparison of General and administrative expenses is presented below:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 % Change 2020 2021 % Change 2020

(Dollars in thousands)

General and administrative $ 36,160 (5)% $ 38,109 $ 112,212 —% $ 111,719

General and administrative expenses decreased by $1.9 million during the three months ended September 30, 2021, compared to the same period last year, primarily due to a $2.1 million decrease in external legal costs on various projects.

General and administrative expenses increased by $0.5 million during the nine months ended September 30, 2021, compared to the same period last year, due to increases in salary and employee benefits expenses, equipment and software expenses, and stock-based compensation expenses, partially offset by an increase in overhead expenses allocated to other cost types and decreases in legal expenses and charitable contributions.

Salary and employee benefits expenses increased by $4.6 million due to an increase in average headcount and higher expenses for certain employee health insurance related benefits.

Equipment and software expenses increased by $4.3 million due to expenses related to network security and other software services.

Stock-based compensation expenses increased by $3.3 million due to higher achievement levels on certain performance-based RSU grants and increases in the total value of RSUs granted in 2021.

Overhead expenses allocated to other cost types increased by $3.7 million due to an increase in the total allocable expenses.

Legal expenses decreased by $4.5 million due to a decrease in external legal costs on various projects.

Charitable contributions decreased by $2.0 million due to contributions we made during the nine months ended September 30, 2020 to help with immediate COVID-related hardship and to support social justice efforts, compared to ongoing contributions during the nine months ended September 30, 2021.

We expect General and administrative expenses as a percentage of revenues to remain consistent during the remainder of 2021 compared to the nine months ended September 30, 2021.

Research and development expenses increased by $2.6 million during the three months ended March 31, 2022, compared to the same period last year, due to a combination of individually insignificant factors.

Selling, general and administrative

Selling, general and administrative expenses consist primarily of salaries and other personnel-related expenses for our executive, administrative, legal, finance, information technology, human resources, sales, and marketing personnel, travel and related expenses, trade shows, costs of computer and communications equipment and support services, consulting and professional service fees, costs of marketing programs, costs of facilities, management information systems, support services, and certain tax and license fees, offset by allocations of indirect costs such as facilities and shared services expenses to other cost types.

A comparison of Selling, general and administrative expenses is presented below:

Three Months Ended March 31,

2022 % Change 2021

(Dollars in millions)

Selling, general and administrative $ 48.5 6% $ 45.9

Selling, general and administrative expenses increased by $2.6 million during the three months ended March 31, 2022, compared to the same period last year, primarily due to a $2.1 million increase in salary and employee benefits expenses as a result of an increase in expenses for certain employee health insurance related benefits.

Interest expense

Interest expense decreased by $3.7 million and $3.2 million in the three and nine months ended September 30, 2021, respectively, compared to the same periods last year due to the lower interest rate on our 2031 Notes compared to the 2023 Notes which were redeemed in June 2021.

We expect Interest expense in the fourth quarter of 2021 to be consistent with the third quarter of 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)

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

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

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

Transition services income — — — 2,100

Other, net 53 (21) 278 60

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

Interest income decreased in the three and nine months ended September 30, 2021 due to a decline in interest rates on our investments in debt securities.

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 during the second quarter of 2021.

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.

The transition services income in 2020 relates to the divested security services business.

The transition services agreement ended in February 2020.

We do not expect Non-operating income (loss), net to be significant during the remainder of 2021.

Income tax expense (benefit)

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in thousands)

Income tax expense (benefit) $ 46,018 $ 13,908 $ 124,083 $ (90,226)

Interest expense decreased by $3.7 million in the three months ended March 31, 2022 compared to the same period last year, due to the lower interest rate on our 2031 Notes compared to the 2023 Notes which were redeemed in the second quarter of 2021.

Income tax expense

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

Three Months Ended March 31,

(Dollars in millions)

Income tax expense $ 48.8 $ 37.9

Effective tax rate 24 % 20 %

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 and U.S.

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.

We 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 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 our federal income tax returns for 2010 through 2014.

Notwithstanding these written confirmations, our U.S.

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

We expect our annual effective tax rate for 2021 to be between 20% and 23%.

The effective tax rate for each of the periods in the table above differed from the statutory federal rate of 21%, due to state income taxes and U.S.

taxes on foreign earnings, net of foreign tax credits, offset by a lower foreign effective tax rate.

Liquidity and Capital Resources

The following table presents our principal sources of liquidity:

September 30, December 31,

(In thousands)

March 31, December 31,

(In millions)

Cash and cash equivalents $ 758.5 $ 223.5

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Treasury bills purchased with original maturities of three months or less.

As of September 30, 2021, all of our debt securities have contractual maturities of less than one year.

As of March 31, 2022, all of our debt securities have contractual maturities of less than one year.

Our cash and cash equivalents are readily accessible.

For additional information on our investment portfolio, see Note 2, “Financial Instruments,” of our Notes to Condensed Consolidated Financial Statements in Part I, Item I of this Quarterly Report on Form 10-Q.

During the three months ended September 30, 2021, we repurchased 0.8 million shares of our common stock for an aggregate cost of $172.4 million.

As of September 30, 2021, there was approximately $565.1 million remaining available for future share repurchases under the share repurchase program which has no expiration date.

On June 8, 2021, we issued $750.0 million of 2.700% senior unsecured notes due June 15, 2031.

On June 23, 2021, we used the net proceeds from the 2031 Notes, along with cash on hand, to redeem all of our $750.0 million aggregate principal amount of outstanding 4.625% senior notes due 2023.

As of September 30, 2021, we also had $550.0 million principal amount outstanding of 4.75% senior unsecured notes due 2027 and $500.0 million principal amount outstanding of 5.25% senior unsecured notes due 2025.

As of September 30, 2021, there were no borrowings outstanding under our $200.0 million credit facility that will expire in 2024.

We believe existing cash, cash equivalents and marketable securities, and funds generated from operations, together with our borrowing capacity under the unsecured revolving credit facility should be sufficient to meet our working capital, capital expenditure requirements, and to service our debt for at least the next 12 months.

During the three months ended March 31, 2022, we repurchased 0.9 million shares of our common stock for an aggregate cost of $195.5 million.

As of March 31, 2022, there was approximately $892.6 million remaining available for future share repurchases under the share repurchase program which has no expiration date.

As of March 31, 2022, we had $750.0 million of 2.70% senior unsecured notes due 2031, $550.0 million principal amount outstanding of 4.75% senior unsecured notes due 2027, and $500.0 million principal amount outstanding of 5.25% senior unsecured notes due 2025.

As of March 31, 2022, there were no borrowings outstanding under our $200.0 million credit facility that will expire in 2024.

We believe existing cash, cash equivalents and marketable securities, and funds generated from operations, together with our ability to arrange for additional financing should be sufficient to meet our working capital, capital expenditure requirements, and to service our debt for the next 12 months and beyond.

We regularly assess our cash management approach and activities in view of our current and potential future needs.

In summary, our cash flows for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

September 30,

(In thousands)

Our cash requirements have not changed materially since the 2021 Form 10-K.

In summary, our cash flows for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

(In millions)

Net cash provided by operating activities $ 207.1 $ 198.3

Net cash used in investing activities (215,093) (305,820)

Net cash provided by (used in) investing activities 524.5 (175.2)

Net cash used in financing activities (196.4) (177.3)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash (0.1) (0.2)

Net decrease in cash, cash equivalents, and restricted cash $ (148,102) $ (362,492)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 535.1 $ (154.4)

Cash flows from operating activities

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Our primary uses of cash from operating activities are for personnel-related expenditures, and other general operating expenses, as well as payments related to taxes, interest and facilities.

Net cash provided by operating activities increased during the nine months ended September 30, 2021, compared to the same period last year, primarily due to an increase in cash received from customers, partially offset by increases in cash paid to employees and vendors, cash paid for income taxes, cash paid for interest, and decreases in cash received from interest on investments and from transition services.

Cash received from customers increased primarily due to higher domain name registrations and renewals and the impact of the .

com price increase which became effective September 1, 2021.

The increased volume of renewal transactions was due in part to early renewal transactions before the .

com price increase became effective.

Cash paid to employees and vendors increased primarily due to the timing of payments and an increase in operating expenses.

Cash paid for income taxes increased primarily due to comparatively higher federal, state, and foreign taxes.

Cash paid for interest increased as the result of the payment of interest on our 2023 Notes through the date of redemption.

Cash received from interest on investments decreased due to a decline in interest rates.

Cash received from transition services d ecreased due to the expiration of the transition services agreement related to our divested security services business in February 2020.

Net cash provided by operating activities increased during the three months ended March 31, 2022, compared to the same period last year, primarily due to decreases in cash paid for income taxes, partially offset by a decrease in cash received from customers.

Cash paid for income taxes decreased primarily due to the timing of certain non-US income tax payments.

Cash received from customers decreased primarily due to timing of payments from certain large customers.

Cash flows from investing activities

The changes in cash flows from investing activities primarily relate to purchases, maturities and sales of marketable securities, purchases of property and equipment and the sale of businesses.

Net cash used in investing activities decreased during the nine months ended September 30, 2021, compared to the same period last year, primarily due to a decrease in purchases of marketable securities, net of proceeds from maturities and sales of marketable securities, partially offset by payments received during 2020 related to our divested security services business and an increase in purchases of property and equipment.

The changes in cash flows from investing activities primarily relate to purchases, maturities and sales of marketable securities, and purchases of property and equipment.

We had net cash inflows from investing activities in the three months ended March 31, 2022, compared to net cash outflows during the same period last year, primarily due to a decrease in purchases of marketable securities, net of proceeds from maturities and sales of marketable securities.

Cash flows from financing activities

The changes in cash flows from financing activities primarily relate to share repurchases, proceeds from and repayment of borrowings, and our employee stock purchase plan.

Net cash used in financing activities decreased during the nine months ended September 30, 2021, compared to the same period last year, primarily due to proceeds received from the issuance of the 2031 Notes and a decrease in share repurchases, partially offset by the redemption of our 2023 Notes.

The changes in cash flows from financing activities primarily relate to share repurchases and our employee stock purchase plan.

Net cash used in financing activities increased during the three months ended March 31, 2022, compared to the same period last year, primarily due an increase in share repurchases.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 2. Management’s Discussion and Analysis