What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-17 compared with 2022-02-18 · 82 added, 114 removed, 149 unchanged (57% of the section changed)

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This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of 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) revenue growth in 2022, (iii) continued growth in registrations in the domain name base in 2022, (iv) cost of revenues, sales and marketing expenses, research and development expenses, general and administrative expenses, interest expense, and non-operating income, net, in 2022, (v) our effective tax rate for 2022, (vi) the sufficiency of our existing cash, cash equivalents and marketable securities, and funds generated from operations, together with our ability to arrange for additional financing, (vii) cash paid for income taxes in 2022, and (viii) our planned property and equipment expenditures for 2022.

These forward-looking statements are based on current expectations and assumptions and involve risks and uncertainties, including, statements regarding our expectations about 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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Renewal rates are not fully measurable until 45 days after the end of the quarter.

• We repurchased 3.3 million shares of our common stock for an aggregate cost of $700.0 million in 2021.

• We repurchased 5.5 million shares of our common stock for an aggregate cost of $1.03 billion in 2022.

As of December 31, 2022, there was $858.8 million remaining for future share repurchases under the share repurchase program.

• Effective February 10, 2022, our Board of Directors authorized the repurchase of our common stock in the amount of $705.4 million, in addition to the $294.6 million that remained available for repurchases under the share repurchase program, for a total repurchase authorization of up to $1.0 billion under the program.

• We generated cash flows from operating activities of $831.1 million in 2022, which represents an increase of 3% as compared to 2021.

• During the fourth quarter of 2021, we recognized a deferred income tax benefit of $165.5 million related to the transfer of certain non-US intellectual property between subsidiaries.

• On June 8, 2021, we issued $750.0 million of 2.700% Senior Notes due June 15, 2031 (“2031 Notes”).

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 (“2023 Notes”).

• On February 9, 2023, we announced that we will increase the annual registry-level wholesale fee for each new and renewal .com domain name registration from $8.97 to $9.59, effective September 1, 2023.

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 2021 primarily driven by an increase in the domain name base for the .com TLD;

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 I, Item 1A of this Form 10-K.

Critical Accounting Estimates

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Significant judgment or interpretation of these laws and regulations is often required in determining our worldwide provision for income taxes, including, for example, the calculations of taxable income in each jurisdiction, deferred taxes, and the availability and amount of deductions and tax credits.

We have recognized $234.6 million of deferred tax assets, net as of December 31, 2022.

Our income tax expense was $206.4 million for the year ended December 31, 2022.

The final taxes payable are also dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from various tax examinations.

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however, due to the complexity of some of these uncertainties, the ultimate resolution may result in an outcome that is materially different from our current estimate of unrecognized tax benefits.

See Note 10, “Income Taxes” of our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of the $165.5 million

deferred tax asset and corresponding income tax benefit recognized in the fourth quarter of 2021 and the $204.2 million income tax benefit recognized in 2020 as a result of the remeasurement of certain previously unrecognized income tax benefits.

See Note 10, “Income Taxes” of our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of the $165.5 million deferred tax asset and corresponding income tax benefit recognized in the fourth quarter of 2021.

Results of Operations

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Cost of revenues 14.1 14.5 14.2

Sales and marketing 3.0 2.9 3.8

Research and development 6.0 6.1 5.9

General and administrative 11.1 11.8 11.2

Selling, general and administrative 13.7 14.1 14.7

Total costs and expenses 33.8 34.7 34.8

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Interest expense (5.3) (6.3) (7.1)

Non-operating (loss) income, net (0.1) 1.2 3.5

Non-operating income (loss), net 0.9 (0.1) 1.2

Income before income taxes 61.8 58.9 59.3

Income tax benefit (expense) 0.2 5.1 (11.9)

Income tax (expense) benefit (14.5) 0.2 5.1

Net income 47.3 % 59.1 % 64.4 %

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.

For domain names registered in the .com and .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.

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

For domain names registered in the .com and .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, 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 DOC.

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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 agreed to an amendment to the .com Registry Agreement that, among other items, incorporates these changes agreed to with the DOC to the pricing terms.

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.

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

We increased the annual registry-level wholesale fee for each new and renewal .

com domain name registration from $7.85 to $8.39 effective September 1, 2021, and from $8.39 to $8.97 effective September 1, 2022.

On February 9, 2023, we announced that we will increase the annual registry-level wholesale fee for each new and renewal .com domain name registration from $8.97 to $9.59, effective September 1, 2023.

We have the contractual right to increase the fees for .net domain name registrations by up to 10% each year during the term of our agreement with ICANN, through June 30, 2023.

We have the contractual right to increase the fees for .

net domain name registrations by up to 10% each year during the term of our agreement with ICANN, through June 30, 2023.

On July 28, 2022, we announced that we will increase the annual registry-level wholesale fee for each new and renewal .net domain name registration from $9.02 to $9.92, effective February 1, 2023.

All fees paid to us for .com and .net registrations are in U.S.

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Change 2021 %

(Dollars in thousands)

(Dollars in millions)

Revenues $ 1,424.9 7 % $ 1,327.6 5 % $ 1,265.1

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173.8 million — % 173.4 million 5 % 165.2 million

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 the past and may continue to do so in the future.

Revenues increased by $62.5 million in 2021 compared to 2020, primarily due to an increase in revenues from the operation of the registry for the .com TLD driven by a 5% increase in the domain name base for .com and the price increase which became effective September 1, 2021.

Revenues increased by $97.3 million in 2022 compared to 2021, primarily due to an increase in revenues from the operation of the registry for the .

com gTLD driven by the price increases that became effective September 1, 2022 and 2021, and to a lesser extent, an increase in the domain name base for .

As discussed in prior periods, we believe that the effects of the COVID-19 pandemic initially led to an 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 increased demand appears to have subsided in 2022.

Additionally, revenues from the operation of the .

tv registry increased by $6.6 million in 2022 primarily due to the recognition of the remaining deferred revenue as the operation of the .

tv registry was transitioned to a new operator in November 2022 and upon completion of the transition, we had no remaining performance obligations to our customers.

Demand for domain names 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, such as for resale at increased prices or for revenue generation through website advertising, and global economic uncertainty, has limited the demand for domain names and may continue to do so in the future.

Geographic revenues

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Europe, the Middle East and Africa (“EMEA”);

and certain other countries, including Canada, Australia and Japan.

and certain other countries, including Canada, Japan and Singapore.

The following table presents a comparison of the Company’s geographic revenues:

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Change 2021 %

(Dollars in thousands)

(Dollars in millions)

U.S $ 937.6 10 % $ 851.3 6 % $ 804.7

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Revenue growth for each region may be impacted by registrars reincorporating, relocating, or from acquisitions or changes in affiliations of resellers.

Revenues in the U.S.

benefited from several such changes during 2022, while revenues in EMEA were negatively impacted.

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

Revenues increased during 2021 in all regions except China.

Revenues from registrars based in China declined during 2021 as a result of lower new registrations and renewal rates in the country.

We expect revenues to continue to grow in 2022, 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.

During 2022, revenues increased in all regions except EMEA, which declined due to the factors described above.

Cost of revenues

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Change 2021 %

(Dollars in thousands)

(Dollars in millions)

Cost of revenues $ 200.7 5 % $ 191.9 7 % $ 180.2

Cost of revenues increased by $11.8 million in 2021 compared to 2020 primarily due to increases in direct cost of revenues, allocated overhead expenses and depreciation expenses.

Direct cost of revenues increased by $5.7 million primarily due to an increase in registry fees payable to ICANN in connection with the operation of the registry for the .com TLD.

Allocated overhead expenses increased by $2.4 million due to an increase in total allocable expenses.

Depreciation expenses increased by $1.9 million as a result of increased investments in our data centers and network infrastructure.

We expect cost of revenues as a percentage of revenues to remain consistent in 2022 as compared to 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:

Year Ended December 31,

Change 2020 %

(Dollars in thousands)

Sales and marketing $ 39,877 8 % $ 36,790 (21) % $ 46,637

Sales and marketing expenses increased by $3.1 million in 2021 compared to 2020 primarily due to a $2.6 million increase in salary and employee benefits expenses as a result of 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 remain consistent in 2022 as compared to 2021.

Cost of revenues increased by $8.8 million in 2022 compared to 2021 primarily due to a increases in compensation and benefits expenses, telecommunications expenses, allocated overhead expenses and several other individually insignificant factors.

Compensation and benefits expenses increased by $2.3 million as a result of an increase in expenses related to employee salaries.

Telecommunications expenses increased by $1.9 million due to an increase in network costs supporting our operations.

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

Research and development

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Change 2021 %

(Dollars in thousands)

(Dollars in millions)

Research and development $ 85.7 6 % $ 80.5 8 % $ 74.7

Research and development expenses increased by $5.9 million in 2021 compared to 2020 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 $3.0 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 in 2022 as compared to 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:

Research and development expenses increased by $5.2 million in 2022 compared to 2021 primarily due to a decrease in capitalized labor, an increase in allocated overhead expenses and a combination of several other individually insignificant factors.

Capitalized labor decreased by $1.5 million due to a shift in work from capital projects to certain non-capital projects and

maintenance of existing software products.

Allocated overhead expenses increased by $1.3 million primarily due to an increase in total allocable expenses.

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:

Year Ended December 31,

Change 2021 %

(Dollars in thousands)

General and administrative $ 148,434 (1) % $ 149,213 8 % $ 137,625

General and administrative expenses decreased by $0.8 million in 2021 compared to 2020 primarily due to decreases in professional services expenses and charitable contributions and an increase in overhead expenses allocated to other cost types, partially offset by increases in salary and employee benefits expenses, equipment and software expenses, and stock-based compensation expenses.

Professional services expenses decreased by $6.0 million due to a decrease in external consulting costs on various projects.

Overhead expenses allocated to other cost types increased by $5.0 million due to an increase in the total allocable expenses.

Charitable contributions decreased by $1.6 million due to greater contributions made during 2020 to help with immediate COVID-related hardship and to support social justice efforts, compared to contributions made during 2021.

Salary and employee benefits expenses increased by $4.7 million due to an increase in average headcount and higher expenses for certain employee health insurance related benefits.

(Dollars in millions)

Selling, general and administrative $ 195.4 4 % $ 188.4 1 % $ 186.0

Selling, general and administrative expenses increased by $7.0 million in 2022 compared to 2021 primarily due to increases in stock-based compensation expenses, equipment and software expenses, compensation and benefits expenses, and several other individually insignificant factors, partially offset by an increase in overhead expenses allocated to other cost types.

Stock-based compensation expenses increased by $3.3 million due to higher projected achievement levels on certain performance-based RSU grants and increases in the total value of RSUs granted in 2022.

Equipment and software expenses increased by $3.1 million due to expenses related to network security and other software services.

Stock-based compensation expenses increased by $3.0 million due to higher achievement levels on certain performance-based RSU grants and increases in the total value of RSUs granted in 2021.

We expect general and administrative expenses as a percentage of revenues to remain consistent in 2022 as compared to 2021.

Compensation and benefits expenses increased by $1.4 million due to increased employee salaries expenses and insurances related benefits expenses.

Overhead expenses allocated to other cost types increased by $3.1 million due to an increase in the total allocable expenses.

Interest expense

Interest expense decreased by $6.9 million in 2021 compared to 2020 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 to decrease in 2022 due to the lower interest rate on our 2031 Notes compared to the 2023 Notes.

Non-operating loss, net

See Note 9, “Non-operating (Loss) Income, Net” of our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

We expect Non-operating loss, net to decrease in 2022 as compared to 2021 due to the loss on extinguishment of debt recognized in 2021.

Income tax (benefit) expense

Interest expense decreased by $8.0 million in 2022 compared to 2021 primarily due to the lower interest rate on our 2031 Notes compared to the 2023 Notes which were redeemed in June 2021.

Non-operating income (loss), net

See Note 9, “Non-operating Income (Loss), Net” of our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

Income tax expense (benefit)

Year Ended December 31,

2022 2021 2020

(Dollars in thousands)

Income tax (benefit) expense (2,611) $ (64,644) $ 146,477

(Dollars in millions)

Income tax expense (benefit) 206.4 $ (2.6) $ (64.7)

Effective tax rate 23 % — % (9) %

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

taxes on foreign earnings, net of foreign tax credits.

Additionally, during 2021, we completed a transfer of intellectual property between certain non-U.S.

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.

During 2021, we completed a transfer of intellectual property between certain non-U.S.

subsidiaries.

This intellectual property did not have any book value, however the transfer created an amortizable tax basis that resulted in the recognition of a $165.5 million deferred tax asset and a corresponding income tax benefit.

During 2020, we recognized an income tax benefit of $204.2 million as a result of the remeasurement of certain previously unrecognized income tax benefits.

The majority of this tax benefit related to the worthless stock deduction taken in 2013.

These remeasurements were based on written confirmations from Internal Revenue Service (“IRS”), received in 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, and the lapse of statutes of limitations related to other unrecognized income tax benefits.

Notwithstanding these written confirmations, our U.S.

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

As of December 31, 2022, we had deferred tax assets arising from deductible temporary differences, tax losses, and tax credits of $236.2 million, net of valuation allowances, but before the offset of certain deferred tax liabilities.

With the exception of

deferred tax assets related to certain state and foreign net operating loss and foreign tax credit carryforwards, we believe it is more likely than not that the tax effects of the deferred tax liabilities, together with future taxable income, will be sufficient to fully recover the remaining deferred tax assets.

We expect the effective tax rate for 2022 to be between 21% and 24%.

With the exception of deferred tax assets related to certain state and foreign net operating loss and foreign tax credit carryforwards, we believe it is more likely than not that the tax effects of the deferred tax liabilities, together with future taxable income, will be sufficient to fully recover the remaining deferred tax assets.

Liquidity and Capital Resources

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As of December 31,

(In thousands)

(In millions)

Cash and cash equivalents $ 373.6 $ 223.5

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For additional information on our investment portfolio, see Note 2, “Financial Instruments,” of our Notes to Consolidated Financial Statements in Item 8 of this Form 10-K.

In 2021, we repurchased 3.3 million shares of our common stock at an average stock price of $215.16 for an aggregate cost of $700.0 million under our share repurchase program.

In 2022, we repurchased 5.5 million shares of our common stock at an average stock price of $187.07 for an aggregate cost of $1.03 billion under our share repurchase program.

In 2021, we repurchased 3.3 million shares of our common stock at an average stock price of $215.16 for an aggregate cost of $700.0 million.

Effective February 10, 2022, our Board of Directors authorized the repurchase of our common stock in the amount of $705.4 million, in addition to the $294.6 million that remained available for repurchases under the share repurchase program, for a total repurchase authorization of up to $1.0 billion under the program.

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 December 31, 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 December 31, 2021, there were no borrowings outstanding under our $200.0 million credit facility that will expire in 2024.

Effective October 27, 2022, our Board of Directors authorized the repurchase of our common stock in the amount of $803.0 million, in addition to the $197.0 million that remained available for repurchases under the share repurchase program, for a total repurchase authorization of up to $1.00 billion under the program.

As of December 31, 2022, there was approximately $858.8 million remaining available for future share repurchases under the share repurchase program which has no expiration date.

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

As of December 31, 2022, there were no borrowings outstanding under our $200.0 million unsecured revolving 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.

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2022 2021 2020

(In thousands)

(In millions)

Net cash provided by operating activities $ 831.1 $ 807.2 $ 730.2

Net cash (used in) provided by investing activities (269,246) (72,258) 167,195

Net cash provided by (used in) investing activities 355.7 (269.2) (72.3)

Net cash used in financing activities (1,035.8) (719.1) (764.9)

Effect of exchange rate changes on cash, cash equivalents and restricted cash (0.8) (0.7) —

Net (decrease) increase in cash, cash equivalents and restricted cash $ (181,785) $ (107,000) $ 150,848

Net increase (decrease) in cash, cash equivalents and restricted cash $ 150.2 $ (181.8) $ (107.0)

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 in 2021 compared to 2020 primarily due to an increase in cash received from customers, partially offset by increases in cash paid for income taxes, cash paid to employees and vendors, 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 for income taxes increased primarily due to comparatively higher federal, state, and foreign taxes.

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

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

Cash received from transition services decreased 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 in 2022 compared to 2021 primarily due to increases in cash received from customers and interest on investments and a decrease in cash paid for interest , partially offset by an increase in cash paid for income taxes.

Cash received from customers increased primarily due to the impact of the .

com price increases that were effective on each of September 1, 2021 and September 1, 2022.

Cash received from interest on investments increased due to higher interest

rates on our investments in debt securities.

Cash paid for interest decreased due to the lower interest rate on our 2031 Notes compared to the 2023 Notes which were refinanced in the second quarter of 2021.

Cash paid for income taxes increased primarily due to comparatively higher U.S.

federal, state, and foreign income taxes.

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 increased in 2021 compared to 2020 primarily due to an increase in purchases of marketable securities and investments, net of proceeds from maturities and sales of marketable securities and investments, an increase in purchases of property and equipment, and payments received during 2020 related to our divested security services business.

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 2022, compared to net cash outflows in 2021, primarily due to an increase in proceeds from maturities and sales of marketable securities, net of purchases of marketable securities, and a decrease in purchases of property and equipment.

Cash flows from financing activities

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

Net cash used in financing activities decreased in 2021 compared to 2020 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.

We expect cash paid for income taxes as a percentage of pre-tax income to be between 21% and 24% in 2022.

Property and Equipment Expenditures

Our planned property and equipment expenditures for 2022 are anticipated to be between $40.0 million and $50.0 million and will primarily be focused on infrastructure upgrades software enhancements.

Net cash used in financing activities increased in 2022 compared to 2021, primarily due an increase in share repurchases, partially offset by the net impact of the redemption of our 2023 Senior Notes and the issuance of the 2031 Senior Notes during 2021.

Dilution from RSUs

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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-K

Item 7. Management’s Discussion and Analysis