What changed in this filing

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Item 1. Financial Statements

2024-04-25 compared with 2023-10-26 · 58 added, 86 removed, 239 unchanged (38% of the section changed)

3 unchanged sentences

(In millions, except par value)

September 30,

2024 December 31,

29 unchanged sentences

Issued shares:

354.8 at September 30, 2023 and 354.5 at December 31, 2022;

355.1 at March 31, 2024 and 354.9 at December 31, 2023;

Outstanding shares:

102.4 at September 30, 2023 and 105.3 at December 31, 2022

100.1 at March 31, 2024 and 101.3 at December 31, 2023

11,559.4 11,808.0

7 unchanged sentences

(In millions, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Revenues $ 384.3 $ 364.4

10 unchanged sentences

Net income 194.1 178.7

Other comprehensive income (loss) 0.4 0.2 ( 0.3 ) 0.1

Other comprehensive loss ( 0.2 ) —

Comprehensive income $ 193.9 $ 178.7

9 unchanged sentences

(In millions)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Total stockholders’ deficit, beginning of period $ ( 1,581.0 ) $ ( 1,562.2 )

12 unchanged sentences

Beginning balance ( 2.6 ) ( 2.7 )

Other comprehensive income (loss) 0.4 0.2 ( 0.3 ) 0.1

Other comprehensive loss ( 0.2 ) —

Balance, end of period ( 2.8 ) ( 2.7 )

4 unchanged sentences

(In millions)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation expense 15.1 13.8

Amortization of discount on investments in debt securities ( 7.0 ) ( 4.0 )

Other, net 1.0 1.1

1 unchanged sentence

Other assets ( 4.1 ) 1.9

Accounts payable and accrued liabilities ( 16.2 ) ( 40.1 )

Other liabilities ( 8.0 ) 12.1

Deferred revenues 38.6 41.8

5 unchanged sentences

Purchases of property and equipment ( 3.8 ) ( 5.7 )

Net cash (used in) provided by investing activities ( 201.5 ) 546.0

Net cash provided by investing activities 496.4 409.8

Cash flows from financing activities:

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 0.4 ) ( 0.2 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 216.0 ) 337.1

Net increase in cash, cash equivalents, and restricted cash 491.7 446.1

Cash, cash equivalents, and restricted cash at beginning of period 245.5 379.0

16 unchanged sentences

Such reclassifications have no effect on net income as previously reported.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires additional disclosure of significant segment expenses on an annual and interim basis.

This guidance will be applied retrospectively and will be effective for our 2024 Form 10-K, and for interim periods beginning in 2025.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

This guidance will be effective for our 2025 Form 10-K.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Financial Instruments

1 unchanged sentence

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:

September 30, December 31,

March 31, December 31,

(In millions)

11 unchanged sentences

The gross and net unrealized gains and losses included in the fair value of the debt securities were not significant for the periods presented.

All of the debt securities held as of September 30, 2023 are scheduled to mature in less than one year.

All of the debt securities held as of March 31, 2024 are scheduled to mature in less than one year.

Fair Value Measurements

4 unchanged sentences

Debt securities purchased with original maturities in excess of three months are included in Marketable securities.

The fair value of the Company’s foreign currency forward contracts is based on foreign currency rates quoted by banks or foreign currency dealers and other public data sources.

The fair value of all of these financial instruments are classified as Level 1 in the fair value hierarchy.

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

As of September 30, 2023, the carrying value of these financial instruments approximated their fair value.

The aggregate fair value of the Company’s senior notes is $ 1.62 billion and $ 1.65 billion as of September 30, 2023 and December 31, 2022, respectively.

As of March 31, 2024, the Company’s other financial instruments include cash, accounts receivable, restricted cash, and accounts payable whose carrying values approximated their face values.

The aggregate fair value of the Company’s senior notes is $ 1.67 billion and $ 1.69 billion as of March 31, 2024 and December 31, 2023, respectively.

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:

September 30, December 31,

March 31, December 31,

(In millions)

2 unchanged sentences

Accounts receivable, net 6.5 6.3

Unrealized gain on foreign currency forward contracts 4.5 0.2

Foreign currency forward contracts 5.3 —

Taxes receivable 1.4 7.3

Other 1.0 1.2

2 unchanged sentences

Other long-term assets consist of the following:

September 30, December 31,

March 31, December 31,

(In millions)

Operating lease right-of-use asset $ 8.8 $ 7.2

Long-term prepaid registry fees $ 8.3 $ 8.3

Restricted cash 5.3 5.4

Operating lease right-of-use asset 7.4 7.4

Long-term prepaid expenses 7.2 4.8

Restricted cash 5.4 5.4

Other 3.3 3.1

4 unchanged sentences

Accounts payable and accrued liabilities consist of the following:

September 30, December 31,

March 31, December 31,

(In millions)

Accounts payable and accrued expenses $ 9.4 $ 12.5

Taxes payable 83.7 49.5

Customer deposits 66.9 77.2

Accrued employee compensation 38.2 61.2

Taxes payable 43.2 37.4

Interest payable 24.6 19.5

2 unchanged sentences

Current operating lease liabilities 5.0 5.1

Foreign currency forward contracts — 10.7

Other accrued liabilities 2.2 2.9

Total accounts payable and accrued liabilities $ 249.9 $ 257.4

The balance of customer deposits varies from period to period due to the timing of payments from certain large customers.

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, 2022 was paid during the nine months ended September 30, 2023.

Taxes payable reflects amounts accrued for the income tax provision and payments made during the period.

This balance fluctuates from period to period due to the timing of income tax payments in the Company’s major tax jurisdictions.

The balance of customer deposits varies from period to period due to the timing of payments from certain large customers.

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, 2023 was paid during the three months ended March 31, 2024.

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

Property Plant and Equipment, net

The following table presents the detail of property and equipment, net:

September 30, December 31,

(In millions)

Computer equipment and software $ 411.7 $ 402.7

Buildings and building improvements 260.2 257.5

Land 37.9 31.1

Office equipment and furniture 11.0 10.4

Capital work in progress 15.3 3.6

Leasehold improvements 1.6 1.5

Total cost 737.7 706.8

accumulated depreciation ( 499.5 ) ( 474.8 )

Total property and equipment, net $ 238.2 $ 232.0

In July 2023, the Company purchased a building in Reston, Virginia to be used as its future corporate headquarters for $ 19.8 million.

Based on a valuation of the property, $ 13.0 million of the total purchase price was allocated to the building which is included in capital work in progress in the table above due to ongoing construction.

The remaining $ 6.8 million was allocated to land.

Long-term Tax and Other Liabilities

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

September 30, December 31,

(In millions)

Long-term tax liabilities $ 42.5 $ 60.5

Long-term operating lease liabilities 2.9 1.6

Long-term tax and other liabilities $ 45.4 $ 62.1

Long-term tax liabilities as of September 30, 2023 reflects a $ 19.3 million reclassification to current liabilities of the next installment of the transition tax liability on accumulated foreign earnings resulting from the 2017 Tax Cuts and Jobs Act.

The liability related to the unrealized loss on foreign currency forward contracts as of December 31, 2023 was remeasured and paid upon settlement of the forward contract during the three months ended March 31, 2024.

Share Repurchases

Effective July 27, 2023, the Company’s Board of Directors authorized the repurchase of its common stock in the amount of $ 1.14 billion, in addition to the $ 356.1 million that remained available for repurchases under the share repurchase program, for a total repurchase authorization of up to $ 1.50 billion under the program.

Effective July 27, 2023, the Company’s Board of Directors authorized the repurchase of its common stock in the amount of $ 1.14 billion, in addition to the $ 356.1 million that remained available for repurchases under the share repurchase program, for a total authorization of up to $ 1.50 billion under the program.

The program has no expiration date.

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

As of September 30, 2023 there was approximately $ 1.34 billion remaining available for repurchases under the program.

As of March 31, 2024 there was approximately $ 859.6 million remaining available for repurchases under the program.

The Company’s share repurchases are as following.

Amounts may not add up due to rounding:

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

Shares Total Costs Average Price Shares Total Costs Average Price

Three Months Ended March 31, 2024

Shares Total Costs Average Price

(In millions, except average price amounts)

3 unchanged sentences

Since inception, the Company has repurchased 254.9 million shares of its common stock for an aggregate cost of $ 13.92 billion, which is recorded as a reduction of Additional paid-in capital.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

In the nine months ended September 30, 2023, the Company reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in

Accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheet as of September 30, 2023.

The share repurchase and authorization amounts disclosed in this Form 10-Q exclude the excise tax.

The share repurchase and authorization amounts disclosed in this Form 10-Q exclude the excise tax on share repurchases.

Calculation of Earnings per Share

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(In millions)

8 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

Three Months Ended March 31,

(In millions)

10 unchanged sentences

As payments 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 nine months ended September 30, 2023 was primarily driven by amounts billed in the nine months ended September 30, 2023 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 $ 755.4 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, 2023 represents our aggregate remaining performance obligations.

The increase in the deferred revenues balance for the three months ended March 31, 2024 was primarily driven by amounts billed in the three months ended March 31, 2024 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 $ 343.0 million of revenues recognized that were included in the deferred revenues balance at December 31, 2023.

The balance of deferred revenues as of March 31, 2024 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.

The long-term deferred revenues amounts will be recognized in revenues over several years and in some cases up to 10 years.

The long-term deferred revenues amounts will be recognized in revenues over several years and in some cases up to ten years.

Stock-based Compensation

1 unchanged sentence

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(In millions)

6 unchanged sentences

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(In millions)

1 unchanged sentence

Performance-based RSUs 2.1 2.1

ESPP 1.1 1.1 3.3 3.2

Total stock-based compensation $ 15.3 $ 14.1

Non-operating Income, Net

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(In millions)

Interest income $ 11.6 $ 4.6 $ 33.8 $ 6.4

Other, net 1.5 0.3 3.3 0.4

Total non-operating income, net $ 13.1 $ 4.9 $ 37.1 $ 6.8

Interest income is earned principally from the Company’s surplus cash balances and marketable securities.

The increase in interest income during the three and nine months ended September 30, 2023 reflects higher interest rates on the Company’s investments in debt securities.

The increase in other non-operating income, net, during the three and nine months ended September 30, 2023 primarily reflects net gains and losses from the Company’s foreign currency exposure and related hedges.

Non-operating income, net, primarily consists of interest income from the Company’s surplus cash balances and marketable securities.

Interest income was $ 12.0 million and $ 10.7 million during the three months ended March 31, 2024 and 2023, respectively.

The increase in interest income in the first quarter of 2024 reflects higher interest rates on the Company’s investments in debt securities.

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

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

(Dollars in millions)

1 unchanged sentence

Effective tax rate 24 % 24 %

The effective tax rate for each of the periods in the table above was higher than the statutory federal rate of 21 %, due to state income taxes and 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, partially offset by a lower foreign effective tax rate.

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