What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-24 compared with 2025-04-24 · 72 added, 65 removed, 135 unchanged (50% of the section changed)

5 unchanged sentences

Our actual results may differ significantly from those projected in the forward-looking statements.

Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part II, Item 1A of the Quarterly Report on Form 10-Q for the period ended March 31, 2025.

You should also carefully review the risks described in other documents we file from time to time with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q or Current Reports on Form 8-K that we file in 2025.

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

As of March 31, 2025, we had 169.8 million .com and .net registrations in the domain name base.

As of June 30, 2025, we had 170.5 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 $402.3 million during the three months ended March 31, 2025, which represents an increase of 5% compared to the same period in 2024.

• We recorded operating income of $271.2 million during the three months ended March 31, 2025, which represents an increase of 5% compared to the same period in 2024.

• As of March 31, 2025, we had 169.8 million .com and .net registrations in the domain name base, which represents a 1.5% decrease from March 31, 2024, and a net increase of 0.8 million domain name registrations from December 31, 2024.

• During the three months ended March 31, 2025, we processed 10.1 million new domain name registrations for .com and .net compared to 9.5 million for the same period in 2024.

• We recorded revenues of $409.9 million and $812.2 million during the three and six months ended June 30, 2025, which represents an increase of 6% and 5%, respectively, compared to the same periods in 2024.

• We recorded operating income of $280.7 million and $551.9 million during the three and six months ended June 30, 2025, which represents an increase of 5% compared to the same periods in 2024.

• As of June 30, 2025, we had 170.5 million .com and .net registrations in the domain name base, which represents a 0.1% decrease from June 30, 2024, and a net increase of 0.7 million domain name registrations from March 31, 2025.

• During the three months ended June 30, 2025, we processed 10.4 million new domain name registrations for .com and .net compared to 9.2 million for the same period in 2024.

• The final .

net renewal rate for the fourth quarter of 2024 was 74.0% compared to 73.2% for the fourth quarter of 2023.

net renewal rate for the first quarter of 2025 was 75.5% compared to 74.1% for the first quarter of 2024.

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

• We generated cash flows from operating activities of $291.3 million during the three months ended March 31, 2025, compared to $257.3 million for the same period in 2024.

• During the three months ended March 31, 2025, we repurchased 1.0 million shares of our common stock for an aggregate cost of $229.9 million.

As of March 31, 2025, there was $792.7 million remaining for future share repurchases under the share repurchase program.

• On March 11, 2025, we issued $500.0 million of 5.25% senior notes due June 1, 2032.

On March 31, 2025, we used the net proceeds from the 2032 Notes, along with cash on hand, to fund the repayment of all of our $500.0 million aggregate principal amount of outstanding 5.25% senior notes due April 1, 2025.

• On April 23, 2025, our Board of Directors declared a cash dividend of $0.77 per share of our outstanding common stock to stockholders of record as of the close of business on May 19, 2025, payable on May 28, 2025.

We intend to continue to pay a cash dividend on a quarterly basis, subject to market conditions and approval by our Board of Directors.

• We generated cash flows from operating activities of $493.8 million during the six months ended June 30, 2025, compared to $417.7 million for the same period in 2024.

• During the three months ended June 30, 2025, we repurchased 0.6 million shares of common stock for an aggregate cost of $162.6 million.

As of June 30, 2025, there was $630.1 million remaining for future share repurchases under

the share repurchase program.

Effective July 24, 2025, the Board of Directors authorized the repurchase of common stock in the amount of $913.1 million, in addition to the $586.9 million that remained available for repurchases under the prior share repurchase authorization, for a total repurchase authorization of up to $1.50 billion under the program.

• On April 23, 2025, the Board of Directors declared a cash dividend of $0.77 per share of outstanding common stock, totaling $72.1 million, which was paid on May 28, 2025.

On July 22, 2025, the Board of Directors declared a cash dividend of $0.77 per share of outstanding common stock to stockholders of record as of the close of business on August 19, 2025, payable on August 27, 2025.

Pursuant to our agreements with ICANN, we make available files containing all active domain names registered in the .com and .net registries.

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

Three Months Ended March 31,

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

2025 2024 2025 2024

Revenues 100.0 % 100.0 % 100.0 % 100.0 %

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The current such six-year period began on October 26, 2024.

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

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

com domain name registration from $9.59 to $10.26 effective September 1, 2024.

Under the .net Registry Agreement, we are permitted to increase the price of .net domain name registrations by up to 10% each year during the term of our agreement with ICANN, through June 30, 2029.

We increased the annual registry-level wholesale fee for each new and renewal .net domain name registration from $9.92 to $10.91 effective February 1, 2024.

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

renewal .net domain name registration from $9.92 to $10.91 effective February 1, 2024.

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

A comparison of revenues is presented below:

Three Months Ended March 31,

2025 % Change 2024

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

2025 % Change 2024 2025 % Change 2024

(Dollars in millions)

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

March 31, 2025 % Change March 31, 2024

June 30, 2025 % Change June 30, 2024

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

170.5 million —% 170.6 million

Revenues increased during the three months ended March 31, 2025, as compared to the same period last year, primarily due to the .

net price increases, partially offset by a decline in the .com and .net domain name base.

Revenues increased during the three and six months ended June 30, 2025, as compared to the same periods last year, primarily due to the .

net price increases, partially offset by a slight decline in the .com and .net domain name base as of June 30, 2025 compared to June 30, 2024.

Demand for .com and .net 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 and artificial intelligence, ongoing changes in internet practices and behaviors of consumers and businesses, 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 conditions, has limited the demand for .com and .net domain names and may continue to do so in the future.

While the core value proposition of a domain name has remained strong, challenging economic and regulatory conditions weakened demand for .

net domain name registrations in China, and some registrars, particularly in the U.S., shifted their focus to increasing profitability through higher retail pricing and decreasing marketing activities targeting new customer acquisition during 2024.

The combination of these factors negatively impacted our renewal rates and the volume of new domain name registrations, resulting in a decline in our domain name base during 2024.

These business conditions began to improve at the end of 2024 and have continued into the first quarter of 2025 resulting in an increase in both new registrations and renewal rates.

While still early, we are seeing more focus from registrars on customer acquisition and some early engagement from registrars with our marketing programs.

net domain names and may continue to do so in the future.

Our domain name base increased during the three and six months ended June 30, 2025 compared to December 31, 2024, with higher new registrations and renewal rates, as business conditions improved following a period of decline during 2024 and as registrars focus more on customer acquisition and have continued to engage with our marketing programs.

Geographic revenues

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The following table presents a comparison of our geographic revenues:

Three Months Ended March 31,

2025 % Change 2024

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

2025 % Change 2024 2025 % Change 2024

(Dollars in millions)

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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.

The majority of our revenue growth was generated from registrars based in the U.S.

and EMEA, while revenue in APAC decreased slightly during the three months ended March 31, 2025 compared to the same period in 2024.

The decline in revenues from registrars based in APAC was due to lower demand in China where revenues decreased by 7% compared to the prior period.

While revenues increased in all regions during the three and six months ended June 30, 2025, compared to the same periods in 2024, the majority of our revenue growth was generated from registrars based in the U.S.

Cost of revenues

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A comparison of cost of revenues is presented below:

Three Months Ended March 31,

2025 % Change 2024

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

2025 % Change 2024 2025 % Change 2024

(Dollars in millions)

Cost of revenues $ 49.1 4% $ 47.1 $ 98.5 2% $ 96.2

Cost of revenues remained consistent during the three months ended March 31, 2025, compared to the same period last year.

Cost of revenues increased slightly during the three months ended June 30, 2025, compared to the same period last year, due to a combination of individually insignificant factors.

Cost of revenues increased slightly during the six months ended June 30, 2025, compared to the same period last year, primarily due to a $2.7 million increase in compensation and benefit expenses, including stock-based compensation expenses, as a result of annual salary increases, an increase in average headcount, and a combination of other individually insignificant factors.

Research and development

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A comparison of research and development expenses is presented below:

Three Months Ended March 31,

2025 % Change 2024

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

2025 % Change 2024 2025 % Change 2024

(Dollars in millions)

Research and development $ 25.7 8% $ 23.8 $ 51.7 6% $ 48.6

Research and development expenses increased slightly during the three months ended March 31, 2025, compared to the same period last year, due to a combination of individually insignificant factors.

Research and development expenses increased slightly during the three and six months ended June 30, 2025, compared to the same periods last year, due to a combination of individually insignificant factors.

Selling, general and administrative

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

Three Months Ended March 31,

2025 % Change 2024

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

2025 % Change 2024 2025 % Change 2024

(Dollars in millions)

Selling, general and administrative $ 54.4 9% $ 50.0 $ 110.1 9% $ 101.5

Selling, general and administrative expenses increased during the three months ended March 31, 2025, compared to the same period last year, primarily due to an increase in compensation and benefits expenses, including stock-based compensation expenses.

Compensation and benefits expenses, including stock-based compensation expenses, increased by $3.8 million, primarily due to higher expenses for certain employee health insurance related benefits, annual salary increases, and an increase in the total projected achievement levels on certain performance-based RSU grants.

Selling, general and administrative expenses increased during the three months ended June 30, 2025, compared to the same period last year, primarily due to an increase in compensation and benefits expenses.

Compensation and benefits expenses increased by $2.9 million primarily due to an increase in average headcount, higher expenses for certain employee health insurance related benefits, an increase in bonus expenses, and annual salary increases, partially offset by a combination of individually insignificant factors.

Selling, general and administrative expenses increased during the six months ended June 30, 2025, compared to the same period last year, primarily due to increases in compensation and benefit expenses and stock-based compensation expenses.

Compensation and benefits expenses increased by $4.6 million primarily due to an increase in average headcount, higher expenses for certain employee health insurance related benefits, an increase in bonus expenses, and annual salary increases.

Stock-based compensation expenses increased by $3.6 million primarily due to an increase in the total projected achievement levels on certain performance-based RSU grants and an increase in the total value of RSUs granted in 2025.

Interest expense

Interest expense increased slightly during the three months ended March 31, 2025, compared to the same period last year, due to interest accrued on the 2032 Notes issued on March 11, 2025.

Interest expense increased slightly during the six months ended June 30, 2025, compared to the same period last year, primarily due to the period of overlap between the issuance of the 2032 Notes and repayment of the 2025 Notes.

Non-operating income, net

Non-operating income decreased during the three months ended March 31, 2025, compared to the same period last year, primarily due to a decrease in interest income as a result of lower amounts invested in debt securities in the current period and slightly lower interest rates on the Company’s investments in debt securities.

Non-operating income decreased during the three and six months ended June 30, 2025, compared to the same periods last year, primarily due to a decrease in interest income as a result of lower amounts invested in debt securities in the current periods and slightly lower interest rates on the Company’s investments in debt securities.

Income tax expense

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

Three Months Ended March 31,

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

2025 2024 2025 2024

(Dollars in millions)

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

House Resolution 1, commonly referred to as the One Big Beautiful Bill Act, was enacted into law on July 4, 2025.

We are currently evaluating the impact that the tax regulations included in the Act will have on our financial statements.

Liquidity and Capital Resources

The following table presents our principal sources of liquidity:

March 31, December 31,

June 30, December 31,

(In millions)

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

As of March 31, 2025, all of our debt securities have contractual maturities of less than one year.

As of June 30, 2025, 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.

Effective July 25, 2024, our Board of Directors authorized the repurchase of our common stock in the amount of $1.11 billion, in addition to the $388.0 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.

During the three months ended March 31, 2025, we repurchased 1.0 million shares of our common stock for an aggregate cost of $229.9 million.

As of March 31, 2025, there was approximately $792.7 million remaining available for future share repurchases under the share repurchase program.

On March 11, 2025, we issued $500.0 million of 5.25% senior notes due June 1, 2032.

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

As of March 31, 2025, we had no outstanding borrowings and $200.0 million in borrowing capacity under our credit facility which matures in 2028.

On April 23, 2025, our Board of Directors declared a cash dividend of $0.77 per share of our outstanding common stock to stockholders of record as of the close of business on May 19, 2025, payable on May 28, 2025.

We intend to continue to pay a cash dividend on a quarterly basis, subject to market conditions and approval by our Board of Directors.

Effective July 25, 2024, the Board of Directors authorized the repurchase of common stock in the amount of $1.11 billion, in addition to the $388.0 million that remained available for repurchases under the prior share repurchase authorization, for a total repurchase authorization of up to $1.50 billion under the program.

During the three months ended June 30, 2025, we repurchased 0.6 million shares of common stock for an aggregate cost of $162.6 million.

As of June 30, 2025, there was $630.1 million remaining available for future share repurchases under the share repurchase program.

On April 23, 2025, the Board of Directors declared a cash dividend of $0.77 per share of outstanding common stock, totaling $72.1 million, which was paid on May 28, 2025.

We intend to continue to pay a cash dividend on a quarterly basis, subject to market conditions and approval by the Board of Directors.

On March 11, 2025, we issued $500.0 million of the 2032 Notes.

On March 31, 2025, we used the net proceeds from the 2032 Notes, along with cash on hand, to fund the repayment of all of our $500.0 million aggregate principal amount of outstanding 2025 Notes.

As of June 30, 2025, we also had $750.0 million principal amount outstanding of 2.70% senior unsecured notes due 2031 and $550.0 million principal amount outstanding of 4.75% senior unsecured notes due 2027.

As of June 30, 2025, we had no outstanding borrowings and $200.0 million in borrowing capacity under our credit facility which matures in 2028.

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, fund our dividend program, and to service our debt for the next 12 months and beyond.

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Our cash requirements have not changed materially since the 2024 Form 10-K.

In summary, our cash flows for the three months ended March 31, 2025 and 2024 were as follows:

Three Months Ended March 31,

In summary, our cash flows for the six months ended June 30, 2025 and 2024 were as follows:

Six Months Ended June 30,

(In millions)

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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 three months ended March 31, 2025, compared to the same period last year, primarily due to an increase in cash received from customers, partially offset by increases in cash paid for interest and cash paid for income taxes.

Net cash provided by operating activities increased during the six months ended June 30, 2025, compared to the same period last year, primarily due to an increase in cash received from customers, partially offset by increases in cash paid for income taxes and cash paid for interest.

Cash received from customers increased primarily due to the .

1 unchanged sentence

com domain name registrations and renewals.

Cash paid for interest increased due to the payment of interest accrued on our 2025 Notes in March 2025, prior to their maturity date of April 1, 2025.

Cash paid for income taxes increased primarily due to comparatively higher non-US income tax payments.

Cash paid for income taxes increased primarily due to comparatively higher state and non-U.S.

income taxes.

Cash paid for interest increased due to the payment of interest on our 2032 Notes in June 2025.

Cash flows from investing activities

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

Net cash provided by investing activities decreased during the three months ended March 31, 2025, compared to the same period last year, primarily due to a decrease in proceeds from maturities and sales of marketable securities, net of purchases of marketable securities.

Net cash provided by investing activities decreased during the six months ended June 30, 2025, compared to the same period last year, primarily due to a decrease in proceeds from maturities and sales of marketable securities, net of purchases of marketable securities.

Cash flows from financing activities

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

Net cash used in financing activities decreased during the three months ended March 31, 2025, compared to the same period last year, primarily due to proceeds received from the issuance of our 2032 Notes and a decrease in share repurchases, partially offset by the repayment of our 2025 Notes.

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

Net cash used in financing activities decreased during the six months ended June 30, 2025, compared to the same period last year, primarily due to proceeds received from the issuance of our 2032 Notes and a decrease in share repurchases, partially offset by the repayment of our 2025 Notes, dividend payments to common shareholders in May 2025, and payment of excise tax on share repurchases.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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 2. Management’s Discussion and Analysis