What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-05 compared with 2025-02-13 · 63 added, 58 removed, 177 unchanged (41% 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, 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.

These forward-looking statements are based on current expectations and assumptions and involve risks, uncertainties, and other important factors, including, among other things, statements regarding the Company’s quarterly dividend and 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.

In some cases, you can identify forward-looking statements by terms such as “assumes,” “could,” “estimates,” “forecasts,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “targets,” “will,” “would,” “seeks,” “expects,” “anticipates,” “intends,” “believes” and similar language intended to identify forward-looking statements.

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

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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.

The number of domain name registrations under our management may be negatively impacted by certain factors, including overall economic conditions, competition from ccTLDs, other gTLDs, services that offer alternatives for an online presence, such as social media, and ongoing changes in the internet practices and behaviors of consumers and businesses.

The number of domain name registrations under our management may be negatively impacted by certain factors, including overall economic conditions, competition from ccTLDs, other gTLDs, services that offer alternatives for an online presence, and ongoing changes in the internet practices and behaviors of consumers and businesses.

Factors such as the evolving practices and preferences of internet users, and how they navigate the internet, as well as the motivation of domain name registrants and how they will manage their investment in domain names, can negatively impact our business and the demand for new domain name registrations and renewals.

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• We recorded operating income of $1,121.0 million during 2025, which represents an increase of 6% as compared to 2024.

• We finished 2024 with 169.0 million .com and .net registrations in the domain name base, which represents a 2.1% decrease from December 31, 2023.

• We finished 2025 with 173.5 million .com and .net registrations in the domain name base, which represents a 2.6% increase from December 31, 2024.

• During 2025, we processed 41.7 million new domain name registrations for .

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

• We repurchased 6.6 million shares of our common stock for an aggregate cost of $1.21 billion in 2024.

• We repurchased 3.4 million shares of our common stock for an aggregate cost of $858.6 million in 2025.

As of December 31, 2025, there was $1.08 billion remaining for future share repurchases under the share repurchase program.

• We generated cash flows from operating activities of $1,091.1 million in 2025, which represents an increase of 21% as compared to 2024.

• Effective September 1, 2024, we increased the annual registry-level wholesale fee for each new and renewal .

com domain name registration from $9.59 to $10.26.

• On November 25, 2024, we renewed the .

com Registry Agreement with ICANN, pursuant to which we will remain the sole registry operator for the .

com registry through November 30, 2030.

Pursuant to the renewed .

com Registry Agreement, we cannot increase the price of a .

com domain name registration during the first two years of the six year contract term.

• On February 3, 2026, our Board of Directors approved a 5.2% increase in the quarterly cash dividend to $0.81 per share of the Company’s outstanding common stock to stockholders of record as of the close of business on February 19, 2026, payable on February 27, 2026.

Critical Accounting Estimates

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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.

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.

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.

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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.

The first such six-year period began on October 26, 2018.

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

We increased 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, and from $9.59 to $10.26 effective September 1, 2024.

Under the .net Registry Agreement, which renewed in June 2023, 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 $9.02 to $9.92 effective February 1, 2023, and from $9.92 to $10.91 effective February 1, 2024.

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.

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

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Revenues increased in 2025 compared to 2024, primarily due to the .

net price increases, partially offset by a decline in the .

net domain name base, and the elimination of revenue from the operation of the .

gov gTLD, which was transitioned to another service provider in the fourth quarter of 2023.

net price increases and an increase in the domain name base.

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, 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 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 remains strong, challenging economic and regulatory conditions have continued to weaken demand for .com and .net domain name registrations in China, and some registrars, particularly in the U.S., have shifted their focus to increasing profitability through higher retail pricing and a decrease in marketing activities targeting new customer acquisition.

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

However, the demand for .

net domain names may be limited by competitive pressure from other TLDs and alternatives for an online presence.

Additionally, changes in internet practices, consumer behavior, and global economic conditions, 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, may impact demand for .

net domain names.

Our domain name base increased during 2025 compared to 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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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 growth in APAC was limited during 2024 compared to 2023 primarily as a result of a 13% decline in revenues from China due to the lower demand noted above.

While revenues increased in all regions during 2025 compared to 2024, the majority of our revenue growth was generated from registrars based in the U.S.

Cost of revenues

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Cost of revenues $ 196.3 3 % $ 191.4 (3) % $ 197.3

Cost of revenues decreased in 2024 compared to 2023 primarily due to decreases in depreciation expenses and telecommunication expenses, partially offset by an increase in compensation and benefits expenses and a combination of other individually insignificant factors.

Cost of revenues increased in 2025 compared to 2024 primarily due to increases in compensation and benefits expenses and a combination of other individually insignificant factors, partially offset by a decrease in depreciation expenses.

Compensation and benefits expenses increased by $5.0 million primarily due to annual salary increases, an increase in bonus expenses, and an increase in average headcount.

Depreciation expenses decreased by $4.4 million due to a decrease in capital expenditures in recent periods.

Telecommunication expenses decreased by $3.9 million primarily due to savings on renewals of colocation agreements.

Compensation and benefits expenses increased by $2.6 million primarily due to annual salary increases.

Research and development

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Research and development expenses increased in 2025 compared to 2024 primarily due to an increase in compensation and benefit expenses and a combination of several other individually insignificant factors.

Compensation and benefits expenses increased by $3.0 million primarily due to annual salary increases.

Compensation and benefits expenses increased by $5.1 million primarily due to annual salary increases and an increase in bonus expenses.

Selling, general and administrative

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Selling, general and administrative $ 235.7 12 % $ 211.1 3 % $ 204.2

Selling, general and administrative expenses increased in 2024 compared to 2023 primarily due to increases in compensation and benefits expenses, equipment and software expenses and professional services expenses, partially offset by an increase in overhead expenses allocated to other cost types.

Compensation and benefits expenses increased by $4.4 million primarily due to annual salary increases.

Selling, general and administrative expenses increased in 2025 compared to 2024 primarily due to increases in compensation and benefits expenses, stock-based compensation expenses, equipment and software expenses, and legal expenses.

Compensation and benefits expenses increased by $9.7 million primarily due to an increase in bonus expenses, higher expenses for certain employee health-insurance related benefits, annual salary increases, and an increase in average headcount.

Stock-based compensation expense increased by $7.2 million primarily due to an increase in the total projected achievement levels on certain performance-based RSU grants and an increase in the value of RSU grants awarded in 2025.

Equipment and software expenses increased by $4.5 million primarily due to increases in expenses related to network security and other software services.

Professional services expenses increased by $2.9 million primarily due to an increase in external consulting costs related to various projects.

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

Legal expenses increased by $4.2 million due to an increase in litigation expenses and other external legal costs.

Interest expense

Interest expense remained consistent during 2024 compared to 2023.

Interest expense increased slightly during 2025 compared to 2024 primarily due to the period of overlap between the issuance of $500.0 million of senior unsecured notes due June 2032 (“2032 Notes”) and repayment of $500.0 million aggregate principal amount of outstanding senior unsecured notes due April 2025 (“2025 Notes”).

Non-operating income, net

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

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

Year Ended December 31,

2025 2024 2023

(In millions)

Interest income $ 26.5 $ 37.4 $ 46.1

Other, net (2.0) 1.6 5.1

Total non-operating income, net $ 24.5 $ 39.0 $ 51.2

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

The decrease in interest income in 2025 primarily reflects the lower amounts invested in debt securities in 2025 and slightly lower interest rates on our investments in debt securities compared to 2024.

Other, net, reflects net gains and losses from the Company’s foreign currency exposure and related hedges.

Income tax expense

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

During 2023, we recognized $69.3 million of income tax benefits related to a step-up in tax basis of certain non-U.S.

intellectual property, recognition of previously unrecognized income tax benefits as the related statutes of limitations lapsed, and a beneficial change in certain state income apportionment rules.

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

The tax regulations included in the Act did not have a material impact on our effective tax rate for 2025 and we do not expect it to have a material impact in future years.

As of December 31, 2025, we had deferred tax assets arising from deductible temporary differences, tax losses, and tax credits of $234.2 million, net of valuation allowances, but before the offset of certain deferred tax liabilities.

With the exception of a portion of deferred tax assets related to intellectual property, 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.

The income tax expense for 2024 includes the impact of the OECD Pillar 2 minimum tax adopted by applicable tax jurisdictions.

While our foreign income taxes increased as a result of the Pillar 2 minimum tax, the overall impact was not material as the additional taxes in these jurisdictions were partly offset by related foreign tax credits in the U.S.

Liquidity and Capital Resources

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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.

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.

In 2024, we repurchased 6.6 million shares of our common stock at an average stock price of $183.84 for an aggregate cost of $1.21 billion under our share repurchase program.

In 2023, we repurchased 4.2 million shares of our common stock at an average stock price of $210.28 for an aggregate cost of $882.8 million.

Effective July 24, 2025, our Board of Directors authorized the repurchase of our common stock in the amount of $913.1 million, in addition to the $586.9 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.

In 2025, we repurchased 3.4 million shares of our common stock at an average stock price of $252.42 for an aggregate cost of $858.6 million under our share repurchase program.

In 2024, we repurchased 6.6 million shares of our common stock at an average stock price of $183.84 for an aggregate cost of $1.21 billion.

As of December 31, 2025, there was approximately $1.08 billion remaining available for future share repurchases under the share repurchase program.

As of December 31, 2024, we had $750.0 million principal amount outstanding 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 April 2025 (“2025 Senior Notes”).

Under existing market conditions, we intend to refinance all of our 2025 Senior Notes through the issuance of new long-term debt.

In April 2025, we initiated a quarterly cash dividend.

In 2025, we paid dividends of $215.2 million.

On February 3, 2026, our Board of Directors declared a cash dividend of $0.81 per share of the Company’s outstanding common stock to stockholders of record as of the close of business on February 19, 2026, payable on February 27, 2026.

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

If a suitable refinancing arrangement is not available due to a change in market conditions, we intend to utilize the credit facility to repay $200.0 million of the 2025 Senior Notes.

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 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 quarterly dividend, 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.

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Effect of exchange rate changes on cash, cash equivalents and restricted cash — (0.8) (0.1)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (33.4) $ (133.5) $ 150.2

Net increase (decrease) in cash, cash equivalents and restricted cash $ 97.4 $ (33.4) $ (133.5)

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 2024 compared to 2023 primarily due to an increase in cash received from customers and a decrease in cash paid for income taxes, partially offset by an increase in cash paid to employees and vendors.

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

com and the .net price increases.

Cash paid for income taxes decreased primarily due to comparatively lower federal and foreign income tax payments, partially offset by higher state income tax payments and a higher installment payment for the transition tax on accumulated foreign earnings resulting from the 2017 Tax Cuts and Jobs Act.

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

Net cash provided by operating activities increased in 2025 compared to 2024 primarily due to an increase in cash received from customers, decreases in cash paid for income taxes and cash paid to employees and vendors, partially offset by an increase in cash paid for interest.

Cash received from customers increased primarily due to the .

net price increases and higher .

com domain name registrations and renewals.

Cash paid for income taxes decreased primarily due to the enactment of the Act which restored the immediate deduction of research and development expenditures for U.S.

federal income taxes.

Cash paid to employees and vendors decreased primarily due to the timing of payments.

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.

We had net cash inflows from investing activities in 2024, compared to net cash outflows from investing activities in 2023, 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, primarily related to the purchase of a building in 2023.

Net cash provided by investing activities decreased in 2025 compared to 2024 primarily due to a decrease 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 our employee stock purchase plan and payment of excise tax on share repurchases.

Net cash used in financing activities increased in 2024 compared to 2023 primarily due to an increase in share repurchases and payment of excise tax on share repurchases in 2024.

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 in 2025 compared to 2024 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 shareholders, and an increase in the excise tax paid on share repurchases.

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