VRSN Q1 Earnings Call: Domain Growth and Dividend Initiation Highlight Strategic Shift

Domain name registry operator Verisign (NASDAQ:VRSN) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 4.7% year on year to $402.3 million. Its GAAP profit of $2.10 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

VeriSign’s first quarter was defined by growth in its core domain name registry business and a significant capital allocation shift. Management pointed to a sequential improvement in new domain registrations and higher renewal rates, attributing these gains to increased registrar engagement and the rollout of targeted marketing programs. CEO Jim Bidzos emphasized, “We’re seeing registrars shift back toward customer acquisition, and our marketing initiatives are beginning to show results.”

Looking ahead, leadership remains cautious due to ongoing macroeconomic uncertainty but raised its outlook for the domain name base given encouraging early trends. VeriSign’s decision to initiate a quarterly dividend marked a notable evolution in its approach to returning capital, with CFO George Kilguss stating the company aims to balance ongoing share buybacks and dividends while maintaining liquidity and investing for growth.

Key Insights from Management’s Remarks

VeriSign’s management explained first quarter performance by referencing improved domain registration activity and operational changes, while also detailing a new dividend program and leadership transition.

• Domain registration momentum: Management attributed the higher new registrations and improved renewal rates to increased registrar engagement, especially through new marketing programs rolled out in late 2024 and early 2025. These programs allowed registrars greater flexibility and contributed to a net increase of 777,000 domain names.
• Geographic diversification: All three major regions—the US, EMEA (Europe, Middle East, Africa), and Asia Pacific—experienced domain base growth, which management noted as a positive trend compared to recent quarters.
• Shift in registrar behavior: CEO Jim Bidzos highlighted a return by registrars to customer acquisition strategies, moving away from a prior focus on average revenue per user (ARPU). This was evidenced by increased marketing spend, including Super Bowl advertising by registrars for the first time in years.
• Capital allocation changes: The introduction of a quarterly cash dividend alongside continued share repurchases represents a strategic shift in capital return. Management explained this diversification as a response to business stability and a desire to broaden return methods.
• Leadership transition: The upcoming retirement of CFO George Kilguss and the appointment of John Callis as the next CFO was described as a seamless transition, with Callis having previously served in interim CFO roles and worked closely with Kilguss.

Drivers of Future Performance

Management’s outlook for the remainder of the year centers on continued domain base growth, careful expense control, and caution regarding macroeconomic uncertainty that could affect registration activity and renewal trends.

• Marketing program expansion: Ongoing registrar engagement with new marketing initiatives is expected to support further increases in new domain registrations and renewal rates, though management noted performance would depend on broader economic clarity.
• Balanced capital return approach: The company plans to maintain both share buybacks and dividends, with future increases in the dividend tied to earnings growth. This approach is expected to provide flexibility depending on cash flow and investment needs.
• Expense discipline and macro risks: Operating expense growth is projected to remain modest, driven mostly by headcount and incentive compensation, but management cautioned that uncertainties in the global economy could still impact domain demand.

Top Analyst Questions

• Ygal Arounian (Citigroup): Asked why now was the right time for a dividend and whether it would reduce share buybacks; management said the dividend diversifies capital return and will be balanced with ongoing buybacks.
• Ygal Arounian (Citigroup): Inquired about drivers of domain base outperformance and factors influencing the guidance range; management cited registrar engagement and marketing programs but maintained a cautious stance due to macro uncertainties.
• Ygal Arounian (Citigroup): Requested an update on .net pricing; management declined to provide guidance but noted that any changes would be announced with appropriate notice.
• Rob Oliver (Baird): Asked about traction with new marketing channel programs; management reported early positive registrar engagement and attributed improved registration trends in part to these initiatives.
• Rob Oliver (Baird): Sought an update on the .web top-level domain; management shared that legal proceedings are ongoing, with a final hearing expected in November, and reiterated its intent to bring .web to market.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) whether the uplift in new registrations and higher renewal rates continues as the year progresses, (2) the impact of expanded marketing programs and registrar engagement on domain base trends, and (3) execution of the new capital return strategy, especially the balance between dividends and buybacks. Additional developments in the .web legal process could also serve as a key milestone for growth.

VeriSign currently trades at a forward price-to-sales ratio of 16.3×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.

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