UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________

(Mark One)



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2023



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-23593

VERISIGN, INC.

(Exact name of registrant as specified in its charter)



Delaware		94-3221585
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12061 Bluemont Way, ~~Reston, Virginia~~		~~20190~~
Reston,	Virginia	20190
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (703) 948-3200

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	VRSN	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES~~ x NO oYes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ~~YES~~ x NO oYes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth ~~company.”~~company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act.): YES~~ o NO xAct). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:



Class						Shares Outstanding as of October 20, ~~2017~~2023
Common stock, ~~$.001~~$0.001 par value per share						~~98,570,102~~102.1 million

Table of Contents

TABLE OF CONTENTS



		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	4
	Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	56
	Notes to Condensed Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1112
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1917
Item 4.	Controls and Procedures	1917
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	2018
Item 1A.	Risk Factors	2018
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3227
Item 6.5.	~~Exhibits~~Other Information	3327
~~Signatures~~Item 6.	34Exhibits	28
Signatures		29

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VERISIGN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In ~~thousands,~~millions, except par value)

(Unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	157.7	$	373.6
Marketable securities	785.8		606.8
Other current assets	63.5		58.3
Total current assets	1,007.0		1,038.7
Property and equipment, net	238.2		232.0
Goodwill	52.5		52.5
Deferred tax assets	224.1		234.6
Deposits to acquire intangible assets	145.0		145.0
Other long-term assets	29.1		30.6
Total long-term assets	688.9		694.7
Total assets	$	1,695.9	$	1,733.4
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	232.2	$	226.5
Deferred revenues	941.4		890.4
Total current liabilities	1,173.6		1,116.9
Long-term deferred revenues	320.7		328.7
Senior notes	1,789.6		1,787.9
Long-term tax and other liabilities	45.4		62.1
Total long-term liabilities	2,155.7		2,178.7
Total liabilities	3,329.3		3,295.6
Commitments and contingencies
Stockholders’ deficit:
Preferred stock—par value $.001 per share; Authorized shares: 5.0; Issued and outstanding shares: none	—		—
Common stock and additional paid-in capital—par value $.001 per share; Authorized shares: 1,000; Issued shares: 354.8 at September 30, 2023 and 354.5 at December 31, 2022; Outstanding shares: 102.4 at September 30, 2023 and 105.3 at December 31, 2022	12,020.7		12,644.5
Accumulated deficit	(13,651.1)		(14,204.0)
Accumulated other comprehensive loss	(3.0)		(2.7)
Total stockholders’ deficit	(1,633.4)		(1,562.2)
Total liabilities and stockholders’ deficit	$	1,695.9	$	1,733.4

September 30,
2017 December 31,
2016
ASSETS
Current assets:
Cash and cash equivalents $ 286,822
$ 231,945
Marketable securities 2,078,905
1,565,962
Other current assets 40,293
44,435
Total current assets 2,406,020
1,842,342
Property and equipment, net 265,306
266,125
Goodwill 52,527
52,527
Deferred tax assets 20,458
9,385
Deposits to acquire intangible assets 145,000
145,000
Other long-term assets 19,052
19,193
Total long-term assets 502,343
492,230
Total assets $ 2,908,363
$ 2,334,572
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 193,462
$ 203,920
Deferred revenues 717,586
688,265
Subordinated convertible debentures, including contingent interest derivative 624,474
629,764
Total current liabilities 1,535,522
1,521,949
Long-term deferred revenues 289,262
287,424
Senior notes 1,781,912
1,237,189
Deferred tax liabilities 401,359
371,433
Other long-term tax liabilities 130,246
117,172
Total long-term liabilities 2,602,779
2,013,218
Total liabilities 4,138,301
3,535,167
Commitments and contingencies

Stockholders’ deficit:
Preferred stock—par value $.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none —
—
Common stock—par value $.001 per share; Authorized shares: 1,000,000; Issued shares:325,172 at September 30, 2017 and 324,118 at December 31, 2016; Outstanding shares:98,865 at September 30, 2017 and 103,091 at December 31, 2016 325
324
Additional paid-in capital 16,570,518
16,987,488
Accumulated deficit (17,797,627 ) (18,184,954 )
Accumulated other comprehensive loss (3,154 ) (3,453 )
Total stockholders’ deficit (1,229,938 ) (1,200,595 )
Total liabilities and stockholders’ deficit $ 2,908,363
$ 2,334,572

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In ~~thousands,~~millions, except per share data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2017			2016			2017			2016				2023		2022		2023		2022
Revenues	$	292,428		$	287,554		$	869,594		$	855,896		Revenues	$	376.3	$	356.9	$	1,112.7	$	1,055.7
Costs and expenses:													Costs and expenses:
Cost of revenues	47,333			49,807			145,646			149,142			Cost of revenues	48.6		50.0		148.8		150.2
Sales and marketing	18,667			18,647			56,463			58,431
Research and development	12,715			14,324			39,569			45,355			Research and development	21.7		21.0		68.1		64.2
General and administrative	32,654			30,000			96,626			85,158
Selling, general and administrative													Selling, general and administrative	51.7		49.1		151.5		143.7
Total costs and expenses	111,369			112,778			338,304			338,086			Total costs and expenses	122.0		120.1		368.4		358.1
Operating income	181,059			174,776			531,290			517,810			Operating income	254.3		236.8		744.3		697.6
Interest expense	(37,756		)	(28,919		)	(95,869		)	(86,582		)	Interest expense	(18.8)		(18.8)		(56.5)		(56.5)
Non-operating income, net	6,241			3,262			21,544			8,092			Non-operating income, net	13.1		4.9		37.1		6.8
Income before income taxes	149,544			149,119			456,965			439,320			Income before income taxes	248.6		222.9		724.9		647.9
Income tax expense	(34,645		)	(34,692		)	(102,554		)	(104,227		)	Income tax expense	(60.1)		(53.4)		(172.0)		(153.6)
Net income	114,899			114,427			354,411			335,093			Net income	188.5		169.5		552.9		494.3
Realized foreign currency translation adjustments, included in net income	—			—			—			85
Unrealized gain (loss) on investments	61			(485		)	739			1,301
Realized gain on investments, included in net income	(325		)	(11		)	(440		)	(78		)
Other comprehensive (loss) income	(264		)	(496		)	299			1,308
Other comprehensive income (loss)													Other comprehensive income (loss)	0.4		0.2		(0.3)		0.1
Comprehensive income	$	114,635		$	113,931		$	354,710		$	336,401		Comprehensive income	$	188.9	$	169.7	$	552.6	$	494.4

Earnings per share:													Earnings per share:
Basic	$	1.15		$	1.08		$	3.51		$	3.10		Basic	$	1.83	$	1.58	$	5.32	$	4.55
Diluted	$	0.93		$	0.90		$	2.85		$	2.58		Diluted	$	1.83	$	1.58	$	5.32	$	4.55
Shares used to compute earnings per share													Shares used to compute earnings per share
Basic	99,614			106,307			101,036			107,982			Basic	102.9		107.1		103.9		108.7
Diluted	124,074			127,750			124,162			129,967			Diluted	103.0		107.1		104.0		108.7

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In millions)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total stockholders’ deficit, beginning of period	$	(1,617.9)	$	(1,455.0)	$	(1,562.2)	$	(1,260.5)

Common stock and additional paid-in capital
Beginning balance	12,225.1		13,100.9		12,644.5		13,620.1
Repurchase of common stock	(222.4)		(277.9)		(675.8)		(834.0)
Stock-based compensation	15.8		16.7		45.8		45.4
Issuance of common stock under stock plans	4.3		4.1		12.3		12.3
Excise tax on repurchase of common stock	(2.1)		—		(6.1)		—
Balance, end of period	12,020.7		12,843.8		12,020.7		12,843.8

Accumulated deficit
Beginning balance	(13,839.6)		(14,553.0)		(14,204.0)		(14,877.8)
Net income	188.5		169.5		552.9		494.3
Balance, end of period	(13,651.1)		(14,383.5)		(13,651.1)		(14,383.5)

Accumulated other comprehensive loss
Beginning balance	(3.4)		(2.9)		(2.7)		(2.8)
Other comprehensive income (loss)	0.4		0.2		(0.3)		0.1
Balance, end of period	(3.0)		(2.7)		(3.0)		(2.7)

Total stockholders’ deficit, end of period	$	(1,633.4)	$	(1,542.4)	$	(1,633.4)	$	(1,542.4)

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In ~~thousands)~~millions)

(Unaudited)


	Nine Months Ended September 30,							Nine Months Ended September 30,
	2017			2016				2023		2022
Cash flows from operating activities:							Cash flows from operating activities:
Net income	$	354,411		$	335,093		Net income	$	552.9	$	494.3
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment	37,665			44,114			Depreciation of property and equipment	33.7		35.2
Gain on sale of business	(10,421		)	—
Stock-based compensation	40,043			35,745
Payment of contingent interest	(15,232		)	(13,385		)
Amortization of debt discount and issuance costs	10,827			9,971
Stock-based compensation expense							Stock-based compensation expense	45.0		44.2
Other, net	(8,942		)	(5,355		)	Other, net	(15.6)		0.7
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Other assets	4,566			14,278			Other assets	(3.7)		(2.5)
Accounts payable and accrued liabilities	(9,524		)	(8,285		)	Accounts payable and accrued liabilities	(16.2)		(40.1)
Deferred revenues	32,790			19,470			Deferred revenues	43.0		82.1
Net deferred income taxes and other long-term tax liabilities	67,385			56,397
Net deferred income taxes							Net deferred income taxes	10.5		0.3
Net cash provided by operating activities	503,568			488,043			Net cash provided by operating activities	649.6		614.2
Cash flows from investing activities:							Cash flows from investing activities:
Proceeds from maturities and sales of marketable securities	3,895,675			3,029,699			Proceeds from maturities and sales of marketable securities	750.8		1,475.0
Purchases of marketable securities	(4,398,787		)	(2,917,743		)	Purchases of marketable securities	(911.5)		(909.3)
Purchases of property and equipment	(40,609		)	(19,889		)	Purchases of property and equipment	(40.8)		(19.7)
Deposits to acquire intangible assets	—			(143,000		)
Other investing activities	12,102			171
Net cash used in investing activities	(531,619		)	(50,762		)
Net cash (used in) provided by investing activities							Net cash (used in) provided by investing activities	(201.5)		546.0
Cash flows from financing activities:							Cash flows from financing activities:
Repurchases of common stock							Repurchases of common stock	(675.8)		(834.0)
Proceeds from employee stock purchase plan	12,915			13,670			Proceeds from employee stock purchase plan	12.3		12.3
Repurchases of common stock	(474,290		)	(501,934		)
Proceeds from borrowings, net of issuance costs	543,185			—
Net cash provided by (used in) financing activities	81,810			(488,264		)
Effect of exchange rate changes on cash and cash equivalents	1,118			109
Net increase (decrease) in cash and cash equivalents	54,877			(50,874		)
Cash and cash equivalents at beginning of period	231,945			228,659
Cash and cash equivalents at end of period	$	286,822		$	177,785
Net cash used in financing activities							Net cash used in financing activities	(663.5)		(821.7)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash							Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(0.6)		(1.4)
Net (decrease) increase in cash, cash equivalents, and restricted cash							Net (decrease) increase in cash, cash equivalents, and restricted cash	(216.0)		337.1
Cash, cash equivalents, and restricted cash at beginning of period							Cash, cash equivalents, and restricted cash at beginning of period	379.0		228.8
Cash, cash equivalents, and restricted cash at end of period							Cash, cash equivalents, and restricted cash at end of period	$	163.0	$	565.9
Supplemental cash flow disclosures:							Supplemental cash flow disclosures:
Cash paid for interest	$	86,622		$	84,930		Cash paid for interest	$	49.5	$	49.6
Cash paid for income taxes, net of refunds received	$	22,717		$	14,474		Cash paid for income taxes, net of refunds received	$	178.8	$	159.6

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

VERISIGN, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

Interim Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by VeriSign, Inc. (“Verisign” or the “Company”) in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and notes normally provided in audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for any other interim period or for a full fiscal year. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes contained in Verisign’s ~~fiscal 2016~~ Annual Report on Form 10-K for the year ended December 31, 2022 (the ~~“2016~~“2022 Form 10-K”) filed with the SEC on February 17, ~~2017.~~2023.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to current period presentation. Such reclassifications have no effect on net income as previously reported.

~~Adoption of New Accounting Standards~~

~~Effective January 1, 2017, the Company adopted Accounting Standards Update (“ASU”) No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~, issued by the Financial Accounting Standards Board (“FASB”). The new guidance requires excess tax benefits and tax deficiencies to be recorded as a discrete adjustment to income tax expense when stock awards vest, rather than in additional paid-in capital when they reduce income taxes payable. The Company also made the accounting policy election, as allowed by the new guidance, to account for forfeitures of stock awards as they occur, rather than estimating forfeitures. These changes were required to be applied on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative effect of adopting ASU 2016-09 was an increase in Deferred tax assets of $11.0 million, a decrease in Deferred tax liabilities of $24.4 million, an increase in Additional paid-in capital of $2.5 million, and a decrease in Accumulated deficit of $32.9 million, as of January 1, 2017, as a result of recognizing $35.4 million of previously unrecognized excess tax benefits from stock-based compensation, and a $2.5 million adjustment related to the change in accounting policy for forfeitures. The impacts to Deferred tax liabilities, and Accumulated deficit related to previously unrecognized excess tax benefits, reflect immaterial adjustments recorded during the third quarter of 2017, upon completion of the Company’s 2016 U.S. federal income tax return. Additionally, the new guidance requires cash flows related to excess tax benefits from stock-based compensation to be recognized with other income tax cash flows in operating activities, rather than separately as a financing activity. The Company elected to apply this new cash flow presentation requirement retrospectively, which resulted in an increase to both net cash from operating activities and net cash used in financing activities of $15.6 million for the nine months ended September 30, 2016.

~~Effective January 1, 2017, the Company adopted ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment,~~ which was issued by the FASB. The guidance in the ASU simplifies certain aspects of the goodwill impairment test, including the elimination of the requirement to perform a qualitative assessment of the likelihood of a goodwill impairment for reporting units with a negative carrying value. All of the Company’s goodwill is included in the Registry Services reporting unit which has a negative carrying value. As a result, the Company will no longer be required to perform the qualitative assessment.

~~Recent Accounting Pronouncements~~

~~On May 28, 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the Company on January 1, 2018. The FASB also issued several amendments to the standard, including clarification on accounting for licenses of intellectual property and identifying performance obligations. The Company’s evaluation of the new revenue guidance is substantially complete. Other than the inclusion of the additional required disclosures, the Company does not currently expect the adoption of the new revenue standard to have a material impact on its consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~. The guidance introduces a lessee model that requires most leases to be reported on the balance sheet. This ASU will become effective for the Company on January 1, 2019 and requires the modified retrospective transition method. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.

Note 2. Financial Instruments

Cash, Cash Equivalents, and Marketable Securities

The following table summarizes the Company’s cash, cash equivalents, and marketable securities asand the fair value categorization of ~~September 30, 2017~~the financial instruments measured at fair value on a recurring basis:


	September 30,		December 31,
	2023		2022
	(In millions)
Cash	$	22.4	$	27.0
Time deposits	4.3		4.1
Money market funds (Level 1)	136.3		178.6
Debt securities issued by the U.S. Treasury (Level 1)	785.8		776.1
Total	$	948.8	$	985.8

Cash and cash equivalents	$	157.7	$	373.6
Restricted cash (included in Other long-term assets)	5.3		5.4
Total Cash, cash equivalents, and restricted cash	163.0		379.0
Marketable securities	785.8		606.8
Total	$	948.8	$	985.8

The gross and ~~December 31, 2016:~~

September 30, December 31,
2017 2016
(In thousands)
Cash $ 33,466
$ 39,183
Time deposits 3,139
4,632
Money market funds (Level 1) 259,499
134,790
Debt securities issued by the U.S. Treasury (Level 1) 2,078,882
1,626,764
Equity securities of public companies (Level 1) 23
2,174
Total $ 2,375,009
$ 1,807,543

Included in Cash and cash equivalents $ 286,822
$ 231,945
Included in Marketable securities 2,078,905
1,565,962
Included in Other long-term assets (Restricted cash) 9,282
9,636
Total $ 2,375,009
$ 1,807,543

~~The~~net unrealized gains and losses included in the fair value of the debt securities ~~held as of September 30, 2017 was $2.1 billion, including less than $0.5 million of gross and net unrealized gains.~~were not significant for the periods presented. All of the debt securities held as of September 30, ~~2017~~2023 are scheduled to mature in less than one year.

Fair Value Measurements

The fair value of the Company’s investments in money market funds approximates their face value. Such instruments are included in Cash and cash equivalents. The fair value of the debt securities consisting of U.S. Treasury bills is based on their quoted market prices. Debt securities purchased with original maturities in excess of three months are included in Marketable securities. The fair value of ~~the equity securities of public companies is based on quoted market prices and are included in Marketable securities. The fair value of~~ all of these financial instruments are classified as Level 1 in the fair value hierarchy.

The $14.3 million contingent interest derivative on the Subordinated Convertible Debentures as of December 31, 2016 included $7.7 million contingent interest that was paid in February 2017, and $6.6 million estimated fair value of the $7.5 million contingent interest that was to be paid in August 2017. Effective August 15, 2017, Verisign has the right to redeem the Subordinated Convertible Debentures under the terms of the indenture. Therefore, the fair value of the contingent interest embedded derivative for periods after August 15, 2017 is negligible.

The Company’s other financial instruments include cash, accounts receivable, restricted cash, and accounts payable. As of September 30, ~~2017,~~2023, the carrying value of these financial instruments approximated their fair value. The aggregate fair value of the Company’s ~~Subordinated Convertible Debentures was $3.9~~senior notes is $1.62 billion and $1.65 billion as of September 30, ~~2017. The fair values of the senior notes due~~ 2023 ~~(the “2023 Senior Notes”), the senior notes due 2025 (the “2025 Senior Notes”),~~ and ~~the senior notes due 2027 (the “2027 Senior Notes”) were $776.1 million, $540.9 million, and 567.4 million, respectively, as of September 30, 2017.~~December 31, 2022, respectively. The fair values of these debt instruments are based on available market information from public data sources and are classified as Level 2.

Table of Contents

Note 3. ~~Other~~Selected Balance Sheet Items

Other Current Assets

Other current assets consist of the following:


	September 30,		December 31,
	2023		2022
	(In millions)
Prepaid expenses	$	27.4	$	24.3
Prepaid registry fees	24.6		24.3
Accounts receivable, net	4.6		6.2
Unrealized gain on foreign currency forward contracts	4.5		0.2
Other	2.4		3.3
Total other current assets	$	63.5	$	58.3

September 30, December 31,
2017 2016
(In thousands)
Prepaid expenses $ 20,004
$ 14,385
Accounts receivable, net 12,584
13,051
Income taxes receivable 4,026
15,328
Other 3,679
1,671
Total other current assets $ 40,293
$ 44,435
Other Long-Term Assets

~~The Income taxes receivable as of December 31, 2016 primarily consists~~Other long-term assets consist of the ~~remaining U.S. federal income tax overpayment from prior years,~~following:


	September 30,		December 31,
	2023		2022
	(In millions)
Operating lease right-of-use asset	$	8.8	$	7.2
Long-term prepaid registry fees	8.6		9.1
Restricted cash	5.3		5.4
Long-term prepaid expenses	4.1		6.6
Other	2.3		2.3
Total other long-term assets	$	29.1	$	30.6

The prepaid registry fees in the tables above relate to the fees the Company pays to ICANN for each annual term of .com domain name registrations and renewals which ~~has been used in 2017 to offset a portion of current year income taxes.~~are deferred and amortized over the domain name registration term.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:


	September 30,		December 31,
	2023		2022
	(In millions)
Accounts payable and accrued expenses	$	9.4	$	9.8
Customer deposits	75.3		72.0
Accrued employee compensation	50.8		59.0
Taxes payable	43.2		37.4
Interest payable	24.6		19.5
Accrued registry fees	13.3		12.7
Customer incentives payable	7.4		7.1
Current operating lease liabilities	5.6		5.5
Other accrued liabilities	2.6		3.5
Total accounts payable and accrued liabilities	$	232.2	$	226.5

September 30, December 31,
2017 2016
(In thousands)
Accounts payable $ 18,218
$ 19,455
Accrued employee compensation 37,292
61,426
Customer deposits, net 53,743
52,173
Interest payable 41,360
27,701
Income taxes payable and other tax liabilities 23,018
23,144
Other accrued liabilities 19,831
20,021
Total accounts payable and accrued liabilities $ 193,462
$ 203,920

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, ~~2016,~~2022 was paid during the nine months ended September 30, ~~2017.~~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. Interest payable ~~includes coupon and contingent interest~~varies at each period-end based on the ~~Subordinated Convertible Debentures,~~payment due dates for each senior note issuance.

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Property Plant and ~~interest payable~~Equipment, net

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


	September 30,		December 31,
	2023		2022
	(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
Less: 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 ~~2023 Senior Notes~~property, $13.0 million of the ~~2025 Senior Notes,~~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 ~~the 2027 Senior Notes. Income taxes payable~~Other Liabilities

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


	September 30,		December 31,
	2023		2022
	(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 ~~primarily includes amounts payable for U.S.~~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 ~~foreign income taxes which are paid during the following year.~~Jobs Act.

Note 4. ~~Stockholders’ Deficit~~Share Repurchases

~~On February 9, 2017,~~Effective July 27, 2023, the Company’s Board of Directors authorized the repurchase of ~~approximately $640.9 million of~~ its common stock in the amount of $1.14 billion, in addition to the ~~$359.1~~$356.1 million ~~remaining~~that remained available for ~~repurchase~~repurchases under the ~~previous~~ share repurchase program, for a total repurchase authorization of up to ~~$1.0~~$1.50 billion ~~of its common stock.~~ under the program. The ~~share repurchase~~ program has no expiration date. Purchases made under the program ~~can~~could be effected through open market transactions, block purchases, accelerated share repurchase agreements or other negotiated transactions. ~~During the three and nine months ended~~ ~~September 30, 2017~~ ~~the Company repurchased~~ ~~1.5 million~~ ~~and 5.0 million shares of its common stock, respectively, at an average stock price of~~ ~~$100.30~~ ~~and $90.21, respectively. The aggregate cost of the repurchases in the three and nine months ended September 30, 2017 was~~ ~~$147.0 million~~ ~~and $447.6 million, respectively.~~ As of September 30, ~~2017, $622.5 million remained~~2023 there was approximately $1.34 billion remaining available for ~~further~~ repurchases under the program.

The Company’s share ~~repurchase program.~~repurchases are as following. Amounts may not add up due to rounding:

~~During the nine months ended~~ ~~September 30, 2017, the Company placed~~ ~~0.3 million~~ ~~shares, at an average stock price of~~ ~~$83.88, and for an aggregate cost of~~ ~~$26.7 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).~~


	Three Months Ended September 30, 2023					Nine Months Ended September 30, 2023
	Shares	Total Costs		Average Price		Shares	Total Costs		Average Price
	(In millions, except average price amounts)
Total repurchases under the repurchase plans	1.1	$	219.9	$	208.41	3.1	$	659.8	$	211.10
Total repurchases for tax withholdings	—	2.6		$	206.42	0.1	16.0		$	212.08
Total repurchases	1.1	$	222.4	$	208.39	3.2	$	675.8	$	211.13

Since inception, the Company has repurchased ~~226.3~~252.5 million shares of its common stock for an aggregate cost of ~~$8.6~~$13.43 billion,, which is ~~presented~~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

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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.

Note 5. 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,			Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016		2023	2022	2023	2022
	(In thousands)					(In millions)
Weighted-average shares of common stock outstanding	99,614	106,307	101,036	107,982	Weighted-average shares of common stock outstanding	102.9	107.1	103.9	108.7
Weighted-average potential shares of common stock outstanding:					Weighted-average potential shares of common stock outstanding:
Conversion spread related to Convertible Debentures	23,956	20,789	22,605	21,244
Unvested RSUs and ESPP	504	654	521	741	Unvested RSUs and ESPP	0.1	—	0.1	—
Shares used to compute diluted earnings per share	124,074	127,750	124,162	129,967	Shares used to compute diluted earnings per share	103.0	107.1	104.0	108.7

The calculation of diluted weighted average shares outstanding excludes ~~potentially dilutive securities, the effect of which would have been anti-dilutive, as well as~~ performance-based RSUs granted by the Company for which the relevant performance criteria have not been ~~achieved.~~achieved and any awards that are antidilutive. The number of potential shares excluded from the calculation was not significant in any period presented.

Note 6. Revenues

The Company generates revenues in the U.S.; Europe, the Middle East and Africa (“EMEA”); China; 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
	(In millions)
U.S.	$	250.8	$	236.3	$	741.2	$	691.8
EMEA	57.7		55.0		169.4		170.0
China	22.0		26.8		71.0		79.3
Other	45.8		38.8		131.1		114.6
Total revenues	$	376.3	$	356.9	$	1,112.7	$	1,055.7

Revenues in the table above are attributed to the country of domicile and the respective regions in which registrars are located; however, this may differ from the regions where the registrars operate or where registrants are located. Revenues for each region may be impacted by registrars reincorporating, relocating, or from acquisitions or changes in affiliations of resellers. Revenues for each region may also be impacted by registrars domiciled in one region, registering domain names in another region.

Deferred Revenues

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. 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.

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Note 6.7. Stock-based Compensation

Stock-based compensation is classified in the Condensed Consolidated Statements of Comprehensive Income in the same expense line items as cash compensation. The following table presents the classification of stock-based compensation:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In millions)
Cost of revenues	$	1.9	$	1.8	$	5.2	$	5.3
Research and development	2.5		2.5		7.5		7.2
Selling, general and administrative	11.1		12.0		32.3		31.7
Stock-based compensation expense	15.5		16.3		45.0		44.2
Capitalization (included in Property and equipment, net)	0.3		0.4		0.8		1.2
Total stock-based compensation	$	15.8	$	16.7	$	45.8	$	45.4

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(In thousands)
Cost of revenues $ 1,774
$ 1,779
$ 5,311
$ 5,367
Sales and marketing 1,369
1,129
4,255
4,219
Research and development 1,575
1,676
4,553
4,966
General and administrative 9,387
8,270
25,924
21,193
Total stock-based compensation expense $ 14,105
$ 12,854
$ 40,043
$ 35,745

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
	(In millions)
RSUs	$	13.4	$	12.3	$	35.9	$	33.2
Performance-based RSUs	1.3		3.3		6.6		9.0
ESPP	1.1		1.1		3.3		3.2
Total stock-based compensation	$	15.8	$	16.7	$	45.8	$	45.4

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(In thousands)
RSUs $ 10,556
$ 10,276
$ 28,930
$ 28,034
Performance-based RSUs 3,100
2,216
9,992
6,878
ESPP 1,000
924
2,941
2,594
Capitalization (included in Property and equipment, net) (551 ) (562 ) (1,820 ) (1,761 )
Total stock-based compensation expense $ 14,105
$ 12,854
$ 40,043
$ 35,745

~~Note 7. Debt and Interest Expense~~

On July 5, 2017, the Company issued $550.0 million of 4.75% senior unsecured notes due July 15, 2027. The Company intends to use the proceeds for general corporate purposes, including, but not limited to, the repurchase of shares of its common stock under its share repurchase program. The Company will pay interest on the notes semi-annually on January 15 and July 15, commencing on January 15, 2018. The Company may redeem these senior notes, in whole or in part, at the Company’s option, at times and redemption prices specified in the indenture. In connection with the offering the Company incurred $6.8 million of issuance costs which are presented on the balance sheet as a reduction of the debt obligation. The issuance costs are being amortized to Interest expense over the 10 year term of the notes.

~~The following table presents the components of the Company’s interest expense:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(In thousands)
Contractual interest on Subordinated Convertible Debentures $ 12,426
$ 10,156
$ 32,738
$ 30,469
Contractual interest on Senior Notes 21,403
15,235
51,872
45,704
Amortization of debt discount on Subordinated Convertible Debentures 3,034
2,802
8,916
8,235
Amortization of debt issuance costs and other interest expense 893
726
2,343
2,174
Total interest expense $ 37,756
$ 28,919
$ 95,869
$ 86,582

Effective August 15, 2017, Verisign has the right to redeem the Subordinated Convertible Debentures under the terms of the indenture. Therefore, the fair value of the contingent interest embedded derivative for periods after August 15, 2017 is negligible. Contingent interest for periods after August 15, 2017 is included in Contractual interest of Subordinated Convertible Debentures.

Note 8. 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

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(In thousands)
Interest income $ 5,832
$ 1,728
$ 11,386
$ 4,292
(Loss) gain on sale of business (186 ) —
10,421
—
Unrealized gain (loss) on contingent interest derivative on Subordinated Convertible Debentures —
1,440
(893 ) 2,411
Other, net 595
94
630
1,389
Total non-operating income, net $ 6,241
$ 3,262
$ 21,544
$ 8,092

~~On April 1, 2017,~~Interest income is earned principally from the ~~Company completed the sale of its iDefense business, which resulted~~Company’s surplus cash balances and marketable securities. The increase in ~~a gain of approximately $10.4 million for the nine months ended September 30, 2017.~~

~~Note 9. Income Taxes~~

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

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars in thousands)
Income tax expense $ 34,645
$ 34,692
$ 102,554
$ 104,227
Effective tax rate 23 % 23 % 22 % 24 %

~~The effective tax rate for~~during the three and nine months ended September 30, ~~2017~~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 ~~2016~~nine months ended September 30, 2023 primarily reflects net gains and losses from the Company’s foreign currency exposure and related hedges.

Note 9. Income Taxes

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
	(Dollars in millions)
Income tax expense	$	60.1		$	53.4		$	172.0		$	153.6
Effective tax rate	24		%	24		%	24		%	24		%

The effective tax rate for each of the periods in the table above was ~~lower~~higher than the statutory federal rate of ~~35% primarily~~21%, due to state income taxes and U.S. taxes on foreign earnings, net of foreign tax ~~benefits from foreign income taxed at lower rates,~~credits, partially offset by ~~state income taxes. Additionally, the~~a lower foreign effective tax ~~rate for nine months ended September 30, 2017 is also reduced by $8.2 million~~rate.

Table of ~~excess tax benefits related to stock-based compensation, which are included in income tax expense, pursuant to the adoption of ASU 2016-09~~ ~~Improvements to Employee Share-Based Payment Accounting~~ ~~as discussed in Note 1.~~Contents

Deferred tax assets, net of a valuation allowance, and liabilities as of September 30, 2017 reflect the use of a portion of U.S. foreign tax credits during the nine months ended September 30, 2017, an increase in the deferred tax liability related to the Subordinated Convertible Debentures, as well as the recognition of previously unrecognized excess tax benefits on stock awards which were recorded pursuant to the Company’s adoption of ASU 2016-09.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the 2022 Form 10-K and the interim unaudited Condensed Consolidated Financial Statements and related ~~notes.~~notes included in Part I, Item I of this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (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 ~~anticipated costs~~expectations about the sufficiency of our existing cash, cash equivalents and ~~expenses~~marketable securities, and ~~revenue mix.~~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. 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. 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 ~~2017 and our 2016 Form 10-K, which was filed on February 17, 2017, which discuss our business in greater detail.~~2023. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update publicly ~~release any revisions to the forward-looking~~or revise such statements, ~~or reflect~~whether as a result of new information, future events, or ~~circumstances after the date~~otherwise, except as required by law.

For purposes of this ~~document.~~Quarterly Report on Form 10-Q, the terms “Verisign,” “the Company,” “we,” “us,” and “our” refer to VeriSign, Inc. and its consolidated subsidiaries.

Overview

We are a global provider of critical internet infrastructure and domain name registry services, ~~and internet security,~~ enabling internet navigation for many of the world’s most recognized domain ~~names and providing protection for websites and enterprises around the world. Our Registry Services ensure~~names. We help enable the security, stability, and resiliency of ~~key~~the Domain Name System and the internet ~~infrastructure and~~by providing root zone maintainer services, ~~including the~~ ~~.com~~ ~~and~~ ~~.net~~ ~~domains,~~operating two of the ~~internet’s~~13 global internet root servers, and ~~the operation of the Root Zone Maintainer function~~providing registration services and authoritative resolution for the ~~core~~.com and .net generic top-level domains (“gTLDs”), which support the majority of the internet’s DNS. Our product suite also includes Security Services, consisting of DDoS Protection Services and Managed DNS Services. Revenues from Security Services are not significant in relation to our consolidated revenues. We completed the sale of our iDefense business on April 1, 2017.global e-commerce.

As of September 30, ~~2017,~~2023, we had ~~approximately 145.8~~173.9 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. Growth in the number of domain name registrations under our management may be hindered by certain factors, including overall economic conditions, competition from ~~ccTLDs, the introduction of new~~country code top-level domains (“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. 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.

Business Highlights and Trends

•We recorded revenues of ~~$292.4~~$376.3 million and ~~$869.6 million during the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017. This represents an increase of~~ 2% ~~in each period compared to the same periods in 2016.~~

~~We recorded operating income of~~ ~~$181.1 million~~ ~~and $531.3~~$1,112.7 million during the three and nine months ended September 30, ~~2017. This represents~~2023, an increase of ~~4% and 3%, respectively,~~5% compared to the same periods in 2022.

•We recorded operating income of ~~2016.~~

$254.3 million and $744.3 million during the three and nine months ended September 30, 2023, an increase of 7% compared to the same periods in 2022.

~~We finished the third quarter with 145.8~~•As of September 30, 2023, we had 173.9 million .com and .net registrations in the domain name base, which represents a ~~1% increase~~0.1% decrease from September 30, ~~2016,~~2022, and a net ~~increase~~decrease of ~~1.5~~0.5 million domain name registrations from June 30, ~~2017.~~

2023.

•During the three months ended September 30, ~~2017,~~2022 and 2023, we processed ~~8.9~~9.9 million new domain name registrations for .com and .net ~~compared to 8.3 million for the same period in 2016.~~

•The final .com and .net renewal rate for the second quarter of ~~2017~~2023 was ~~74.0%~~73.4% compared ~~with~~to 73.8% for the ~~same~~second quarter ~~in 2016.~~of 2022. Renewal rates are not fully measurable until 45 days after the end of the quarter.

~~During~~•Effective July 27, 2023, our Board of Directors authorized the ~~three months ended~~ ~~September 30, 2017, we repurchased~~ ~~1.5 million~~ ~~shares~~repurchase of our 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 ~~$147.0~~a total repurchase authorization of up to $1.50 billion under the program.

Table of Contents

•During the three months ended September 30, 2023, we repurchased 1.1 million. shares of our common stock for an aggregate cost of $219.9 million. As of September 30, ~~2017, $622.5 million remained~~2023, there was approximately $1.34 billion remaining available for ~~further~~future share repurchases under our share repurchase program.

~~Through October 25, 2017, we repurchased an additional 0.4 million shares for $41.4 million under our share repurchase program.~~

•We generated cash flows from operating activities of ~~$503.6~~$649.6 million during the nine months ended September 30, ~~2017~~,2023, compared to ~~$488.0~~$614.2 million infor the same period ~~last year.~~

in 2022.

•On July ~~5, 2017,~~27, 2023, we ~~issued $550.0 million of 4.75% Senior Notes due July 15, 2027. We intend~~announced that we will increase the annual registry-level wholesale fee for each new and renewal .net domain name registration from $9.92 to ~~use the proceeds for general corporate purposes, including, but not limited to, the repurchase of shares under our share repurchase program.~~$10.91, effective February 1, 2024.

Pursuant to our agreements with ICANN, we make available ~~on our website (at~~ ~~www.Verisign.com/zone~~) files containing all active domain names registered in the .~~com~~.com and .~~net~~.net registries. ~~At the same website address,~~Further, we also make available a summary of the active zone count registered in the .~~com~~.com and .~~net~~ .net registries and the number of .~~com~~.com and .~~net~~.net domain name registrations in the domain name base. The zone counts and information on how to obtain access to the zone files can be found at https://www.Verisign.com/zone. The domain name base is the active zone plus the number of domain ~~name registrations~~names that are registered but not configured for use in the respective ~~top level~~top-level domain zone file plus the number of domain ~~name registrations~~names that are in a client or server hold status. The domain name base may also reflect compensated or uncompensated judicial or administrative actions to add or remove from the active zone an immaterial number of domain names. These files and the related summary data are updated ~~at least once per day.~~daily. The update times may vary each day. The number of domain ~~name registrations~~names provided in this Form 10-Q are as of midnight of the date reported. ~~Information available on, or accessible through, our website is not incorporated herein by reference.~~

Results of Operations

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


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016			2023		2022		2023		2022
Revenues	100.0	%	100.0	%	100.0	%	100.0	%	Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Costs and expenses:									Costs and expenses:
Cost of revenues	16.2		17.3		16.7		17.4		Cost of revenues	12.9		14.0		13.4		14.2
Sales and marketing	6.4		6.5		6.5		6.8
Research and development	4.3		5.0		4.6		5.3		Research and development	5.8		5.9		6.1		6.1
General and administrative	11.2		10.4		11.1		10.0
Selling, general and administrative									Selling, general and administrative	13.7		13.8		13.6		13.6

Total costs and expenses	38.1		39.2		38.9		39.5		Total costs and expenses	32.4		33.7		33.1		33.9
Operating income	61.9		60.8		61.1		60.5		Operating income	67.6		66.3		66.9		66.1
Interest expense	(12.9	)	(10.0	)	(11.0	)	(10.1	)	Interest expense	(5.0)		(5.3)		(5.1)		(5.4)
Non-operating income, net	2.1		1.1		2.5		0.9		Non-operating income, net	3.4		1.5		3.3		0.7
Income before income taxes	51.1		51.9		52.6		51.3		Income before income taxes	66.0		62.5		65.1		61.4
Income tax expense	(11.8	)	(12.1	)	(11.8	)	(12.1	)	Income tax expense	(15.9)		(15.0)		(15.4)		(14.6)
Net income	39.3	%	39.8	%	40.8	%	39.2	%	Net income	50.1	%	47.5	%	49.7	%	46.8	%

Revenues

~~Revenues related to our Registry Services~~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 and technical systems for several other ~~TLDs~~gTLDs and ~~from providing back-end registry services to a number of TLD registry operators,~~ccTLDs, all of which are not significant in relation to our consolidated revenues. For domain names registered ~~with~~in the .com and .net registries we receive a fee from registrars per annual registration that is ~~fixed~~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.~~Department of Commerce (“DOC”). 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. We ~~increased the annual fee for a~~ ~~.net~~ ~~domain name registration from $6.79 to $7.46 on February 1, 2016, and from $7.46 to $8.20 on February 1, 2017. On July 27, 2017, we announced an increase in the annual fee for a .net~~ ~~domain name registration from $8.20 to $9.02, effective February 1, 2018. 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. The annual fee for a~~ ~~.com~~ ~~domain name registration is $7.85 for the duration of the current~~ ~~.com~~ Registry Agreement through November 30, 2024, except that prices may be raised by up to 7% each year due to the imposition of any new Consensus Policy or documented extraordinary expense resulting from an attack or threat of attack on the Security and Stability (each as defined in the ~~.com~~ ~~Registry Agreement) of the DNS, subject to approval~~

~~of the DOC. We~~also offer promotional ~~marketing~~incentive-based discount programs ~~for our~~to registrars based upon market conditions and the business environment in which the registrars operate.

Under the .com Registry Agreement, we are permitted to increase the price of a .com domain name 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 $8.39 to $8.97 effective September 1, 2022, and from $8.97 to $9.59, effective September 1, 2023. Effective February 1, 2023, we increased the annual registry-level wholesale fee for each new and renewal .net domain name registration from $9.02 to $9.92. In June 2023, we entered into a renewal of the .net Registry Agreement with ICANN, pursuant to which we will remain the sole registry operator for the .net registry through June 30, 2029. We have the contractual right to increase the fees for .net domain name registrations by up to 10% each year during

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the term of our agreement with ICANN, through June 30, 2029. On July 27, 2023, we announced that we will increase 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. dollars. ~~Revenues from Security Services are not significant in relation to our total consolidated revenues.~~

A comparison of revenues is presented below:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		% Change	2022		2023		% Change	2022
	(Dollars in millions)
Revenues	$	376.3	5%	$	356.9	$	1,112.7	5%	$	1,055.7

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 % Change 2016 2017 % Change 2016
(Dollars in thousands)
Revenues $ 292,428
2 % $ 287,554
$ 869,594
2 % $ 855,896

The following table compares the .com and .net domain name registrations in the domain name ~~base managed by our Registry Services business:~~

base:

September 30, ~~2017~~2023

% Change

September 30, ~~2016~~2022

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

~~145.8~~173.9 million

1—%

~~144.1~~174.2 million

Revenues increased ~~by $4.9 million and $13.7 million~~ during the three and nine months ended September 30, ~~2017, respectively,~~2023, as compared to the same ~~period~~periods last year, primarily due to an increase in revenues from the operation of the ~~registries~~registry for the .com gTLD supported by the price increases that became effective September 1, 2022 and 2021. This increase in revenue was partially offset by the elimination of revenue from the operation of the .~~net~~ ~~TLDs,~~tv ccTLD which was ~~driven by a 1% increase~~transitioned to another service provider in the fourth quarter of 2022.

Demand for domain ~~name base for .com~~ ~~and the increase in the .net~~ ~~domain name registration fees in February 2016 and 2017.~~

~~Growth in the domain name base~~names has been primarily driven by continued internet growth and marketing activities carried out by us and our registrars. During the second half of 2015 and the first quarter of 2016 we experienced an increased volume of new domain name registrations primarily from our registrars in China. The volume of these new registrations was inconsistent and episodic compared to prior periods, and by the end of the first quarter of 2016, reverted back to a more normalized registration pace. However, ~~periods of economic uncertainty,~~ competitive pressure from ccTLDs, ~~the introduction of new~~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 ~~and how they will manage~~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 ~~rate of growth of the~~demand for domain ~~name base in recent years~~names and may ~~continue to~~ do so in the remainder of ~~2017~~2023 and beyond.

~~We expect~~ While the ~~rate of~~core value proposition for domain names remains strong, softness in demand primarily in China has recently limited the overall growth in ~~revenues will increase in the fourth quarter of 2017 compared to the nine months ended September 30, 2017, as a result of continued growth in the aggregate number of domain names ending in .com~~ ~~and increases in the .net~~our domain name ~~registration fees in February 2016 and 2017.~~base.

Geographic revenues

We generate revenues in the U.S.; Europe, the Middle East and Africa (“EMEA”); China; and certain other countries, including Canada, ~~Australia~~Japan, and ~~Japan.~~Singapore.

The following table presents a comparison of our geographic revenues:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,					Nine Months Ended September 30,
	2017		% Change		2016		2017		% Change		2016			2023		% Change	2022		2023		% Change	2022
	(Dollars in thousands)													(Dollars in millions)
U.S.	$	173,433	3	%	$	167,796	$	518,913	4	%	$	497,595	U.S.	$	250.8	6%	$	236.3	$	741.2	7%	$	691.8
EMEA	52,790		2	%	51,615		158,509		2	%	155,280		EMEA	57.7		5%	55.0		169.4		—%	170.0
China	27,177		(18	)%	33,224		80,680		(17	)%	97,150		China	22.0		(18)%	26.8		71.0		(10)%	79.3
Other	39,028		12	%	34,919		111,492		5	%	105,871		Other	45.8		18%	38.8		131.1		14%	114.6
Total revenues	$	292,428			$	287,554	$	869,594			$	855,896	Total revenues	$	376.3		$	356.9	$	1,112.7		$	1,055.7

Revenues ~~for our Registry Services business~~in the table above are attributed to the country of domicile and the respective regions in which our registrars are ~~located,~~located; however, this may differ from the regions where the registrars operate or where registrants are located. Revenue growth for each region may be impacted by registrars reincorporating, relocating, or from acquisitions or changes in affiliations of resellers. ~~The impacts of these~~Several such changes ~~are reflected in the growth rates~~benefited revenues in the U.S. and ~~Other regions.~~negatively impacted revenues in EMEA during the three and nine months ended September 30, 2023. Revenue growth for each region may also be impacted by registrars domiciled in one region, registering domain names in another region. ~~Although revenues grew~~The majority of our revenue growth was generated from registrars based in the U.S.~~, EMEA~~ and ~~Other regions for~~certain other countries, while revenues from registrars based in China declined in both the three and nine months ended September 30, ~~2017,~~2023 compared to the same ~~period last~~periods of the prior year ~~revenues from China decreased. Revenues from China for~~due to the three and nine months ended September 30, 2016 benefited from the increased volume of registrations in the second half of 2015 and first quarter of 2016, discussed earlier. However, a significant portion of those registrations did not renew, resulting in the decline in revenues from China.lower demand noted above.

Cost of revenues

Cost of revenues consist primarily of salaries and employee benefits expenses for our personnel who manage the operational systems, depreciation expenses, operational costs associated with the delivery of our services, fees paid to ICANN, customer support and training, ~~consulting and development services,~~ costs of facilities and computer equipment used in these activities, telecommunications expense and allocations of indirect costs such as corporate overhead.

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A comparison of cost of revenues is presented below:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 % Change 2016 2017 % Change 2016
(Dollars in thousands)
Cost of revenues $ 47,333
(5 )% $ 49,807
$ 145,646
(2 )% $ 149,142


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		% Change	2022		2023		% Change	2022
	(Dollars in millions)
Cost of revenues	$	48.6	(3)%	$	50.0	$	148.8	(1)%	$	150.2

Cost of revenues decreased ~~by $2.5 million~~slightly during the three months ended September 30, ~~2017,~~2023, compared to the same period last year, ~~primarily~~ due to a ~~$1.6 million decrease in depreciation expense and a $1.5 million decrease in salary and employee benefits expenses. Depreciation expense decreased as a result~~combination of ~~lower hardware purchases in recent years. Salary and employee benefits expenses decreased primarily due to a reduction in average headcount related to the sale of the iDefense business.~~individually insignificant factors.

Cost of revenues decreased ~~by $3.5 million~~slightly during the nine months ended September 30, ~~2017,~~2023, compared to the same period last year, ~~primarily~~ due to a decrease ~~of $4.1 million~~ in ~~depreciation expenses and $1.8 million in salary and employee benefits expenses,~~registry fees that was partially offset by a $1.5 million increase in telecommunication expenses. Depreciation expenses decreased primarily due to lower hardware purchases in recent years. Salary and employee benefits expenses decreased primarily due to a reduction in average headcount related to the sale of the iDefense business. Telecommunication expenses increased as a result of an increase in ~~network costs supporting our operations.~~

~~We expect cost~~compensation and benefit expenses. Registry fees decreased by $3.7 million due to the transition of ~~revenues as a percentage~~the operation of ~~revenues~~the registry for the .tv ccTLD to ~~remain consistent during~~another service provider in the fourth quarter of ~~2017 compared~~2022. Compensation and benefit expenses increased by $3.1 million due to ~~the nine months ended September 30, 2017.~~

~~Sales~~salary increases and ~~marketing~~

Sales and marketing expenses consist primarily of salaries, sales commissions, sales operations and other personnel-related expenses, travel and related expenses, trade shows, costs of lead generation, 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:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 % Change 2016 2017 % Change 2016
(Dollars in thousands)
Sales and marketing $ 18,667
— % $ 18,647
$ 56,463
(3 )% $ 58,431

Sales and marketing expenses remained consistent during the three months ended September 30, 2017, compared to the same period last year as a $1.7 million decrease in salary and employee benefits expenses was offset by a $1.7 millionan increase in ~~advertising and marketing expenses. Salary and employee benefits expenses decreased as a result of a reduction in~~average headcount. ~~Advertising and marketing expenses increased primarily due to increases in costs related to certain marketing campaigns supporting our Registry Services business.~~

Sales and marketing expenses decreased by $2.0 million during the nine months ended September 30, 2017, compared to the same period last year, primarily due to a $3.2 million decrease in salary and employee benefits expenses, partially offset by a $2.4 million increase in advertising and marketing expenses. Salary and employee benefits expenses decreased as a result of a reduction in headcount. Advertising and marketing expenses increased primarily due to increases in costs related to certain marketing campaigns supporting our Registry Services business.

We expect sales and marketing expenses as a percentage of revenues to increase during the fourth quarter of 2017 compared to the nine months ended September 30, 2017, as the volume of marketing initiatives increases.

Research and development

Research and development expenses consist primarily of costs related to research and development personnel, including salaries and other personnel-related expenses, consulting fees, facilities costs, computer and communications equipment, support services used in our service and technology development, and allocations of indirect costs such as corporate overhead.

A comparison of research and development expenses is presented below:

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 % Change 2016 2017 % Change 2016
(Dollars in thousands)
Research and development $ 12,715
(11 )% $ 14,324
$ 39,569
(13 )% $ 45,355


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		% Change	2022		2023		% Change	2022
	(Dollars in millions)
Research and development	$	21.7	4%	$	21.0	$	68.1	6%	$	64.2

Research and development expenses ~~decreased by $1.6 million~~increased slightly during the three months ended September 30, ~~2017,~~2023, compared to the same period last year, due to a combination of individually insignificant factors.

Research and development expenses increased during the nine months ended September 30, 2023, compared to the same period last year, primarily due to a $2.3 million decrease in ~~salary and employee benefits expenses resulting from a reduction in headcount.~~

Research and development expenses decreased by $5.8 million during the nine months ended September 30, 2017, compared to the same period last year, primarily due to a decrease in salary and employee benefits expenses resulting from a reduction in headcount.

~~We expect research and development expenses~~capitalized labor as a ~~percentage~~result of ~~revenues~~a shift in work from capital projects to ~~remain consistent during the fourth quarter~~certain non-capital projects and maintenance of ~~2017 compared to the nine months ended September 30, 2017.~~existing software products.

~~General~~Selling, general and administrative

~~General~~Selling, general and administrative expenses consist primarily of salaries and other personnel-related expenses for our executive, administrative, legal, finance, information technology, ~~and~~ human resources, sales, and marketing personnel, travel and related expenses, trade shows, costs of ~~facilities,~~ computer and communications equipment and support services, consulting and professional service fees, costs of marketing programs, costs of facilities, management information systems, support services, ~~professional services fees,~~and certain tax and license fees, ~~and bad debt expense,~~ 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:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		% Change	2022		2023		% Change	2022
	(Dollars in millions)
Selling, general and administrative	$	51.7	5%	$	49.1	$	151.5	5%	$	143.7

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 % Change 2016 2017 % Change 2016
(Dollars in thousands)
General and administrative $ 32,654
9 % $ 30,000
$ 96,626
13 % $ 85,158

~~General~~Selling, general and administrative expenses increased ~~by $2.7 million~~ during the three months ended September 30, ~~2017~~,2023, compared to the same period last year, ~~primarily~~ due to a combination of individually insignificant ~~items.~~factors.

~~General~~Selling, general and administrative expenses increased ~~by $11.5 million~~ during the nine months ended September 30, ~~2017,~~2023, compared to the same period last year, ~~primarily~~ due to ~~a $6.6 million increase~~increases in ~~salary~~compensation and ~~employee benefits~~benefit expenses ~~including stock-based compensation, a $3.1 million increase in legal expenses~~ and ~~a combination of~~ other individually insignificant ~~items, partially offset by a $2.3 million decrease in depreciation expenses. Salary~~factors. Compensation and ~~employee benefits expenses, including stock-based compensation~~benefit expenses increased by $3.9 million due to salary increases and an increase in average headcount and higher projected achievement levels on certain performance-based RSU grants. Legal expenses increased due to higher external legal fees. Depreciation expenses decreased due to lower capital expenditures in recent years.

~~We expect general and administrative expenses as a percentage of revenues to remain consistent during the fourth quarter of 2017 compared to the nine months ended September 30, 2017.~~

headcount.

Interest expense

~~The following table presents the components of~~ Interest ~~expense:~~

~~We expect interest~~ expense ~~as a percent of revenues to increase~~remained consistent during the fourth quarter of 2017 compared to the nine months ended September 30, 2017, due to the additional interest expense related to the senior notes issued in July 2017 and due to the contingent interest related to our Subordinated Convertible Debentures. Effective August 15, 2017, we have the right to redeem the Subordinated Convertible Debentures under the terms of the indenture. Therefore, the fair value of the contingent interest embedded derivative for periods after August 15, 2017 is negligible, and any future contingent interest is recognized as interest expense.

~~Non-operating income, net~~

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

On April 1, 2017, we completed the sale of our iDefense business, which resulted in a gain of approximately $10.4 million for the nine months ended September 30, 2017. Interest income increased in both the three and nine months ended September 30, ~~2017 due~~2023 compared to ~~higher amounts invested~~the same periods last year.

Non-operating income, net

See Note 8, “Non-operating Income, Net” of our Notes to Consolidated Financial Statements in ~~marketable securities and higher interest rates.~~Item 1 of this Form 10-Q.

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Income tax expense

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


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016				2023			2022			2023			2022
	(Dollars in thousands)													(Dollars in millions)
Income tax expense	$	34,645		$	34,692		$	102,554		$	104,227		Income tax expense	$	60.1		$	53.4		$	172.0		$	153.6
Effective tax rate	23		%	23		%	22		%	24		%	Effective tax rate	24		%	24		%	24		%	24		%

The effective tax rate for each of the ~~three and nine months ended~~ ~~September 30, 2017~~ ~~and 2016 was lower than~~periods in the table above differed from the statutory federal rate of ~~35%~~ ~~primarily~~21%, due to state income taxes and U.S. taxes on foreign earnings, net of foreign tax ~~benefits from foreign income taxed at lower rates, partially~~credits, offset by ~~state income taxes. Additionally, the~~a lower foreign effective tax ~~rate for nine months ended September 30, 2017 is also reduced by $8.2 million of excess tax benefits related to stock-based compensation, pursuant to the adoption of ASU 2016-09 -~~ ~~Improvements to Employee Share-Based Payment Accounting, effective January 1, 2017, as discussed in Note 1 to our Notes to Condensed Consolidated Financial Statements.~~rate.

Liquidity and Capital Resources

September 30, December 31,
2017 2016
(In thousands)
Cash and cash equivalents $ 286,822
$ 231,945
Marketable securities 2,078,905
1,565,962
Total $ 2,365,727
$ 1,797,907

~~As of~~ ~~September 30, 2017~~,The following table presents our principal ~~source~~sources of ~~liquidity was~~ ~~$286.8 million~~ ~~of cash and cash equivalents and~~ ~~$2.1 billion~~ ~~of marketable securities.~~ liquidity:


	September 30,		December 31,
	2023		2022
	(In millions)
Cash and cash equivalents	$	157.7	$	373.6
Marketable securities	785.8		606.8
Total	$	943.5	$	980.4

The marketable securities primarily consist of debt securities issued by the U.S. Treasury meeting the criteria of our investment policy, which is focused on the preservation of our capital through investment in investment grade securities. The cash equivalents consist of amounts invested in money market funds, time deposits and U.S. Treasury bills purchased with original maturities of ~~less than 90 days.~~three months or less. As of September 30, ~~2017,~~2023, 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, ~~“Cash, Cash Equivalents, and Marketable Securities,~~“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 27, 2023, our Board of Directors authorized the repurchase of our 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. During the three months ended September 30, 2023, we repurchased 1.1 million shares of our common stock for an aggregate cost of $219.9 million. As of September 30, 2023, there was approximately $1.34 billion remaining available for future share repurchases under our share repurchase program.

As of September 30, ~~2017, the~~2023, we had $750.0 million principal amount outstanding of cash and cash equivalents and marketable securities held by foreign subsidiaries was $1.6 billion. Our intent remains to indefinitely reinvest these funds outside of the U.S. and accordingly, we have not provided deferred U.S. taxes for these funds. In the event funds from foreign operations are needed to fund operations in the U.S. and if U.S. tax has not already been provided, we would be required to accrue and pay additional U.S. taxes in order to repatriate these funds.

~~On July 5, 2017, we issued~~2.70% senior unsecured notes due 2031, $550.0 million principal amount outstanding of 4.75% senior unsecured notes due July 15, 2027. We intend to use the proceeds for general corporate purposes, including, but not limited to, the repurchase of shares under our share repurchase program. We will pay interest on the notes semi-annually on January 152027, and ~~July 15, commencing on January 15, 2018. Additionally, as of September 30, 2017, we also had~~ $500.0 million principal amount outstanding of ~~the~~ 5.25% senior unsecured notes due ~~2025 and $750.0 million principal amount outstanding of the 4.625% senior unsecured notes due 2023.~~

2025. As of September 30, ~~2017,~~2023, there were no borrowings outstanding under ~~the~~our $200.0 million ~~unsecured revolving~~ credit facility that will expire in ~~2020.~~

As of September 30, 2017, we had $1.25 billion principal amount outstanding of 3.25% subordinated convertible debentures due 2037. The price of our common stock exceeded the conversion price threshold trigger during the third quarter of 2017. Accordingly, the Subordinated Convertible Debentures are convertible at the option of each holder through December 31, 2017. We do not expect a material amount of the Subordinated Convertible Debentures to be converted in the near term as the trading price of the debentures exceeds the value that is likely to be received upon conversion. However, we cannot provide any assurance that the trading price of the debentures will continue to exceed the value that would be derived upon conversion or that the holders will not elect to convert the Subordinated Convertible Debentures. If a holder elects to convert its Subordinated Convertible Debentures, we are permitted under the Indenture to pursue an exchange in lieu of conversion or to settle the conversion value (as defined in the Indenture) in cash, stock, or a combination thereof. If we choose not to pursue or cannot complete an exchange in lieu of conversion, we currently have the intent and the ability (based on current facts and circumstances) to settle the principal amount of the Subordinated Convertible Debentures in cash. However, if the principal amount of the Subordinated Convertible Debentures that holders actually elect to convert exceeds our cash on hand and cash from operations, we will need to draw cash from existing financing or pursue additional sources of financing to settle the Subordinated Convertible Debentures in cash. We cannot provide any assurances that we will be able to obtain new sources of financing on terms acceptable to us or at all, nor can we assure that we will be able to obtain such financing in time to settle the Subordinated Convertible Debentures that holders elect to convert. The Subordinated Convertible Debentures continue to generate cash tax benefits while they remain outstanding and they are an important part of our capital structure. Although we have the right to redeem these debentures under the terms of the indenture, our intention, based on current conditions, is to not redeem these debentures, which will allow the cash tax benefits to continue to accrue.

We paid contingent interest of $7.7 million in February 2017 and $7.5 million in August 2017 in addition to the normal coupon interest. In August 2017, the upside trigger on the Subordinated Convertible Debentures was met again, and we will pay contingent interest of $9.1 million in February 2018.

We derive significant tax savings from the Subordinated Convertible Debentures. For 2017, the interest deduction for income tax purposes, related to our Subordinated Convertible Debentures, is projected to be $191.5 million, compared to cash interest, including contingent interest, of $55.9 million. For income tax purposes, we deduct interest expense on the Subordinated Convertible Debentures calculated at 8.5% of the adjusted issue price, subject to adjustment for actual versus projected contingent interest. The adjusted issue price, and consequently the interest deduction for income tax purposes, grows

over the term due to the difference between the interest deduction taken using a comparable yield of 8.5% on the adjusted issue price, and the coupon rate of 3.25% on the principal amount, compounded annually. The interest deduction taken is subject to recapture upon settlement to the extent that the amount paid (in cash or stock) to settle the Subordinated Convertible Debentures is less than the adjusted issue price. Interest recognized in accordance with GAAP, which is calculated at 8.39% of the liability component of the Subordinated Convertible Debentures, will also grow over the term, but at a slower rate. This difference will result in a continuing increase in the deferred tax liability on our Condensed Consolidated Balance Sheet.2024.

We believe existing cash, cash equivalents and marketable securities, and funds generated from operations, together with our ~~borrowing capacity under the unsecured revolving credit facility~~ability to arrange for additional financing should be sufficient to meet our working capital, capital expenditure requirements, and to service our debt for ~~at least~~ the next 12 ~~months.~~months and beyond. We regularly assess our cash management approach and activities in view of our current and potential future needs. Our cash requirements have not changed materially since the 2022 Form 10-K.

In summary, our cash flows for the nine months ended September 30, ~~2017~~2023 and ~~2016 are~~2022 were as follows:


	Nine Months Ended September 30,
	2023		2022
	(In millions)
Net cash provided by operating activities	$	649.6	$	614.2
Net cash (used in) provided by investing activities	(201.5)		546.0
Net cash used in financing activities	(663.5)		(821.7)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(0.6)		(1.4)
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(216.0)	$	337.1

Nine Months Ended
September 30,
2017 2016
(In thousands)
Net cash provided by operating activities $ 503,568
$ 488,043
Net cash used in investing activities (531,619 ) (50,762 )
Net cash provided by (used in) financing activities 81,810
(488,264 )
Effect of exchange rate changes on cash and cash equivalents 1,118
109
Net increase (decrease) in cash and cash equivalents $ 54,877
$ (50,874 )

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Cash flows from operating activities

Our largest source of operating cash flows is cash collections from our customers. Our primary uses of cash from operating activities are for ~~personnel related~~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 nine months ended September 30, ~~2017~~,2023, compared to the same period last year, primarily due to ~~an increase~~increases in cash ~~collected~~received from customers and cash received from interest on investments, partially offset by ~~an increase in cash paid to suppliers and employees and an increase~~increases in cash paid for income ~~taxes.~~ taxes and cash paid to employees and vendors. Cash received from customers increased primarily due to ~~higher~~the .com ~~domain name registrations~~ price increase that became effective on September 1, 2022 and ~~renewals,~~September 1, 2023, changes in customer deposit balances, and the ~~increases in the~~ .net ~~domain name registration fees in~~ price increase that became effective on February ~~2016 and 2017.~~1, 2023. Cash ~~paid to suppliers and employees~~received from interest on investments increased ~~primarily~~ due to ~~the timing of certain vendor payments.~~higher interest rates on our investments in debt securities. Cash paid for income taxes increased primarily due to comparatively higher taxable income and higher transition tax payments on accumulated foreign ~~income tax payments.~~earnings resulting from the 2017 Tax Cuts and Jobs Act. Cash paid to employees and vendors increased primarily due to an increase in operating expenses.

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 and proceeds~~equipment.

We had net cash outflows from ~~the sale of businesses.~~

~~Net cash used in~~ investing activities ~~increased during~~in the nine months ended September 30, ~~2017,~~2023, compared to net cash inflows from investing activities during the same period last year, primarily due to ~~an increase~~a decrease in ~~purchases~~proceeds from maturities and sales of marketable securities, net of ~~proceeds from sales~~purchases of marketable securities and ~~maturities,~~ an increase in purchases of property and equipment, ~~partially offset by the payments made in third quarter of 2016 for the future assignment of the rights~~primarily related to the ~~.web~~ ~~gTLD, and an increase in other investing activities including the proceeds received from the sale~~purchase of a building to be used as our ~~iDefense business.~~future corporate headquarters.

Cash flows from financing activities

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

~~The change~~Net cash used in ~~net cash provided by (used in)~~ financing activities decreased during the nine months ended September 30, ~~2017,~~2023, compared to the same period last year, ~~was~~ primarily due to ~~the proceeds from the issuance of the 4.75% senior notes due 2027 in the third quarter of 2017, net of issuance costs, and~~ a decrease in share repurchases.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our market risk exposures since December 31, ~~2016 other than the issuance of the 4.75% senior notes due 2027 and an increase in marketable securities.~~2022.

ITEM 4. CONTROLS AND PROCEDURES

~~Based on our management’s evaluation,~~Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, as of September 30, ~~2017~~,2023, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, ~~2017~~2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting

Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the control may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On January 18, 2017, the Company received a Civil Investigative Demand (“CID”) from the Antitrust Division of the United States Department of Justice (“DOJ”) requesting certain material related to the Company becoming the registry operator for the .~~web~~ ~~gTLD.~~ We are ~~cooperating with the DOJ. At this time, the Company is unable to estimate a range of potential financial and non-financial outcomes in connection with this matter.~~

~~Verisign is also~~ involved in various investigations, claims and lawsuits arising in the normal conduct of ~~its~~our business, none of which, in ~~its~~our opinion, will have a material adverse effect on ~~its~~our financial condition, results of operations, or cash flows. ~~The Company~~We cannot assure you that itwe will prevail in any litigation. Regardless of the outcome, any litigation may require ~~the Company~~us to incur significant litigation expense and may result in significant diversion of management attention.

ITEM 1A.RISK FACTORS

Please carefully consider the following discussion of significant factors, events and uncertainties that make an investment in our securities risky. In addition to other information in this Form 10-Q, the following risk factors should be carefully considered in evaluating us and our ~~business because these~~business. When the factors, ~~currently have a significant impact~~events and contingencies described below or ~~may have a significant impact on~~elsewhere in this Form 10-Q materialize, our business, operating results, financial condition, reputation, cash flows or prospects can be materially adversely affected. In such case, the trading price of our common stock could decline and you could lose part or all of your investment. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our business, operating results, financial ~~condition.~~condition, reputation, cash flows and prospects. Actual results could differ materially from those projected in the forward-looking statements contained in this Form 10-Q as a result of the risk factors discussed below and elsewhere in this Form 10-Q and in other filings we make with the SEC.

~~Risks arising~~Cybersecurity and Technology Risk Factors

Attempted security breaches, including from the exploitation of vulnerabilities, cyber-attacks and Distributed Denial of Service (“DDoS”) attacks against our ~~agreements governing~~systems and services increase our ~~Registry Services business could limit our ability to maintain or grow our business.~~

~~We are parties to (i) a Cooperative Agreement (as amended) with the DOC with respect to the .com~~ ~~gTLD and (ii) Registry Agreements with ICANN for~~ ~~.com~~, ~~.net, .name,~~ and other gTLDs including our IDN gTLDs. As substantially all of our revenues are derived from our Registry Services business, limitations and obligations in, or changes or challenges to, these agreements, particularly the agreements that involve .~~com~~ ~~and .net, could have a material adverse impact on our business. Certain competing registries, such as the ccTLDs, do not face the same limitations or obligations that we face in our agreements.~~

~~Modifications or Amendments.~~ ~~In October 2016, the Company and ICANN entered into an amendment to extend the term of the~~ ~~.com~~ ~~Registry Agreement to November 30, 2024 (the “.com~~ ~~Amendment”). As part of the~~ ~~.com~~ ~~Amendment, the Company and ICANN agreed to negotiate in good faith to amend the terms of the~~ ~~.com~~ ~~Registry Agreement: (i) by October 20, 2018, to preserve and enhance the security and stability of the internet or the~~ ~~.com~~ ~~TLD, and (ii) as may be necessary for consistency with changes to, or the termination or expiration of, the Cooperative Agreement. We can provide no assurance that any new terms for the~~ ~~.com~~ ~~Registry Agreement that we agree to as a result of the above obligations will not have a material adverse impact on our business, operating results, financial condition, and cash flows.~~

~~The DOC approved the .com~~ Amendment under amendment 34 to the Cooperative Agreement. The DOC did not extend the term of the Cooperative Agreement, which will expire on November 30, 2018, unless the DOC, in its sole discretion, extends the term. Under amendment 34, the DOC has the right to conduct a public interest review for the sole purpose of determining whether the DOC will exercise its right to extend the term of the Cooperative Agreement. In connection with the aforementioned review, we agreed to cooperate fully and to work in good faith to reach a mutual agreement with the DOC to resolve issues identified in such review and to work in good faith to implement any agreed upon changes as of the expiration of the current term of the Cooperative Agreement. We can provide no assurance that any changes that we agree to as a result of the above obligations will not have a material adverse impact on our business, operating results, financial condition, and cash flows.

In addition, our Registry Agreements for new gTLDs, including the Registry Agreements for our IDN gTLDs, include ICANN’s right to amend the agreements without our consent, which could impose unfavorable contract obligations on us that could impact our plans and competitive positions with respect to new gTLDs. At the time of renewal of our ~~.com~~ or ~~.net~~ Registry Agreements, ICANN might also attempt to impose this same unilateral right to amend these registry agreements under certain conditions. ICANN has also included new mandatory obligations on new gTLD registry operators, including us, that may increase the risks and potential liabilities associated with operating new gTLDs. ICANN might seek to impose these new mandatory obligations in our other Registry Agreements under certain conditions. We can provide no assurance that any changes to our Registry Agreements as a result of the above obligations will not have a material adverse impact on our business, operating results, financial condition, and cash flows.

~~Pricing. Under the terms of the Cooperative Agreement with the DOC and the~~ ~~.com~~ ~~Registry Agreement with ICANN, we are restricted during the term of the Registry Agreement from increasing the price of registrations or renewals of .com~~ ~~domain names above $7.85, except that we are entitled to increase the price up to 7%, with the prior approval of the DOC, due to the~~

~~imposition of any new Consensus Policies, as established and defined under ICANN’s bylaws and due process, and covering certain items listed in the .com~~ Registry Agreement, or documented extraordinary expense resulting from an attack or threat of attack on the security and stability of the DNS. However, it is uncertain that such circumstances will arise, or if they do, whether we would seek, or the DOC would approve, any request to increase the price for ~~.com~~ domain name registrations. We also have the right under the Cooperative Agreement to seek the removal of these pricing restrictions if we demonstrate to the DOC that market conditions no longer warrant such restrictions. However, it is uncertain whether we will seek the removal of such restrictions, or whether the DOC would approve the removal of such restrictions. In comparison, under the terms of the ~~.net~~ ~~and~~ ~~.name~~ Registry Agreements with ICANN, we are permitted to increase the price of domain name registrations and renewals in these TLDs up to 10% per year. Additionally, ICANN’s registry agreements for new gTLDs do not contain such pricing restrictions.

~~Vertical integration. Under the~~ ~~.com, .net,~~ ~~and .name~~ Registry Agreements with ICANN, as well as the Cooperative Agreement with the DOC, we are not permitted to acquire, directly or indirectly, control of, or a greater than 15% ownership interest in, any ICANN-accredited registrar. Historically, all gTLD registry operators were subject to this vertical integration prohibition; however, ICANN has established a process whereby registry operators may seek ICANN’s approval to remove this restriction, and ICANN has approved such removal in several instances. If we were to seek removal of the vertical integration restrictions contained in our agreements, it is uncertain whether ICANN and/or DOC approval would be obtained. Additionally, ICANN’s registry agreement for new gTLDs generally permits such vertical integration, with certain limitations including ICANN’s right, but not the obligation, to refer such vertical integration activities to competition authorities. Furthermore, such vertical integration restrictions do not generally apply to ccTLD registry operators. If registry operators of other TLDs, or ccTLDs, are able to obtain competitive advantages through such vertical integration, it could materially harm our business.

~~Renewal and Termination. Our .com, .net,~~ ~~and .name~~ Registry Agreements with ICANN contain “presumptive” rights of renewal upon the expiration of their current terms on November 30, 2024, June 30, 2023 and August 15, 2018 respectively. The Registry Agreements for our new gTLDs including our IDN gTLDs are subject to a 10-year term and contain similar “presumptive” renewal rights. If certain terms in our ~~.com~~ ~~and~~ ~~.net~~ Registry Agreements are not similar to such terms generally in effect in the registry agreements of the five largest gTLDs, then a renewal of these agreements shall be upon terms reasonably necessary to render such terms similar to the registry agreements for those other gTLDs. There can be no assurance that such terms, if they apply, will not have a material adverse impact on our business. A renewal of the .~~com~~ ~~Registry Agreement must be approved by the DOC, which, under certain circumstances, could refuse to grant its approval to the renewal of the~~ ~~.com~~ ~~Registry Agreement on similar terms, or at all. A failure (i) by ICANN or the DOC to approve the renewal of the~~ ~~.com~~ ~~Registry Agreement prior to the expiration of its current term on November 30, 2024, or (ii) by ICANN to approve the renewal of the .net~~ Registry Agreement prior to or upon the expiration of its current term on June 30, 2023, would have, absent an extension, a material adverse effect on our business. ICANN could terminate or refuse to renew our .~~com~~ ~~or .net~~ Registry Agreements if, upon proper notice, (i) we fail to cure a fundamental and material breach of certain specified obligations, and (ii) we fail to timely comply with a final decision of an arbitrator or court. ICANN’s termination or refusal to renew either the .~~com~~ ~~or .net~~ ~~Registry Agreement would have a material adverse effect on our business.~~

~~Consensus Policies~~. Our Registry Agreements with ICANN require us to implement Consensus Policies and specifications or policies established on a temporary basis (“Temporary Policies”). ICANN could adopt Consensus Policies or Temporary Policies that are unfavorable to us as the registry operator of ~~.com~~, ~~.net~~ ~~and our othergTLDs, that are inconsistent with our current or future plans, that impose substantial~~ costs, on our business, that subject the Company to additional legal risks, or that affect our competitive position. Such Consensus Policies or Temporary Policies could have a material adverse effect on our business. As an example, ICANN has adopted a Consensus Policy that requires Verisign to receive and display thick-Whois data for ~~.com~~ ~~and .net~~. The costs of complying or failing to comply with this policy as well as laws and regulations regarding publicly identifiable information and data privacy, such as domestic and various foreign privacy regimes, could expose us to ~~compliance costs and substantial~~potentially material liability, and ~~result in costly and time-consuming investigations or litigation.~~

~~Legal challenges. Our Registry Agreements have faced, and~~ could face in the future, challenges, including possible legal challenges, resulting from our activities or the activities of ICANN, registrars, registrants, and others, and any adverse outcome from such challenges could have a material adverse effect on our business.

Governmental regulation and the application of new and existing laws in the U.S. and overseas may slow business growth, increase our costs of doing business, create potential liability and have an adverse effect on our business.

Application of new and existing laws and regulations in the U.S. or overseas to the internet and communications industry can be unclear. The costs of complying or failing to comply with these laws and regulations could limit our ability to operate in our current markets, expose us to compliance costs and substantial liability, and result in costly and time-consuming litigation. For example, the government of the People’s Republic of China (“PRC”) has indicated that it will issue, and in some instances has begun to issue, new regulations, and has begun to enforce existing regulations, that impose additional costs on, and risks to, our provision of Registry Services in the PRC and could impact the growth or renewal rates of domain name registrations in the PRC. In addition to registry operators, certain of such regulations will also require registrars to obtain a government-issued

license for each TLD whose domain name registrations they intend to sell directly to registrants. Any failure to obtain the required licenses, or to comply with any license requirements or any updates thereto, by us or our registrars could impact the growth of our business in the PRC.

Foreign, federal or state laws could have an adverse impact on our business, financial condition, results of operations and cash flows, and our ability to conduct business in certain foreign countries. For example, laws designed to restrict who can register and who can distribute domain names, the online distribution of certain materials deemed harmful to children, online gambling, counterfeit goods, and cybersquatting; laws designed to require registrants to provide additional documentation or information in connection with domain name registrations; and laws designed to promote cyber security may impose significant additional costs on our business or subject us to additional liabilities. We have a contract pursuant to which we provide services to the U.S. government and it imposes compliance costs, including compliance with the Federal Acquisition Regulation, which could be significant to the Company.

Due to the nature of the internet, it is possible that state or foreign governments might attempt to regulate internet transmissions or prosecute us for violations of their laws. We might unintentionally violate such laws, such laws may be modified, and new laws may be enacted in the future. In addition, as we launch our IDN gTLDs and increase our marketing efforts of our other TLDs in foreign countries, we may raise our profile in certain foreign countries thereby increasing the regulatory and other scrutiny of our operations. Any such developments could increase the costs of regulatory compliance for us, affect our reputation, force us to change our business practices or otherwise materially ~~harm our business. In addition, any such new laws could impede growth of or result in a decline in domain name registrations, as well as impact the demand for our services.~~

~~Undetected or unknown defects in our service, security breaches, and DDoS attacks could expose us to liability and~~ harm our business and reputation.

Services as complex as those we offer or develop could contain undetected defects or errors. Despite testing, defects or errors may occur in our existing or new services, which could result in compromised customer data, including DNS data, diversion of development resources, injury to our reputation, tort or contract claims, increased insurance costs or increased service costs, any of which could harm our business. Performance of our services could have unforeseen or unknown adverse effects on the networks over which they are delivered as well as, more broadly, on internet users and consumers, and third-party applications and services that utilize our services, which could result in legal claims against us, harming our business. Our failure to identify, remediate and mitigate security breaches or our inability to meet customer expectations in a timely manner could also result in loss of or delay in revenues, failure to meet contracted service level obligations, loss of market share, failure to achieve market acceptance, injury to our reputation and increased costs.

In addition to undetected defects or errors, we are also subject to cyber-attacks and attempted security breaches. We retain certain customer and employee information in our data centers and various domain name registration systems. It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure. The Company, asAs an operator of critical internet infrastructure, ~~is frequently targeted and experiences~~we experience a high rate of ~~attacks. These include~~cyber-attacks and attempted security breaches targeting our systems and services, including the most sophisticated forms of attacks, such as advanced persistent threat attacks, exploitation of zero-day vulnerabilities, ransomware attacks, and ~~zero-hour threats. These~~social engineering attacks. The forms of these attacks are constantly evolving and may involve ~~situations where the threat is~~methods, tools, and strategies that may not ~~compiled or has~~have been previously ~~unobserved within our observation~~identified and ~~threat indicators space~~may not have been observed until the moment ~~it is launched. In addition, these forms~~ of ~~attacks may target specific unidentified~~launch, or ~~unresolved vulnerabilities that exist only within the target’s operating environment,~~until sometime after, making these attacks virtually impossible to anticipate and difficult to defend against. In addition to external threats, ~~we may be~~our systems and services are subject to insider ~~threats,~~threat risks, including ~~those~~physical or electronic break-ins, sabotage, and risks from ~~third-party~~ suppliers, such as consultants and advisors, SaaS providers, hardware, software, and network systems manufacturers, regional internet registries, and other ~~outside~~ vendors, or from current or former contractors or ~~contract employees; these~~employees. These threats and any resulting security breaches can ~~be realized~~arise from intentional or unintentional actions. ~~The Shared Registration System, the root zone servers, the root zone file, the Root Zone Management System, the TLD name servers~~Our continued exposure to these threats and the ~~TLD zone files~~potential that ~~we operate are critical~~they could lead to our Registry Services operations. Despite the significant time and money expended on our security measures, we have been subject to a security breach, as disclosed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and our infrastructure may in the future be vulnerable to physical break-ins, outages resulting from destructive malcode, computer viruses, attacks by hackers or nefarious actors or similar disruptive problems, including hacktivism. It is possible that we may havematerial liability claims against us requires us to expend ~~additional~~significant financial and other ~~resources~~resources. We have developed policies, standards, and procedures to ~~address such problems. Any physical~~identify, protect, detect, respond, and recover from threats posed by cybersecurity risks, and failure to comply with these policies, standards, and procedures by our employees or ~~electronic break-in~~suppliers could limit our ability to effectively manage threats from these cybersecurity risks. In addition, we must ensure that our employees stay focused on protecting the Company against cybersecurity threats especially in our hybrid work environment, or ~~other~~our ability to effectively manage cybersecurity risks could be impacted. Our failure to effectively manage these security ~~breach or compromise of the information stored at~~risks, including insider threats, could result in material harm to our ~~data centers or domain name registration systems may cause an outage~~business, including loss of or ~~jeopardize the security of information stored on our premises or~~delay in ~~the computer systems and networks of our customers. In such an event, we could face significant liability, fail~~revenues, failure to meet ~~contracted~~ service level ~~obligations, customers could be reluctant~~agreements, material liability claims, failure to ~~use our services and we could be at risk for loss of various security and standards-based compliance certifications needed for operation of our businesses, all or any of which could adversely affect~~maintain market acceptance, injury to our reputation, and ~~harm~~increased costs, and could call into question our ~~business. Such an occurrence could also result in adverse publicity~~ability to preserve the security and ~~therefore adversely affect the market’s perception~~stability of the ~~security of e-commerce~~internet.

Security vulnerabilities in our systems and ~~communications over the internet as well as of the security or reliability of~~ our ~~services.~~

vendors’ systems, including vulnerabilities in third party software and hardware, pose a material risk to our operations. We use ~~externally developed~~externally-developed technology, systems, and services, including both hardware and software, for a variety of purposes, including ~~without limitation,~~compute, storage, encryption and authentication, back-office support, and other functions. ~~While we~~We have developed ~~operational~~ policies, standards, and procedures to reduce the impact of a security ~~breach~~vulnerabilities in system components, as well as at ~~a vendor~~any vendors where ~~Company~~our data is stored or ~~processed,~~processed. However, such measures cannot provide absolute security. ~~Breaches of~~While we strive to remediate known vulnerabilities on a timely basis, such vulnerabilities could be exploited before a vulnerability has been disclosed or before our ~~vendors’ technology,~~remediation is effective and if so, could cause systems and ~~services~~service interruptions, data loss and other damages. Our failure to identify, remediate and mitigate security vulnerabilities, including any potential failure to timely replace and upgrade hardware, software, or other technology assets, could ~~expose us~~result in material harm to our business, including loss of or delay in revenues, failure to meet service level agreements, material liability claims, failure to maintain market acceptance, injury to our ~~customers~~reputation, increased costs, and call into question our ability to ~~a risk~~preserve the security and stability of ~~loss or misuse of Company data, including but not limited to personal information.~~the internet.

~~Additionally,~~In addition, our networks have been, and likely will continue to be, subject to DDoS attacks. Recent ~~attacks have~~industry experience has demonstrated that DDoS attacks continue to grow in size and sophistication and have anthe ability to widely disrupt internet services. While we have adopted mitigation techniques, procedures, and strategies to defend against ~~such~~DDoS attacks, and have successfully mitigated DDoS attacks to date, there can be no assurance that we will be able to defend against every attack,

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especially as the attacks increase in size and sophistication. Any attack, even if only partially successful, could disrupt our networks, increase response time, negatively impact our ability to meet our ~~contracted~~ service level ~~obligations,~~agreements, and generally ~~hamper~~impede our ability to provide reliable service to our ~~Registry Services~~ customers and the broader internet community. ~~Further, we sell~~We have historically incurred, and will continue to incur, significant costs to enable our infrastructure to process levels of attack traffic that can be substantially larger than our normal transaction volume. We are employing new technologies and new and different services and capabilities to help mitigate DDoS ~~protection~~attacks. If these new technologies, services and capabilities are not effective, our infrastructure could be disrupted, our response times could increase, our ability to meet our service level agreements could be negatively impacted, and our ability to provide reliable service to our ~~Security Services~~customers and the broader internet community could be impeded.

In addition, we are subject to social engineering attacks including phishing, spear phishing, whaling, vishing, smishing, and domain spoofing, which are designed to entice people to divulge sensitive information or take actions that, if successful, could pose a material risk to our operations. The number of such attacks is increasing. Recent advances in artificial intelligence have increased the sophistication of these types of attacks as attackers are able to create more personalized and targeted communications using information derived from people’s relationships, online behavior and preferences. Social engineering attacks have occurred in concert with ransomware attacks. While we deploy advanced tools and conduct continuous security awareness training to address social engineering attacks, such measures cannot provide absolute security. Similarly, although we implement redundant architecture and multiple recovery solutions, and conduct periodic exercises to mitigate the threat of ransomware, we still may be subject to successful ransomware attacks. Our failure to prevent such attacks, including any successful social engineering attack, could result in our inability to meet our service legal agreements and could otherwise materially harm our business, including from legal claims, governmental investigations and scrutiny, injury to our reputation, and increased costs.

We do not maintain specific reserves for security breaches, cyber-attacks and DDoS attacks against our systems and the amount of insurance coverage we maintain may be inadequate to cover claims or liabilities relating to such attacks.

We may introduce undetected or unknown defects into our systems or services, which could materially harm our business and harm our vendors or our customers. ~~Although~~

Despite testing, services as complex as those we ~~increase~~offer or develop could contain undetected defects or errors, which could result in service outages or disruptions, compromised customer data, including DNS data, diversion of development resources, injury to our ~~knowledge~~reputation, legal claims, increased insurance costs or increased service costs. Performance of our services, whether or not defective, could have unforeseen or unknown adverse effects on the networks over which they are delivered, on internet users and consumers, and on third-party applications and services that use our services, any of which could result in legal claims against us. While we strive to prevent, detect and remediate defects or errors, they can and do occur and they could result in our inability to meet customer expectations in a timely manner, failure to meet our service level agreements, injury to our reputation, and increased costs.

Our infrastructure and services are subject to vulnerabilities in the global routing system for the internet, as well as risks arising from internet services providers’ increasing adoption of the Resource Public Key Infrastructure system.

Routing on the internet depends on the Border Gateway Protocol (“BGP”), which is a protocol that relies on networks within the internet infrastructure acting in a trustworthy manner when sharing information about destinations for connectivity and the routing of internet traffic. As a trust-based protocol, BGP has a number of vulnerabilities that may lead to outages or disrupt our services, including as a result of “route hijacks” that involve accidental or malicious rerouting of internet traffic, or “route leaks” that involve the malicious or unintentional propagation of routing information beyond the intended scope of the originator, receiver, and/or one of the networks along the route’s path. Both route hijacks and route leaks can result in partial or full rerouting of internet traffic for the impacted destinations. These types of events, which are generally beyond our control, could enable an array of attack conditions or service disruptions, and could result in adverse publicity and adversely affect the public’s perception of the security of e-commerce and communications over the internet, as well as of the security or reliability of our services.

To address internet routing system vulnerabilities, many internet service providers have adopted and apply internet reachability policies based on a system known as the Resource Public Key Infrastructure (“RPKI”) operated by the regional internet registries (“RIRs”). The RIRs allocate internet number resources, such as internet protocol addresses, to enterprises and network operators. We have limited visibility into the maturity of and ~~develop new techniques~~investment in the ~~identification~~RIRs’ operational and ~~mitigation of attacks through the protection~~security controls, which are outside of our ~~Security Services customers,~~control. When the ~~DDoS protection services share some~~availability, integrity, or confidentiality of any of the information in the RPKI system, or systems used to maintain and administer RPKI data and systems, are impacted or otherwise compromised in any of the RIRs, or any network operator that is a relying party of the RPKI system, or the operations or ingestion of data from the RPKI system are otherwise impacted by a known or unknown vulnerability, our services may be negatively impacted. Such impacts may include degraded or full loss of reachability of service addresses in the global internet routing system, resulting in degradation or complete loss of availability of our registration and resolution services. A compromise of the RPKI system and related services, or unintentional or unauthorized manipulation of data therein, may also result in other denial of service attack conditions for our infrastructure ~~used in~~and services. The systemic dependencies introduced by RPKI and the relying parties of the

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RPKI system, including network service providers, are outside of our ~~Registry Services business. Therefore~~control, and systems that depend upon the RPKI may be only as secure as the weakest elements of the RPKI system. Contracting with RIRs for the provision of ~~such~~and access to RPKI services ~~might~~carries material operational risks, as described above, as well as material contractual risks, which may expose us to service disruptions and material liability.

We could encounter system interruptions or systems failures resulting from activities beyond our ~~critical Registry Services infrastructure~~direct control that could materially harm our business.

We depend on the uninterrupted operation of our various systems, secure data centers, points of presence around the world and other computer and communication networks. Our systems and operations are vulnerable to ~~temporary degradations~~damage or ~~outages~~interruption from power loss, transmission cable cuts and other telecommunications failures, damage or interruption caused by ~~DDoS~~fire, earthquake, and other natural disasters, intentional acts of vandalism, terrorist attacks, ~~against those customers,~~unintentional mistakes, or errors. Our systems and operations also face risks inherent in, ~~addition~~or arising from, the terms and conditions of our agreements with service providers to ~~any attacks directed specifically against us~~operate our networks and data centers. We are also subject to the risk of state suppression of internet operations. Any of these scenarios could create potential liability and exposure, including from a failure to meet our service level agreements, and could decrease customer satisfaction, harming our business, or resulting in adverse publicity and damage to our reputation or call into question our ability to preserve the security and stability of the internet.

Our data centers, our data center systems, including the Shared Registration Systems located at our data centers, and our ~~networks.~~resolution systems are vulnerable to damage or interruption, which could impede our ability to provide our services, expose us to material liability, and materially harm our reputation.

~~Changes~~Most of the computing infrastructure for our Shared Registration System is located at, and most of our customer information is stored in, data centers we own or lease and operate. In 2019, we expanded some of our data center services to a leased data center facility. These data centers are vulnerable to damage or interruption, including from natural disasters, such as fires, earthquakes, hurricanes, and floods, power loss, hardware or system failures, physical or electronic break-ins, human error or interference. We are also regularly updating and enhancing our network architecture in several of our new and existing data centers and globally distributed resolution systems. If our data center facilities or the ~~multi-stakeholder model~~updated network architectures, hardware or software upgrades, or security controls do not operate as expected, including the ability to quickly switch over between sites, we could experience service interruptions or outages. A failure in the operation of our Shared Registration System could result in the inability of one or more registrars to register or manage domain names for a period of time. If such a registrar has not implemented robust services in a manner that preserves transactions until processed by the registry, then the failure in the operation of our Shared Registration System could result in permanent loss of transactions at the registrar during that period. A failure in the operation of our Shared Registration System could also impact our ability to provide up-to-date information in our globally distributed resolution systems, which could result in breaches of our service level agreements pertaining to our resolution services and impact the resolution of domain names on the internet. Although we carry insurance, we do not carry insurance or designated financial reserves for such interruptions.

In addition, our services depend on the secure and efficient operation of the internet connections to and from customers to our Shared Registration System residing in our secure data centers as well as our globally distributed resolution systems. These connections depend upon the secure and efficient operation of internet ~~governance~~service providers, internet exchange point operators, and internet backbone service providers. Such providers have encountered periodic operational problems or experienced outages in the past beyond our scope of control and may continue to encounter problems and outages or may choose to discontinue their service. If the providers that our connections depend upon do not protect, maintain, improve, and reinvest in their networks or present inconsistent, incorrect, or invalid data regarding routing information or DNS responses through their networks, our business could ~~materially and adversely impact our business.~~be harmed.

~~The internet is governed under a multi-stakeholder model comprising civil society,~~A failure in the ~~private sector including for-profit and not-for-profit organizations such as ICANN, governments including the U.S. government, academia, non-governmental organizations and international organizations.~~

~~Role~~operation or update of the ~~U.S. Government. In~~root zone servers, the fourth quarter of 2016, the United States government completed a transition of the historical role played by NTIA in the coordination of the DNS. Changes arising from this transition to the multi-stakeholder model of internet governance could materially and adversely impact our business. For example, ICANN has adopted bylaws that are designed, in part, to enhance accountability through a new organization called the Empowered Community, which is comprised of a cross section of stakeholders. ICANN or the Empowered Community may assert positions that could negatively impact our strategy or our business.

~~Furthermore, as part of the transition, the NTIA discharged us from our obligations under the Cooperative Agreement to perform~~root zone file, the Root Zone Management System, the TLD name servers, the TLD zone files that we operate, or other network functions, could result in, among other problems, (1) a DNS resolution or other service outage or degradation, (2) the deletion of one or more gTLDs or ccTLDs from the internet, (3) the deletion of one or more second-level domain names from the internet, or (4) a misdirection of one or more domain names to different servers. A failure in the operation or update of the supporting cryptographic and other operational infrastructure that we ~~entered~~maintain could result in similar consequences. Any of these problems or outages could create potential material liability and exposure from litigation and investigations, could result in a failure to meet our service level agreements, and could decrease customer satisfaction, harming our business. These problems could also result in adverse publicity, decrease the public’s trust in the security of e-commerce, or call into ~~a new agreement with ICANN,~~question our ability to preserve the ~~Root Zone Maintainer Service Agreement (“RZMA”) under which~~security and stability of the internet.

We retain certain customer and employee information in our data centers and various domain name registration systems. Any physical or electronic break-in or other security breach or compromise of the information stored at our data centers or domain name registration systems may jeopardize the security of information we ~~now perform~~retain or that is retained in the ~~Root Zone Maintainer functions on behalf~~computer systems and networks of ~~ICANN. As~~our customers. In such an event, we ~~perform~~could face material liability and exposure from litigation and investigations, fail to meet service level agreements, or be at risk of losing various security and standards-based compliance certifications needed for operation of our businesses, and customers could be reluctant to use our services. Any such outcomes

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could also adversely affect our reputation and harm our business or cause financial losses that are either not insured against or not fully covered through any insurance.

We face risks from the operation of the root server system and our performance of the Root Zone Maintainer functions under the ~~RZMA, we may be subject to claims challenging~~RZMA.

Although the ~~agreement~~overall root server system is redundant and dispersed, a failure or ~~our performance under~~interruption in the ~~agreement, and we may not have immunity from, or sufficient indemnification for, such claims.~~

~~By completing the transition discussed above, the U.S. Government through the NTIA has ended its coordination and management of important aspects~~operation of the ~~DNS including~~root server system could impact the ~~IANA functions~~effectiveness of our .com and ~~the root zone. There can be no assurance that the removal of the U.S. Government oversight of these key functions will not~~.net authoritative servers and therefore negatively impact ~~our business.~~

~~Role of ICANN. ICANN plays a central coordination role in the multi-stakeholder system. ICANN is mandated through its bylaws to uphold a private sector-led multi-stakeholder approach to internet governance~~directory services necessary for the public benefit. If ICANN or the Empowered Community fails to uphold or significantly redefines the multi-stakeholder model, it could harm our business. Additionally, the Empowered Community could adversely impact ICANN, which could negatively impact its ability to coordinate the multi-stakeholder system of governance, or negatively affect our interests. Also, legal, regulatory or other challenges could be brought challenging the legal authority underlying the roles and actions of ICANN, the Empowered Community or us.

~~Role of foreign governments~~. Some governments and members of the multi-stakeholder community have questioned ICANN’s role with respect to internet governance and, as a result, could seek a multilateral oversight body as a replacement. Additionally, the role of ICANN’s Governmental Advisory Committee, which is comprised of representatives of national governments, could change, giving governments more control of certain aspects of internet governance. Some governments and governmental authorities outside the U.S. have in the past disagreed, and may in the future disagree, with the actions, policies or programs of ICANN, the U.S. Government and us relating to the DNS. Changes to the roles that foreign governments play in internet governance could materially and adversely impact our business.

~~We operate two root zone servers and are contracted to perform the Root Zone Maintainer functions. Under ICANN’s New gTLD Program, we face increased risk from these operations.~~

We operate two of the 13 root zone servers. Root zone servers are name servers that contain authoritative data for the very top of the DNS hierarchy. These servers have the software and DNS configuration data necessary to locate name servers that contain authoritative data for the TLDs. These root zone servers are critical to the functioningoperation of the internet. ~~Under the RZMA, we play~~We also have an important operational role in support of a key ~~IANA~~Internet Assigned Numbers Authority (“IANA”) function as the Root Zone Maintainer. In this role, we provision and publish the authoritative root zone data and make it available to all root server ~~operators.~~

~~Under its New gTLD Program, ICANN has directed delegations into~~operators under the RZMA with ICANN. If we make errors in the publication of the root zone or experience operational issues that impact the timeliness of a large number of new gTLDs. In view of our role as the Root Zone Maintainer, and as a root server operator, we face increased risks should ICANN’s delegation of these new gTLDs, which represent unprecedented changesupdates to the root zone ~~in volume~~data, we may be subject to material claims challenging the RZMA or our performance under it, including tort claims, and ~~frequency, cause security~~we may not have immunity from, or sufficient indemnification or insurance for, such claims.

Contractual, Regulatory, Legal and ~~stability problems within~~Compliance Risk Factors

Any loss or modification of our right to operate the ~~DNS and/or for parties who rely on the DNS. Such risks include potential instability of the DNS including potential fragmentation of the DNS should ICANN’s delegations create sufficient instability,~~.com and potential claims based on our role in the root zone provisioning and delegation process. These risks, alone or in the aggregate, have the potential to cause serious harm to our Registry Services business. Further, our business could also be harmed through security, stability and resiliency degradation if the delegation of new.net gTLDs into the root zone causes problems to certain components of the DNS ecosystem or other aspects of the global DNS, or other relying parties are negatively impacted as a result of domain name collisions or other new gTLD security issues, such as exposure or other leakage of private or sensitive information.

Additionally, DNSSEC enabled in the root zone and at other levels of the DNS requires new preventative maintenance, including root KSK rollover, functions and complex operational practices that did not exist prior to the introduction of DNSSEC. Any failure by us, ICANN, external DNS vendors and service providers, or relying parties to comply with stated practices, such as those outlined in relevant DNSSEC Practice Statements, introduces risk to DNSSEC relying parties and other internet users and consumers of the DNS, which could have a material adverse impact on our business and result in loss of revenues.

Substantially all of our revenues are derived from our operation of the .com gTLD under our Cooperative Agreement with the DOC and our .com Registry Agreement as well as our operation of the .net gTLD under our .net Registry Agreement. Any loss or modification of our right to operate the .com and .net gTLDs could materially and adversely impact our ability to conduct our business and result in loss of revenues. Our .com and .net Registry Agreements contain “presumptive” rights of renewal upon the expiration of their current terms on November 30, 2024 and June 30, 2023, respectively. ICANN could refuse to renew upon expiration or terminate our .com Registry Agreement or our .net Registry Agreement if, upon proper notice, (1) we fail to cure a fundamental and material breach of certain specified obligations, and (2) we fail to timely comply with a final decision of an arbitrator or court. Additionally, each of the .com and .net Registry Agreements provide that if certain terms of these agreements are not similar to such terms generally in effect in the registry agreements of the five largest gTLDs, then a renewal of these agreements would be upon terms reasonably necessary to render such terms to be similar to the registry agreements for those other gTLDs. Any such terms, if they apply, could be unfavorable to us and have a material adverse impact on our business. ~~In particular, because root KSK rollover involves updates both~~

Standard renewals of the .com Registry Agreement do not require further DOC approval, although the prior written approval of the DOC is required for the removal of, or any changes to the pricing section (other than as approved in Amendment 35 to the Cooperative Agreement), and for changes to certain ~~keys managed by us~~other specified terms whether such removal or changes are made at a renewal or otherwise. We can provide no assurances that DOC approval would be provided upon our request for any of these changes.

In addition, under Amendment 35 to the CooperativeAgreement, we have agreed to continue to operate the .com gTLD in ~~our role as Root Zone Maintainer~~a content-neutral manner and to ~~corresponding keys maintained~~work within ICANN processes to promote the development of content-neutral policies for the operation of the DNS, and under our binding letter of intent with ICANN, we have agreed to work with the ICANN community to develop certain best practices and other commitments for the security, stability and resiliency of the DNS and the internet. Such policies and processes could expose us to compliance costs and substantial liability and result in costly and time-consuming investigations or litigation.

Changes or challenges to the pricing provisions in the .com Registry Agreement could have a material adverse impact on our business.

Under the terms of the .com Registry Agreement, we may increase the annual fee of each .com domain name registration or renewal by ~~external~~up to 7% over the previous year in each of the final four years of each six-year period. We can provide no assurance that we will exercise such right to increase the annual fee. In addition to this contractual right, we are entitled to increase the annual fee of each .com domain name registration or renewal by up to 7% due to the imposition of any new specifications or policies adopted by ICANN pursuant to the procedures set forth in its bylaws and due process (“Consensus Policies”) or documented extraordinary expense resulting from an attack or threat of attack on the security and stability of the DNS ~~vendors~~(an “Extraordinary Expense”). In addition, our ability to increase the price for .com domain name registrations and ~~service providers’ DNSSEC implementations, if such external parties are not adequately prepared for and/~~renewals due to a Consensus Policy or Extraordinary Expense may occur only in years in which we do not ~~appropriately effectuate root key updates, any root KSK rollover,~~increase the price for .com domain name registrations and renewals as described above. It is uncertain whether circumstances would arise that would permit us to take a price increase due to a Consensus Policy or Extraordinary Expense, or if they do, whether we would seek to increase the price for .com domain name registrations for this reason. A failure to seek and obtain a price increase due to a Consensus Policy or Extraordinary Expense, when available, could negatively affect our operating results. We also have the right under the Cooperative Agreement to seek the removal of these pricing restrictions on the .com gTLD if we demonstrate to the DOC that market conditions no longer warrant these restrictions. However, we can provide no assurances whether we will seek the removal of these restrictions, or whether the DOC would approve the removal of these restrictions.

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Our .com Registry Agreement, including ~~the rollover currently planned by ICANN, may introduce substantial risk to relying parties. Even where we have correctly implemented our key updates, we~~its pricing provisions, has faced, and could face ~~potential~~in the future, challenges, including possible legal ~~claims~~challenges, or challenges under ICANN’s accountability mechanisms, from ICANN, registrars, registrants, and ~~reputational harm if the failures described occur.~~others, and any adverse outcome from these challenges could have a material adverse effect on our business.

~~The evolution of internet practices and behaviors~~Government regulation and the ~~adoption~~application of ~~substitute technologies~~new and existing laws in the U.S. and internationally may ~~impact~~slow business growth, increase our costs of doing business, create potential material liability and could have a material adverse effect on our business.

Application of new and existing laws and regulations in the U.S. or internationally to the internet or the domain name industry have imposed and may in the future impose new costs and new restrictions on our business. Laws and regulations, including those designed to restrict who can register and who can distribute domain names or to require registrants to provide additional documentation to register domain names, have, and may in the future, impose significant additional costs on our business and subject us to additional liabilities or could prevent us from operating in certain jurisdictions. For example, the government of China has indicated that it will issue, and has issued, new regulations, and it has begun to enforce existing regulations differently, including by directing certain implementation models for registry services, that impose additional costs on, and risks to, our provision of registry services in China. These regulations are impacting the demand for domain ~~names.~~name registrations in China. These regulations require registries, including us, and China-based registrars, to obtain a government-issued license for each gTLD or ccTLD operating in China. Any failure to obtain or renew the required licenses, or to comply with any license requirements or any updates thereto, or any failure to comply with these regulations or directives, by us or our China-based registrars, could result in significant harm to our business in China including the suspension of some or all of our registry services in China.

~~Domain names~~We are also subject to changing laws and regulations that impact whether, how, and under what circumstances we may transfer, process and/or receive certain data that is critical to our operations, including data shared between countries or regions in which we operate and data shared among our products and services. For example, following the ~~domain name system have been used~~invalidation of the U.S.-EU Safe Harbor by ~~consumers~~the European Court of Justice (“EUCJ”) in 2015, the European Union and ~~businesses~~United States agreed to ~~access~~an alternative framework for data transferred from the European Union to the United States, called Privacy Shield. In 2018, Privacy Shield was also invalidated by the EUCJ. In 2022, the United States and European Union announced a new, but undefined data transfer framework, which once finalized, also could be subject to further legal challenges.

New laws, regulations, directives or ~~disseminate~~ICANN polices that require us to obtain and maintain personal information ~~conduct e-commerce, and develop an online identity for many years. The growth~~ of technologies such as social media, mobile devices, apps and the dominance of search engines has evolved and changed the internet practices and behaviors of consumers and businesses alike. These changes can impact the demand for domain names by those who purchase domain names for personal, commercial and investment reasons. 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 monetize their investment in domain names can negatively impact our business. Some domain name registrars and registrants seek to purchase and resell domain names following an increase in their value. Adverse changes in the resale value of domain names ~~could result in a decrease~~ in the ~~demand and/~~.com and .net gTLDs could impose material compliance costs and could create new, material legal and others risks to our business.

If we are required to, or ~~renewal rates for~~choose to, obtain and maintain personal information of registrants of domain names in ~~our TLDs obtained for resale.~~

~~Some domain name registrants use a domain name~~the .com and .net gTLDs we could be required to ~~access or disseminate information, conduct e-commerce,~~incur significant compliance and develop an online identity. Currently, internet users often navigate to a website either by directly typing its domain name into a web browser, the use of an app on their smart phone or mobile device, the use of a voice recognition technology such as Alexa, Cortana, Google Assistant, or Siri, or through the use of a search engine. If (i) web browser or internet search technologies were to change significantly; (ii) internet users’ preferences or practices shift away from recognizing and relying on web addresses for navigation through the use of new and existing technologies; (iii) internet users were to significantly decrease the use of web browsers in favor of applications to locate and access content; or (iv) internet users were to increasingly use third level domains or alternate identifiers, such as social networking and microblogging sites, in each case the demand for domain names in our TLDs could decrease. This may trigger current or prospective customers and parties in our target markets to reevaluate their need for registration or renewal of domain names.

Some domain name registrars and registrants seek to generate revenue through advertising on their websites; changes in the way these registrars and registrants are compensated (including changes in methodologies and metrics) by advertisers and advertisement placement networks, such as Google, Yahoo!, Baidu and Bing, have, and may continue to, adversely affect the market for those domain names favored by such registrars and registrants which has resulted in, and may continue to result in, a decrease in demand and/or the renewal rate for those domain names. For example, according to published reports, Google has in the past changed (and may change in the future) its search algorithm, which may decrease site traffic to certain websites and provide less pay-per-click compensation for certain types of websites. This has made such websites less profitable which has

~~resulted in, and may continue to result in, fewer domain registrations and renewals. In addition,~~legal costs as a result of GDPR and other similar regulations. For example, we could incur material costs to protect such information from unauthorized disclosure and, under GDPR, to ensure authorized disclosures are permitted.Failure to properly protect such information, or failure to comply with GDPR, could expose the ~~general~~Company to material costs and penalties. In addition, new obligations to obtain and maintain personal information of registrants in the .com and .net gTLDs could conflict with certain laws and regulations that may require such personal information be maintained solely within the jurisdiction of the data subject. In addition, any such new obligations could increase the cost and risks associated with complying with regulations that require verification of registrant personal information, including for purposes of complying with the economic ~~environment, spending on online advertising~~ and ~~marketing may not increase~~trade sanctions programs administered by the Office of Foreign Assets Control (“OFAC”).

Such laws, regulations, directives or ~~may be reduced,~~ICANN policies, could give rise to significant claims, inquiries, investigations or other actions against us, which ~~in turn, may~~could result in ~~a further decline~~significant costs, damages, fines or penalties and could delay the development of new products, change our current business practices, result in ~~the demand for those domain names.~~

Ifnegative publicity, require significant management time and attention, all or any of the above factors negatively impact the renewal of domain names or the demand for new domain names, we may experience material adverse impacts on our business, operating results, financial condition and cash flows.

~~Many of our markets are evolving, and if these markets fail to develop or if our products and services are not widely accepted in these markets, our business could be harmed.~~

We seek to serve many new, developing and emerging markets in foreign countries to grow our business. These markets are rapidly evolving, and may not grow. Even if these markets grow, our services may not be widely used or accepted. Accordingly, the demand for our services in these markets is very uncertain. The factors that may affect market acceptance or adoption of our services in these markets include the following:

~~regional internet infrastructure development, expansion, penetration and adoption;~~

~~market acceptance and adoption of products and services based upon technologies other than those we use,~~ which ~~are substitutes for our products and services;~~

~~public perception of the security of our technologies and of IP and other networks;~~

the introduction and consumer acceptance of new generations of mobile devices, and in particular the use of alternative internet navigation mechanisms other than web browsers with those new generations of mobile devices;

~~increasing cyber threats and the associated customer need and demand for our Security Services offerings;~~

~~government regulations affecting internet access and availability, domain name registrations or the provision of registry services, or e-commerce and telecommunications over the internet;~~

~~the maturity and depth of the sales channels within developing and emerging markets and their ability and motivation to establish and support sales for domain names;~~

~~preference by markets for the use of their own country’s ccTLDs as a substitute or alternative to our TLDs; and~~

~~increased acceptance and use of new gTLDs as substitutes for established gTLDs.~~

~~If the market for e-commerce and communications over IP and other networks does not grow or these services are not widely accepted in the market, our business could be materially harmed.~~

~~We may face operational and other risks from the introduction of new gTLDs by ICANN and our provision of back-end registry services.~~

Over 1,200 new gTLDs have already been delegated in the current round of new gTLDs. ICANN plans on offering a subsequent round of new gTLDs after the completion of the current round, the timing of which remains uncertain. As set forth in the Verisign Labs Technical Report #1130007 version 2.2: New gTLD Security and Stability Considerations released on March 28, 2013, and expanded upon in our more recent publications, we continue to believe there are issues regarding the deployment of the new gTLDs that should have been addressed before any new gTLDs were delegated, and despite our and others’ efforts, some of these issues have not been addressed by ICANN sufficiently, if at all. For example, domain name collisions have been reported to ICANN, which have resulted in various network interruptions for enterprises as well as confusion and usability issues that have led to phishing attacks. It is anticipated that as additional new gTLDs are delegated more domain name collisions and associated security issues will occur.

We have entered into agreements to provide back-end registry services to other registry operators and applicants for new gTLDs. We may face risks regarding ICANN requirements for mitigating name collisions in the new gTLDs which we operate or for which we provide back-end registry services. For example, the possibility exists that “controlled interruption” periods may disrupt network services or that privacy or secure communications may be impacted as a result of insufficient preparedness by ICANN and the community for the launch of new gTLDs.

Our agreements with ICANN to provide registry services in connection with our new gTLDs, including our IDN gTLDs, and our agreements to provide back-end registry services directly to other registry operators and indirectly through reseller relationships expose us to operational and other risks. For example, the increase in the number of gTLDs for which we provide registry services on a standalone basis or as a back-end service provider could further increase costs or increase the frequency or scope of targeted attacks from nefarious actors.

~~The business environment is highly competitive and, if we do not compete effectively, we may suffer lower demand for our products, price reductions, reduced gross margins and loss of market share.~~

The internet and communications network services industries are characterized by rapid technological change and frequent new product and service announcements which require us continually to improve the performance, features and reliability of our services, particularly in response to competitive offerings or alternatives to our products and services. In order to remain competitive and retain our market position, we must continually improve our access to technology and software, support the latest transmission technologies, and adapt our products and services to changing market conditions and our customers’ and internet users’ preferences and practices, or launch entirely new products and services such as new gTLDs in anticipation of, or in response to, market trends. We cannot assure that competing technologies developed by others or the emergence of new industry standards will not adversely affect our competitive position or render our services or technologies noncompetitive or obsolete. In addition, our markets are characterized by announcements of collaborative relationships involving our competitors. The existence or announcement of any such relationships could adversely affect our ability to attract and retain customers. As a result of the foregoing and other factors, we may not be able to compete effectively with current or future competitors, and competitive pressures that we face could materially harm our business.

We face competition in the domain name registry space from other gTLD and ccTLD registries that are competing for the business of entities and individuals that are seeking to obtain a domain name registration and/or establish a web presence. We have been designated as the registry operator for new gTLDs including certain IDN gTLDs; however, there is no guarantee that such new gTLDs will be as or more successful than the new gTLDs obtained by our competitors. For example, some of the new gTLDs, including our new gTLDs, may face additional universal acceptance and usability challenges in that current desktop and mobile device software does not ubiquitously recognize these new gTLDs and developers of desktop and mobile device software may be slow to adopt standards or support these gTLDs, even if demand for such products is strong. This is particularly true for IDN gTLDs, but applies to conventional gTLDs as well. As a result of these challenges, it is possible that resolution of domain names within some of these new gTLDs may be blocked within certain state or organizational environments, challenging universal resolvability of these strings and their general acceptance and usability on the internet.

~~See the “Competition” section in Part I, Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed on February 17, 2017, for further information.~~

We must establish and maintain strong relationships with registrars and their resellers to maintain their focus on marketing our products and services otherwise our Registry Service business could be harmed.

All of our domain name registrations occur through registrars. Registrars and their resellers utilize substantial marketing efforts to increase the demand and/or renewal rates for domain names as well as their own associated offerings. Consolidation in the registrar or reseller industry or changes in ownership, management, or strategy among individual registrars or resellers could result in significant changes to their business, operating model and cost structure. Such changes could include reduced marketing efforts or other operational changes that could adversely impact the demand and/or the renewal rates for domain names.

With the introduction of new gTLDs, many of our registrars have chosen to, and may continue to choose to, focus their short or long-term marketing efforts on these new offerings and/or reduce the prominence or visibility of our products and services on their e-commerce platforms. Our registrars and resellers sell domain name registrations of other competing registries, including the new gTLDs, and some also sell and support their own services for websites such as email, website hosting, as well as other services. Therefore, our registrars and resellers may be more motivated to sell to registrants to whom they can also market their own services. To the extent that registrars and their resellers focus more on selling and supporting their services and less on the registration and renewal of domain names in our TLDs, our revenues could be adversely impacted. Our ability to successfully market our services to, and build and maintain strong relationships with, new and existing registrars or resellers is a factor upon which successful operation of our business is dependent. If we are unable to keep a significant portion of their marketing efforts focused on selling registrations of domain names in our TLDs as opposed to other competing TLDs, including the new gTLDs, or their own services, our business could be harmed.

~~If we encounter system interruptions or failures, we could be exposed to liability and our reputation and business could suffer.~~

We depend on the uninterrupted operation of our various systems, secure data centers and other computer and communication networks. Our systems and operations are vulnerable to damage or interruption from:

~~power loss, transmission cable cuts and other telecommunications failures;~~

~~damage or interruption caused by fire, earthquake, and other natural disasters;~~

~~attacks, including hacktivism, by miscreants or other nefarious actors;~~

~~computer viruses or software defects;~~

~~physical or electronic break-ins, sabotage, intentional acts of vandalism, terrorist attacks, unintentional mistakes or errors, and other events beyond our control;~~

~~risks inherent in or arising from the terms and conditions of our agreements with service providers to operate our networks and data centers;~~

~~state suppression of internet operations; and~~

~~any failure to implement effective and timely remedial actions in response to any damage or interruption.~~

Most of the computing infrastructure for our Shared Registration System is located at, and most of our customer information is stored in, our facilities in New Castle, Delaware; Dulles, Virginia; and Fribourg, Switzerland. To the extent we are unable to partially or completely switch over to our primary alternate or tertiary sites, any damage or failure that causes interruptions in any of these facilities or our other computer and communications systems could materially harm our business. Although we carry insurance for property damage, we do not carry insurance or financial reserves for such interruptions, or for potential losses arising from terrorism.

In addition, our Registry Services business and certain of our other services depend on the secure and efficient operation of the internet connections to and from customers to our Shared Registration System residing in our secure data centers. These connections depend upon the secure and efficient operation of internet service providers, internet exchange point operators, and internet backbone service providers, some or all of which have had periodic operational problems or experienced outages in the past beyond our scope of control. In addition, if these service providers do not protect, maintain, improve, and reinvest in their networks or present inconsistent data regarding the DNS through their networks, our business could be harmed.

A failure in the operation or update of the root zone servers, the root zone file, the Root Zone Management System, the TLD name servers, or the TLD zone files that we operate, including, for example, our operation of the ~~.gov~~ registry, or other network functions, could result in a DNS resolution or other service outage or degradation; the deletion of one or more TLDs from the internet; the deletion of one or more second-level domain names from the internet for a period of time; or a misdirection of a domain name to a different server. A failure in the operation or update of the supporting cryptographic and other operational infrastructure that we maintain could result in similar consequences. A failure in the operation of our Shared Registration System could result in the inability of one or more registrars to register or maintain domain names for a period of time. In the event that a registrar has not implemented back-up services in conformance with industry best practices, the failure could result in permanent loss of transactions at the registrar during that period. Any of these problems or outages could create potential liability, including liability arising from a failure to meet our service level agreements in our Registry Agreements, and could decrease customer satisfaction, harming our business or resulting in adverse publicity and damage to our reputation that could adversely affect the market’s perception of the security of e-commerce and communications over the internet as well as of the reliability of our services or call into question our ability to preserve the security and stability of the internet.

~~Our operating results may be adversely affected as a result of unfavorable market, economic, social and political conditions.~~

~~An unfavorable global economic, social and political environment has impacted or may negatively impact, among other things:~~

our customers’ continued growth and development of their businesses and our customers’ ability to continue as going concerns or maintain their businesses, which could affect demand for our products and services;

~~current and future demand for our services, including decreases as a result of reduced spending on information technology and communications by our customers;~~

~~price competition for our products and services;~~

~~the price of our common stock;~~

~~our liquidity and our associated ability to execute on any share repurchase plans; and~~

~~our ability to service our debt, to obtain financing or assume new debt obligations.~~

In addition, to the extent that the economic, social and political environment impacts specific industry and geographic sectors in which many of our customers are concentrated, that may have a disproportionate negative impact on our business.

Our international operations ~~subject~~expose us and our business to additional economic, legal, regulatory and political risks that could have ana material adverse impact on our revenues and business.

A significant portion of our revenues is derived from customers outside the U.S. ~~Doing~~Our business operations in international ~~markets has~~locations have required, and will continue to require, significant management attention and resources. We may also need to tailor some of our services for a particular ~~market~~location and to enter into international distribution and operating relationships. We may fail to maintain our ability to conduct business, including potentially material business operations in some international locations, or we may not succeed in expanding our services into new international ~~markets~~locations or expand our presence in existing ~~markets.~~locations. Failure to do so could materially harm our business. Moreover, local laws and customs in many countries differ significantly from those in the U.S. In many foreign countries, particularly in those with developing economies, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. law or regulations applicable to us. There can be no assurance that our employees, contractors and agents will not take actions in violation of such policies, procedures, laws and/or regulations. Violations of laws, regulations or internal policies and procedures by our employees, contractors or agents could result in financial reporting problems, investigations, fines, penalties, or prohibition on

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the importation or exportation of our products and services and could have a material adverse effect on our business. In addition, we face risks inherent in doing business ~~on an international basis, including, among others:~~internationally, including:

•competition with ~~foreign~~ companies in international locations or other domestic companies entering ~~the foreign markets~~international locations in which we operate, as well as ~~foreign~~local governments actively promoting ccTLDs ~~which~~that we do not operate;

~~legal uncertainty regarding liability, enforcing our contracts,~~•political and ~~compliance with foreign laws;~~economic tensions between governments and changes in international trade policies and/or the economic and trade sanctions programs administered by OFAC of the U.S. Department of the Treasury;

•tariffs and other trade barriers and restrictions;

•difficulties in staffing and managing ~~foreign~~international operations;

~~currency fluctuations;~~

•potential problems associated with adapting our services to technical conditions existing in different countries;

~~difficulty of verifying customer information, including complying with the customer verification requirements of certain countries;~~

~~more stringent privacy policies in some foreign countries;~~

•additional vulnerability from terrorist groups targeting U.S. interests abroad;

•potentially conflicting or adverse tax consequences;

•reliance on third parties in ~~foreign markets~~international locations in which we only recently started doing business; and

•potential concerns of international governments or customers and prospects regarding doing business with U.S. technology companies due to alleged U.S. government data collection policies.

Political tensions between the United States and China in particular may pose additional risks to our business in China. The U.S. government has imposed restrictions on certain Chinese companies and on trading in certain technologies. The Chinese government has announced actions that, if implemented, could impose additional restrictions on the operations of non-Chinese companies in China. These and future government actions could impact our ability to operate in China and may cause our management’s attention to be diverted, our reputation to be damaged, or our business in China to be adversely affected.

Changes in, or interpretations of, tax rules and regulations or our tax positions may materially and adversely affect our income taxes.

We are subject to income taxes in both the U.S. and numerous international jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Our effective tax rates may fluctuate significantly on a quarterly basis because of a variety of factors, including changes in the mix of earnings and losses in countries with differing statutory tax rates, changes in our business or structure, changes in tax laws that could adversely impact our income or non-income taxes or the expiration of or disputes about certain tax agreements in a particular country. We are subject to audit by various tax authorities. In accordance with U.S. GAAP, we recognize income tax benefits, net of required valuation allowances and accrual for uncertain tax positions. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. Should additional taxes be assessed as a result of an audit or litigation, an adverse effect on our results of operations, financial condition and cash flows in the period or periods for which that determination is made could result.

The Organization for Economic Cooperation and Development (“OECD”) continues to issue guidance that will provide a long-term, multilateral proposal on the taxation of the digital economy. Similarly, some international tax jurisdictions, independent of the OECD, have enacted or may enact new tax regimes aimed at income resulting from digital services. Although we cannot predict the nature or outcome of such changes or the likelihood of such legislative proposals being adopted in the U.S. or throughout the world, any or all of these changes in tax laws could increase our taxes and adversely impact our financial condition and cash flow.

Our business faces risks arising from ICANN’s consensus and temporary policies, technical standards and other processes.

Our Registry Agreements with ICANN require us to implement Consensus Policies and changes mandated by ICANN through temporary specifications or policies (“Temporary Policies”). ICANN could adopt Consensus Policies or Temporary Policies that (1) are unfavorable to us as the registry operator of .com, .net and othergTLDs we operate, (2) are inconsistent with our current or future plans, (3) impose substantial costs on our business, (4) subject the Company to additional legal risks, or (5) affect our competitive position. These Consensus Policies or Temporary Policies could have a material adverse effect on our business.

Our Registry Agreements with ICANN require us to implement and comply with various technical standards and specifications published by the Internet Engineering Task Force (“IETF”). ICANN could impose requirements on us through changes to these IETF standards, or new standards, that are inconsistent with our current or future plans, that impose substantial costs on our business, that subject the Company to additional legal risks, or that affect our competitive position. Any such changes to the IETF standards, or new standards, could have a material adverse effect on our business.

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Weakening of, or changes to,the multi-stakeholder form of internet governance could materially and adversely impact our business.

The internet is governed under a multi-stakeholder model comprising civil society, the private sector, including for-profit and not-for-profit organizations such as ICANN, governments, including the U.S. government, academia, non-governmental organizations and international organizations. If ICANN fails to uphold, or if the multi-stakeholder model is significantly redefined, it could harm our business. For example, certain governments, governmental organizations, and private actors continue to express dissatisfaction with the multi-stakeholder form of internet governance and have proposed alternatives including oversight by the United Nations or by international treaties. Furthermore, national legislation has been proposed on topics such as information security and access to personal information that effectively supplants the multi-stakeholder process for policy development in the DNS. Substantially weakening or replacing the multi-stakeholder form of internet governance could materially harm our business.

In addition, in 2016 the U.S. government transferred key internet functions to ICANN, who adopted new and enhanced accountability mechanisms in its bylaws such as the creation of the Empowered Community. There can be no assurance that the removal of the U.S. government oversight of these key functions, or the changes to ICANN’s bylaws, will not negatively impact our business.

Claims, lawsuits, audits or investigations in which we are or could become involved may result in material adverse outcomes to our business.

We are, and may in the future become, involved in claims, lawsuits, audits, and investigations, including intellectual property litigation and infringement claims. Litigation is inherently unpredictable, and unexpected judgments or excessive verdicts do occur. In addition, proceedings that we initially view as immaterial could prove to be material. Adverse outcomes in lawsuits, audits and investigations, could result in significant monetary damages, including indemnification payments, or injunctive relief that could adversely affect our ability to conduct our business, and may have a material adverse effect on our financial condition, results of operations and cash flows. For example, we are engaged in activities to help mitigate security threats and other forms of DNS abuse in the gTLDs and ccTLDs we operate and we are involved in community efforts that could increase and expand such activities including potential new contractual obligations. Such activities include, for example, receiving reports of suspected threats and abuse from appropriate “trusted notifiers” (typically involving national and international law enforcement) and notifying registrars or others of domain names associated with suspected malicious or illegal activity. Our activities may also include disabling one or more domain names in the gTLDs or ccTLDs we operate including in response to governmental directives and orders in those jurisdictions in which we operate. Activities such as these have resulted in, and could in the future result in, significant litigation and could harm our reputation. Given the inherent uncertainties in litigation, even when we are able to reasonably estimate the amount of possible loss or range of loss and therefore record an aggregate litigation accrual for probable and reasonably estimable loss contingencies, the accrual may change in the future due to new developments or changes in approach. In addition, such claims, lawsuits, audits and investigations could involve significant expense and diversion of management’s attention and resources from other matters.

Strategic, Business and Operating Risk Factors

Deterioration of economic conditions could materially harm our business.

Our business is, and could continue to be, adversely affected by the deterioration in national or global economic conditions, including high inflation rates, increasing interest rates, disruption in the supply chain, and currency fluctuations, resulting from the continuing economic effects of the COVID-19 pandemic, war and civil unrest, and other political and economic developments. The severity and duration of a these economic conditions, as well as the timing, strength, and sustainability of any recovery, are unknown and are not within the Company’s control and may have an adverse effect on our results of operations, financial condition and cash flows.

The business environment is highly competitive and, if we do not compete effectively, we may suffer material adverse impact to our business, including lower demand for our products, reduced gross margins, and loss of market share.

We face competition from services that provide an online identity or presence, including other gTLDs and ccTLDs. In order to remain competitive, we must continually demonstrate the security, stability, and resiliency of our services and must adopt and support new technologies to adapt our services to changing technologies, market conditions, and our customers’ and internet users’ preferences and practices. Also to remain competitive, we have undertaken important initiatives such as our efforts to acquire the .web gTLD, and we may in the future undertake other important initiatives. Any of these initiatives require significant resources, can subject us to regulatory scrutiny and/or negative publicity, and divert management attention from our existing business. Such undertakings, including our efforts to acquire the .web gTLD, may be unsuccessful and costly. In addition, competing technologies developed by others or the emergence of new industry standards may adversely affect our competitive position or render our services or technologies noncompetitive or obsolete. Finally, consolidation within our industry has occurred and is likely to continue to occur. Our ability to participate and benefit from such consolidations may be limited and consolidation within our industry among our competitors could harm our competitive position and adversely impact our business.

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We have been designated as the registry operator for certain new gTLDs, including certain IDN gTLDs. Our new gTLDs may not be as or more successful than the new gTLDs obtained by our competitors. In addition, our new gTLDs may face additional universal acceptance and usability challenges and it is possible that resolution of domain names within some of these new gTLDs may be blocked within certain state or organizational environments, challenging universal resolvability of these strings and their general acceptance and usability.

See the “Competition” section in Part I, Item 1 of the 2022 Form 10-K for further information.

The evolution of technologies or internet practices and behaviors, the adoption of substitute technologies, or wholesale price increases of domain names in the gTLDs we operate may materially and negatively impact the demand for the domain names for which we are the registry operator.

Technologies relating to online presence, including social media, mobile devices, apps, and search engines, have evolved and continue to evolve, changing the internet practices and behaviors of consumers and businesses. These ongoing changes can negatively impact the demand for our domain names. In addition, registrants purchase domain names for a variety of reasons, including personal, commercial, and investment reasons. Changes in the motivation of domain name registrants can negatively impact our business.

Technology changes to web browser or internet search technologies could reduce demand for domain names. Similarly, if internet users’ preferences or practices shift away from recognizing and relying on web addresses or if internet users were to significantly decrease the use of web browsers in favor of applications to locate and access content, demand for domain names in the gTLDs we operate could be negatively impacted. Demand for domain names in the gTLDs we operate could be negatively impacted by new technologies that significantly decrease the use of traditional domain names to present and protect an online identity. New technologies that encourage internet users to expand the use of third-level domains or alternate identifiers, such as identifiers from social networking, e-commerce platforms and microblogging sites, could also negatively impact the demand for domain names in the gTLDs we operate. In addition, the demand for domain names in the gTLDs we operate could be impacted by alternative namespaces with domain-name-like identifiers that are operated outside the single authoritative DNS root zone, including blockchain namespaces. To the extent that web browsers, applications, DNS registrars and DNS resolvers recognize and support such namespaces, and that internet users are able to perform online operations with identifiers from such namespaces, demand for domain names in gTLDs and ccTLDs in the single authoritative DNS root zone, including the gTLDs we operate, could be negatively impacted.

Some registrars and registrants purchase and resell domain names at an increased price in a secondary market. Adverse changes in the resale value of domain names, changes in the business models for such domain name registrars and registrants, or other factors, including regulations limiting the resale of domain names, could result in a decrease in the demand and/or renewal rates for domain names in the gTLDs we operate.

Some registrars and registrants seek to generate revenues by registering domain names specifically for website advertising. Changes in the way these registrars and registrants are compensated (including changes in methodologies and metrics) by advertisers and advertisement placement networks, such as Google, Baidu and Bing, have adversely affected, and may continue to adversely affect the market for domain names used for this purpose, which has resulted in, and may continue to result in, a decrease in demand and/or the renewal rate for such domain names. In addition, if spending on online advertising and marketing is reduced, this may result in a further decline in the demand for domain names used for this purpose.

Under the terms of the .com and .net Registry Agreements, as amended, we are permitted to increase the annual fee of each .com and .net domain name registration or renewal according to the provisions in these agreements. To the extent we increase our prices, there could be a decrease in the demand and/or renewal rates for .com or .net domain names.

If we fail to expand our services into developing and emerging economies in international locations, our business may not grow.

We seek to serve new, developing, and emerging economies in international locations to grow our business. These economies are rapidly evolving and may not grow or even if they do grow, our services may not be widely used or accepted there. Accordingly, the demand for our services in these locations is uncertain. Factors that may affect acceptance or adoption of our services in these locations include:

•regional internet infrastructure development, expansion, penetration and adoption, and the development, maturity and depth of our sales channels;

•acceptance and adoption of substitute products and services that enable online presence without a domain name, including social media, e-commerce platforms, website builders and mobile applications;

•increased acceptance and adoption of other substitute products and services, including ccTLDs or other gTLDs;

•public perception of the security of our products and services;

•the use of mobile applications as the primary engagement mechanism for navigating the internet; and

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•government regulations affecting the internet, internet access and availability, domain name registrations or the provision of registry services, data security, privacy, or data localization, e-commerce or telecommunications.

If our services are not widely accepted or adopted in these locations, our business may not grow.

Our business depends on registrars and their resellers maintaining their focus on marketing our products and services.

All of the domain name registrations and renewals for the registries we operate occur through registrars. Registrars and their resellers engage in substantial marketing efforts to increase the demand and/or renewal rates for domain names as well as their own associated offerings. Consolidation in the registrar or reseller industry or changes in ownership, management, or strategy among individual registrars or resellers, including vertical integration by registrar or reseller industry participants, could result in significant changes to their businesses, operating models, and cost structures. These changes could include reduced marketing efforts for the gTLDs we operate or other operational changes that could adversely impact the demand and/or the renewal rates for the domain names for which we are the registry operator.

With the introduction of new gTLDs, many of our registrars and resellers have chosen to, and may continue to choose to, focus their short- or long-term marketing efforts on these new offerings and/or reduce the prominence or visibility of our products and services on their e-commerce platforms. Our registrars and resellers sell domain name registrations of other competing registries, including new gTLDs, and some also sell and support their own services for websites such as email, website hosting, and other services. Our registrars and resellers may be more motivated to sell to registrants to whom they can also market their own services. To the extent that registrars and resellers focus more on selling and supporting their services and less on the registration and renewal of domain names in the gTLDs we operate, our revenues could be adversely impacted. Our ability to successfully market our services to, and build and maintain strong relationships with, new and existing registrars or resellers is a factor upon which successful operation of our business is dependent. If we are unable to keep a significant portion of their marketing efforts focused on selling registrations of domain names in the gTLDs we operate, as opposed to other competing gTLDs, including the new gTLDs, or their own services, our business could be harmed.

We depend on highly skilled employees to maintain and provide innovative solutions for our business, and our business could be materially harmed if we are not able to attract and retain such qualified talent.

Our business is highly technical and requires individuals skilled and knowledgeable in unique technologies, configurations, operating systems, and software development tools. We depend on the knowledge, experience, and performance of these employees and leaders to effectively manage and provide innovative solutions for our business. For example, we require employees with expertise in DNS operations and with certain cybersecurity specialties. Because such employees are in high demand by our competitors and other companies, we must be able to attract, integrate, retain and motivate such highly skilled employees and leaders. Failure to attract and retain such employees and to effectively implement succession plans for these employees could harm our business.

Intellectual Property Risk Factors

We rely on our intellectual property rights to protect our proprietary assets, and any failure by us to protect or enforce, or any misappropriation of, our intellectual property could materially harm our business.

Our success depends in part on our internally developed technologies and related intellectual property. Despite our precautions, it may be possible for an external party to copy or otherwise obtain and use our intellectual property without authorization. Furthermore, the laws of ~~foreign~~other countries may not protect our proprietary rights in those countries to the same extent U.S. law protects these rights in the U.S. In addition, it is possible that others may independently develop substantially equivalent intellectual property. If we do not effectively protect our intellectual property, our business could suffer. Additionally, we have filed patent applications with respect to some of our technology in the U.S. Patent and Trademark Office and patent offices outside the U.S. Patents may not be awarded with respect to these applications and even if such patents are awarded, third parties may seek to oppose or otherwise challenge our patents, and such patents’ scope may differ significantly from what was requested in the patent applications and may not provide us with sufficient protection of our intellectual property. In the future, we may have to resort to litigation to enforce and protect our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. This type of litigation is inherently unpredictable and, regardless of its outcome, could result in substantial costs and diversion of management attention and technical resources. Some of the software and protocols used in our business are based on standards set by standards setting organizations such as the ~~Internet Engineering Task Force.~~IETF. To the extent any of our patents are considered “standards essential patents,” in some cases we may be required to license such patents to our competitors on reasonable and non-discriminatory ~~terms.~~terms or otherwise be limited in our ability to assert such patents.

We also license externally developed technology that is used in some of our products and services to perform key functions. These externally developed technology licenses may not continue to be available to us on commercially reasonable terms or at all. The loss of, or our inability to obtain or maintain, any of these technology licenses could hinder or increase the cost of our services, launching new products and services, entering into new markets and/or otherwise harm our business. Some

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of the software and protocols used in our ~~Registry Services~~ business are in the public domain or may otherwise become publicly available, which means that such software and protocols are or may become equally available to our competitors.

We rely on the strength of our Verisign brand to help differentiate ~~ourselves~~Verisign in the marketing of our products. Dilution of the strength of our brand could harm our business. We are at risk that we will be unable to fully register, build equity in, or enforce the Verisign logo in all markets where Verisign products and services are sold. In addition, in the U.S. and most other countries, word marks solely for TLDs have currently not been successfully registered as trademarks. Accordingly, we may not be able to fully realize or maintain the value of these intellectual property assets.

~~We could become subject to claims of infringement of intellectual property of others, which could be costly to defend and could harm our business.~~

We cannot be certain that we do not and will not infringe the intellectual property rights of others. Claims relating to infringement of intellectual property of others or other similar claims have been made against us in the past and could be made against us in the future. It is possible that we could become subject to additional claims for infringement of the intellectual property of other parties. The international use of our logo could present additional potential risks for external party claims of infringement. Any claims, with or without merit, could be time consuming, result in costly litigation and diversion of technical and management personnel attention, cause delays in our business activities generally, or require us to develop a non-infringing logo or technology or enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on acceptable terms or at all. If a successful claim of infringement were made against us, we could be required to pay damages or have portions of our business enjoined. If we could not identify and adopt an alternative non-infringing logo, develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, our business could be harmed.

An external party could claim that the technology we license from other parties infringes a patent or other proprietary right. Litigation between the licensor and a third party or between us and a third party could lead to royalty obligations for which we are not indemnified or for which indemnification is insufficient, or we may not be able to obtain any additional license on commercially reasonable terms or at all.

In addition, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights in internet-related businesses, including patents related to software and business methods, are uncertain and evolving. Because of the growth of the internet and internet-related businesses, patent applications are continuously being filed in connection with internet-related technology. There are a significant number of U.S. and foreign patents and patent applications in our areas of interest, and we believe that there has been, and is likely to continue to be, significant litigation in the industry regarding patent and other intellectual property rights.

~~We could become involved in claims, lawsuits, audits or investigations that may result in adverse outcomes.~~

In addition to possible intellectual property litigation and infringement claims, we are, and may in the future, become involved in other claims, lawsuits, audits and investigations, including with respect to the RZMA. Such proceedings may initially be viewed as immaterial but could prove to be material. Litigation is inherently unpredictable, and excessive verdicts do occur. Adverse outcomes in lawsuits, audits and investigations could result in significant monetary damages, including indemnification payments, or injunctive relief that could adversely affect our ability to conduct our business and may have a material adverse effect on our financial condition, results of operations and cash flows. Given the inherent uncertainties in litigation, even when we are able to reasonably estimate the amount of possible loss or range of loss and therefore record an aggregate litigation accrual for probable and reasonably estimable loss contingencies, the accrual may change in the future due to new developments or changes in approach. In addition, such claims, lawsuits, audits and investigations could involve significant expense and diversion of management’s attention and resources from other matters.

We continue to explore new strategic initiatives, the pursuit of any of which may pose significant risks and could have a material adverse effect on our business, financial condition and results of operations.

We explore possible strategic initiatives which may include, among other things, the investment in, and the pursuit of, new revenue streams, services or products, changes to our offerings, initiatives to leverage our patent portfolio, our Security Services business, back-end registry services and IDN gTLDs. In addition, we have evaluated and are pursuing and will continue to evaluate and pursue acquisitions of TLDs that are currently in operation and those that have not yet been awarded or delegated as long as they support our growth strategy.

Any such strategic initiative may involve a number of risks, including: the diversion of our management’s attention from our existing business to develop the initiative, related operations and any requisite personnel; possible regulatory scrutiny or third-party claims; possible material adverse effects on our results of operations during and after the development process; our possible inability to achieve the intended objectives of the initiative; as well as damage to our reputation if we are unsuccessful in pursuing a strategic initiative. Such initiatives may result in a reduction of cash or increased costs. We may not be able to successfully or profitably develop, integrate, operate, maintain and manage any such initiative and the related operations or employees in a timely manner or at all. Furthermore, under our agreements with ICANN, we are subject to certain restrictions in

~~the operation of~~ ~~.com~~, ~~.net,.name~~ and other TLDs, including required ICANN approval of new registry services for such TLDs. If any new initiative requires ICANN review or ICANN determines that such a review is required, we cannot predict whether this process will prevent us from implementing the initiative in a timely manner or at all. Any strategic initiative to leverage our patent portfolio will likely increase litigation risks from potential licensees and we may have to resort to litigation to enforce our intellectual property rights.

~~We depend on key employees to manage our business effectively, and we may face difficulty attracting and retaining qualified leaders.~~

We operate in a unique competitive and highly regulated environment and we depend on the knowledge, experience, and performance of our senior management team and other key employees in this regard and otherwise. We periodically experience changes in our management team. If we are unable to attract, integrate, retain and motivate these key individuals and additional highly skilled technical, sales and marketing, and other experienced employees, and implement succession plans for these personnel, our business may suffer. For example, our service products are highly technical and require individuals skilled and knowledgeable in unique platforms and software implementation.

~~Changes in, or interpretations of, tax rules and regulations or our tax positions may adversely affect our effective tax rates.~~

We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are subject to audit by various tax authorities. In accordance with U.S. GAAP, we recognize income tax benefits, net of required valuation allowances and accrual for uncertain tax positions. For example, we claimed a worthless stock deduction on our 2013 federal income tax return and recorded a net income tax benefit of $380.1 million. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. Should additional taxes be assessed as a result of an audit or litigation, an adverse effect on our results of operations, financial condition and cash flows in the period or periods for which that determination is made could result.

A significant portion of our foreign earnings for the current fiscal year was earned in low tax jurisdictions. Our effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates.

Various legislative changes that would reform U.S. corporate tax laws have been or may be proposed by the Trump administration as well as members of Congress, including proposals that would significantly impact how U.S. multinational corporations are taxed on foreign earnings and potentially limit the deductibility of interest payments. We are unable to predict whether these or other proposals will be implemented. Although we cannot predict whether or in what form any proposed legislation may pass, if enacted, such legislation could have a material adverse impact on our tax expense or cash flow.

Our foreign earnings, which are indefinitely reinvested offshore, constitute a majority of our cash, cash equivalents and marketable securities, and there is a high cost associated with a change in our indefinite reinvestment assertion or a repatriation of those funds to the U.S.

A majority of our cash, cash equivalents and marketable securities are held by our foreign subsidiaries. Our foreign earnings are indefinitely reinvested offshore and are not available to be used in the U.S. for working capital needs, debt obligations, acquisitions, share repurchases, dividends or other general corporate purposes. In the event that funds from our foreign operations are needed in the U.S. for any purpose, we would be required to accrue and pay additional U.S. taxes in order to repatriate those funds, which could be significant. Further, if we are unable to indefinitely reinvest our foreign earnings our effective tax rate would increase. These could adversely impact our business valuation and stock price.

~~Our marketable securities portfolio could experience a decline in market value, which could materially and adversely affect our financial results.~~

As of September 30, 2017, we had $2.4 billion in cash, cash equivalents, marketable securities and restricted cash, of which $2.1 billion was invested in marketable securities. The marketable securities consist primarily of debt securities issued by the U.S. Treasury meeting the criteria of our investment policy, which is focused on the preservation of our capital through the investment in investment grade securities. We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile.

These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by financial market credit and liquidity events. If the global credit or liquidity market deteriorates or other events negatively impact the market for U.S. Treasury securities, our investment portfolio may be impacted and we could determine that some of our investments have experienced an other-than-temporary decline in fair value, requiring an impairment charge which could adversely impact our results of operations and cash flows.

~~We are subject to the risks of owning real property.~~

We own the land and building in Reston, Virginia, which constitutes our headquarters facility. Ownership of this property, as well as our data centers in Dulles, Virginia and New Castle, Delaware, may subject us to risks, including:

adverse changes in the value of the properties, due to interest rate changes, changes in the commercial property markets, easements or other encumbrances, a government exercising its right of eminent domain, or other factors;

~~ongoing maintenance expenses and costs of improvements;~~

~~the possible need for structural improvements in order to comply with environmental, health and safety, zoning, seismic, disability law, or other requirements;~~

~~the possibility of environmental contamination or notices of violation from federal or state environmental agencies; and~~

~~possible disputes with neighboring owners, tenants, service providers or others.~~

~~We have anti-takeover protections that may discourage, delay or prevent a change in control that could benefit our stockholders.~~

Our amended and restated Certificate of Incorporation and Bylaws contain provisions that could make it more difficult for an outside party to acquire us without the consent of our Board of Directors (“Board”). These provisions include:

~~our stockholders may take action only at a duly called meeting and not by written consent;~~

special meetings of our stockholders may be called only by the chairman of the board of directors, the president, our Board, or the secretary (acting as a representative of the stockholders) whenever a stockholder or group of stockholders owning at least thirty-five percent (35%) in the aggregate of the capital stock issued, outstanding and entitled to vote, and who held that amount in a net long position continuously for at least one year, so request in writing;

~~vacancies on our Board can be filled until the next annual meeting of stockholders by a majority of directors then in office; and~~

~~our Board has the ability to designate the terms of and issue new series of preferred stock without stockholder approval.~~

In addition, Section 203 of the General Corporation Law of Delaware prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns or within the last three years has owned 15% or more of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless in the same transaction the interested stockholder acquired 85% ownership of our voting stock (excluding certain shares) or the business combination is approved in a prescribed manner. Section 203 therefore may impact the ability of an acquirer to complete an acquisition of us after a successful tender offer and accordingly could discourage, delay or prevent an acquirer from making an unsolicited offer without the approval of our Board.

~~We have a considerable number of common shares subject to future issuance.~~

As of September 30, 2017, we had one billion authorized common shares, of which 98.9 million shares were outstanding. In addition, of our authorized common shares, 14.0 million common shares were reserved for issuance pursuant to outstanding equity and employee stock purchase plans (“Equity Plans”), and 36.4 million shares were reserved for issuance upon conversion of our 3.25% Junior Subordinated Convertible Debentures due 2037 (“Subordinated Convertible Debentures”). As a result, we keep substantial amounts of our common stock available for issuance upon exercise or settlement of equity awards outstanding under our Equity Plans and/or the conversion of Subordinated Convertible Debentures into our common stock. Issuance of all or a large portion of such shares would be dilutive to existing security holders, could adversely affect the prevailing market price of our common stock and could impair our ability to raise additional capital through the sale of equity securities.

~~Our financial condition and results of operations could be adversely affected if we do not effectively manage our indebtedness.~~

We have a significant amount of outstanding debt, and we may incur additional indebtedness in the future. See Note 7, “Debt and Interest Expense,” of our Notes to Condensed Consolidated Financial Statements in Part I, Item I of this Quarterly Report on Form 10-Q. Our substantial indebtedness, including any future indebtedness, requires us to dedicate a significant portion of our cash flow from operations or to arrange alternative liquidity sources to make principal and interest payments,

when due, or to repurchase or settle our debt, if triggered, by certain corporate events, certain events of default, or conversion. It could also limit our flexibility in planning for or reacting to changes in our business and our industry, or make required capital expenditures and investments in our business; make it difficult or more expensive to refinance our debt or obtain new debt; trigger an event of default; and increase our vulnerability to adverse changes in general economic and industry conditions. Some of our debt contains covenants which may limit our operating flexibility, including restrictions on share repurchases, dividends, prepayment or repurchase of debt, acquisitions, disposing of assets, if we do not continue to meet certain financial ratios. Any rating assigned to our debt securities could be lowered or withdrawn by a rating agency, which could make it more difficult or more expensive for us to obtain additional debt financing in the future. The settlement amount, contingent interest, and potential recapture of income tax deductions related to our Subordinated Convertible Debentures can be substantial, and can increase significantly based on changes in our stock price. The occurrence of any of the foregoing factors could have a material adverse effect on our business, cash flows, results of operations and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents the share repurchase activity during the three months ended September 30, ~~2017~~:2023:

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1)

Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans or
Programs (1)
(Shares in thousands)
July 1 – 31, 2017 414
$ 96.56
414
$ 729.5 million
August 1 - 31, 2017 543
$ 99.77
543
$ 675.4 million
September 1 - 30, 2017 509
$ 103.89
509
$ 622.5 million
1,466
1,466


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) (2)
	(Shares in thousands)
July 1 - 31, 2023	321	$	217.25	321	$	1,493.0	million
August 1 - 31, 2023	390	$	205.83	390	$	1,412.8	million
September 1 - 30, 2023	344	$	203.08	344	$	1,342.9	million
	1,055			1,055

(1) Effective ~~February 9, 2017,~~July 27, 2023, our Board of Directors authorized the repurchase ~~of approximately $640.9 million~~ of our common stock in the amount of $1.14 billion, in addition to the ~~$359.1~~$356.1 million ~~of our common stock remaining~~that remained available for ~~repurchase~~repurchases under the ~~previous~~ share repurchase program, for a total repurchase authorization of up to ~~$1.0~~$1.50 billion ~~of our common stock.~~under the program. The share repurchase program has no expiration date. Purchases made under the program ~~can~~could be effected through open market transactions, block purchases, accelerated share repurchase agreements or other negotiated transactions.

(2) Amounts presented are exclusive of the excise tax on share repurchases.

ITEM 5. OTHER INFORMATION

Insider Trading Arrangements

Our directors and executive officers may from time to time enter into plans or other arrangements for the purchase or sale of our shares that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or may represent a non-Rule 10b5-1 trading arrangement under the Exchange Act.

On August 11, 2023, D. James Bidzos, the Company's Executive Chairman and Chief Executive Officer, adopted a trading plan intended to satisfy Rule 10b5-1(c) to sell up to 144,000 shares of Company common stock between November 14, 2023 and October 17, 2024, subject to certain conditions.

On September 1, 2023, Thomas Indelicarto, the Company's Executive Vice President, General Counsel and Secretary, adopted a trading plan intended to satisfy Rule 10b5-1(c) to sell up to 13,500 shares of Company common stock between January 2, 2024 and November 29, 2024, subject to certain conditions.

No other directors or executive officers adopted, terminated or modified plans or other arrangements during the quarter ended September 30, 2023.

Table of Contents

ITEM 6. EXHIBITS

As required under Item 6—Exhibits, the exhibits filed as part of this report are provided in this separate section. The exhibits included in this section are as follows:

Exhibit

Number

Exhibit Description

Incorporated by Reference

Form

~~Date~~

~~Number~~Date

Number

Filed Herewith

31.01

~~31.01~~

Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a).

31.02

Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a).

32.01

Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. 1350). *

32.02

Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code (18 U.S.C. 1350). *

~~101.INS~~

~~XBRL Instance Document~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase~~

*101

Interactive Data File. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


*			As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the SEC and are not incorporated by reference in any filing of VeriSign, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		VERISIGN, INC.

Date: October 26, ~~2017~~2023	By:	/S/ D. JAMES BIDZOS
		D. James Bidzos
		Chief Executive Officer



Date: October 26, ~~2017~~2023	By:	/S/ GEORGE E. KILGUSS, III
		George E. Kilguss, III
		Chief Financial Officer

3429



	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	286,822		$	231,945
Marketable securities	2,078,905			1,565,962
Other current assets	40,293			44,435
Total current assets	2,406,020			1,842,342
Property and equipment, net	265,306			266,125
Goodwill	52,527			52,527
Deferred tax assets	20,458			9,385
Deposits to acquire intangible assets	145,000			145,000
Other long-term assets	19,052			19,193
Total long-term assets	502,343			492,230
Total assets	$	2,908,363		$	2,334,572
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	193,462		$	203,920
Deferred revenues	717,586			688,265
Subordinated convertible debentures, including contingent interest derivative	624,474			629,764
Total current liabilities	1,535,522			1,521,949
Long-term deferred revenues	289,262			287,424
Senior notes	1,781,912			1,237,189
Deferred tax liabilities	401,359			371,433
Other long-term tax liabilities	130,246			117,172
Total long-term liabilities	2,602,779			2,013,218
Total liabilities	4,138,301			3,535,167
Commitments and contingencies
Stockholders’ deficit:
Preferred stock—par value $.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none	—			—
Common stock—par value $.001 per share; Authorized shares: 1,000,000; Issued shares:325,172 at September 30, 2017 and 324,118 at December 31, 2016; Outstanding shares:98,865 at September 30, 2017 and 103,091 at December 31, 2016	325			324
Additional paid-in capital	16,570,518			16,987,488
Accumulated deficit	(17,797,627		)	(18,184,954		)
Accumulated other comprehensive loss	(3,154		)	(3,453		)
Total stockholders’ deficit	(1,229,938		)	(1,200,595		)
Total liabilities and stockholders’ deficit	$	2,908,363		$	2,334,572