Verisign (VRSN) 10-K risk factor changes: FY2018 vs FY2017

[removed: 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] [added: In addition,] we are entitled to increase the price up to 7%, with the prior approval of the DOC, due to the imposition of any new ICANN [removed: consensus policies,] [added: 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 [removed: such] [added: these additional] 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.

[removed: Under the .com, .net, and .name Registry Agreements with ICANN, as well as the Cooperative Agreement with] [added: As to] the [removed: DOC,] [added: .com TLD,] we are not permitted to acquire, directly or indirectly, control of, or a greater than 15% ownership [added: interest in, any ICANN-accredited registrar that sells .com domain name registrations.]

Historically, all gTLD registry operators were subject to [removed: this] [added: a] 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 [removed: in several instances.][added: for certain other registry operators.]

If we [removed: were to] seek [removed: removal of] [added: to remove] the vertical integration restrictions contained in our agreements, it is uncertain whether ICANN [removed: and/or DOC] approval would be obtained.

If registry operators of other TLDs, [removed: or] [added: including] ccTLDs, are able to obtain competitive advantages through [removed: such] vertical integration, [added: and we are not,] it could materially harm our business.

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, [removed: 2018,] [added: 2020,] respectively.

A failure [removed: (i)] by ICANN [removed: or the DOC] to approve the renewal of the .com Registry Agreement prior to the expiration of its current term on November 30, [removed: 2024,] [added: 2024] or [removed: (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.

The costs of complying or failing to comply with [removed: this policy] [added: these policies] as well as laws and [removed: regulations] [added: regulations, such as General Data Protection Regulation (“GDPR”),] regarding [removed: publicly] [added: personally] identifiable information and data privacy, such as domestic and various foreign privacy regimes, could expose us to compliance costs and substantial liability, and result in costly and time-consuming investigations or litigation.

For example, the government of [removed: the People’s Republic of] China [removed: (“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 [removed: 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 [removed: 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 [removed: the PRC.][added: China.]

For example, laws designed to restrict who can register and who can distribute domain names, [removed: the] online [removed: distribution of certain materials deemed harmful to children, online] gambling, counterfeit goods, and intellectual property violations such as 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.

For example, the European Union’s [removed: General Data Protection Regulation,] [added: GDPR,] which greatly increases the jurisdictional reach of European Union law and adds a broad array of requirements for handling personal data, including the public disclosure of significant data breaches, [removed: becomes] [added: and significant penalties, became] effective in May 2018.

Other countries [added: and other states] have enacted or are enacting data localization laws [removed: that require] [added: regulating or limiting] data [removed: to stay within their borders.][added: collection, storage and transfer.]

Due to the nature of the internet, it is possible that [added: federal,] state or foreign governments might attempt to regulate internet transmissions or prosecute us for violations of [removed: their] laws.

We might unintentionally violate such laws, such laws may be [removed: modified,] [added: modified or enforced using new or novel legal theories,] and new laws may be enacted in the future.

In addition, as we [added: continue to] 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, [added: expose us to liability, penalties or fines,] force us to change our business practices or otherwise materially harm our business.

In addition, any such [removed: new] laws could impede growth [removed: of] [added: of,] or result in a decline [removed: in] [added: in,] domain name [removed: registrations, as well as impact the demand for our services.][added: registrations.]

Despite testing, defects or errors may occur in our existing or new services, which could result in [added: service outages,] 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 [added: on] third-party applications and services that utilize our services, which could result in legal claims against us, harming our business.

In addition to external threats, we may be subject to insider threats, including those from third-party suppliers such as consultants and advisors, SaaS providers, [added: hardware, software, and network systems manufacturers, and] other outside vendors, or from [removed: current,] [added: current or] former [added: contractors] or [removed: contract] employees; these threats can be realized from intentional or unintentional actions.

[removed: 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, [removed: outages] [added: disruptions] resulting from destructive [removed: malcode,] [added: malware,] hardware [added: or enabling software] defects, computer viruses, attacks by hackers or nefarious actors or similar disruptive problems, including hacktivism.

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 cause an outage [removed: of] [added: of,] or jeopardize the security [removed: of] [added: of,] information stored on our premises or in the computer systems and networks of our customers.

In such an event, we could face significant liability, fail to meet contracted service level obligations, customers could be reluctant 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 our reputation and harm our [removed: business.][added: business or cause financial losses that are either not insured against or not fully covered through any insurance that we maintain.]

While we have developed operational policies and procedures to reduce the impact of [removed: a] security [removed: breach] [added: vulnerabilities in system components, as well as] at [removed: a vendor] [added: any vendors] where Company data is stored or processed, such measures cannot provide absolute security.

[removed: Breaches] [added: Vulnerabilities in, and exploits leading to, breaches] of our vendors’ technology, systems [removed: and] [added: or] services could expose us or our customers to a risk of loss or misuse of Company data, including but not limited to [removed: personal] [added: sensitive personally identifiable] information.

[removed: Although we increase our knowledge of and develop new techniques in the identification and mitigation of attacks through the protection of our Security Services customers, the] [added: These] DDoS protection services share some of the infrastructure used in our Registry Services business.

Therefore the [removed: provision] [added: operation] of such services might expose our critical Registry Services infrastructure to temporary degradations or outages caused by DDoS attacks against those customers, in addition to any attacks directed specifically against us and our networks.

In the fourth quarter of 2016, the United States government completed a transition to the [removed: multistakeholder] [added: multi-stakeholder] community of the historical role played by [removed: NTIA] [added: the National Telecommunications and Information Administration (“NTIA”)] in the coordination of the DNS.

Additionally, the role of ICANN’s Governmental Advisory Committee, which is comprised of representatives of national governments, could change, [removed: giving] [added: and give] governments more control of certain aspects of internet governance.

As we perform the Root Zone Maintainer [removed: functions] [added: Services] under the RZMA, we may be subject to significant claims challenging the agreement or our performance under the agreement, and we may not have immunity from, or sufficient indemnification [added: or insurance] for, such claims.

For example, DNSSEC enabled in the root zone and at other levels of the DNS requires new preventative maintenance, including root key signing key (“KSK”) rollover, [added: necessitating] 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 [added: other] relying parties to comply with stated practices, such as those outlined in relevant DNSSEC Practice [removed: Statements,] [added: Statements and internet standards,] 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.

In particular, because root KSK rollover involves updates [removed: both] to [removed: certain keys] [added: the KSK public key (the “Trust Anchor”) and private key pair] managed by [added: ICANN’s Public Technical Identifiers (PTI) operation, to the root zone DNSSEC records published by] us in our role as Root Zone [removed: Maintainer and] [added: Maintainer; and,] to corresponding [removed: keys] [added: trust anchor configurations] maintained by external DNS vendors and service providers’ [removed: DNSSEC] [added: DNSSEC-aware] implementations, if such external parties are not adequately prepared for and/or do not appropriately effectuate root key updates, any root KSK rollover, including the [added: initial] rollover [removed: currently planned by ICANN,] [added: that occurred on October 11, 2018 at ICANN’s direction,] may introduce substantial risk to relying parties.

ICANN plans on offering a subsequent round of new [removed: gTLDs ,] [added: gTLDs,] the timing of which remains uncertain.

[removed: 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 subsequent publications, we continue to] [added: We] believe there are potential security and stability issues that could involve the root zone and at other levels of the DNS from 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 [removed: attacks.][added: and other cyber-attacks.]

It is anticipated that as additional new gTLDs are delegated [added: now, or in subsequent rounds,] more domain name collisions and associated security issues will occur.

Verisign and the DOC entered into Amendment 35 of the Cooperative Agreement on October 26, 2018, which, among other items, extends the term of the Cooperative Agreement until November 30, 2024.

The Cooperative Agreement will automatically renew on the same terms for successive six-year terms unless the DOC provides written notice of non-renewal 120 days prior to the end of the then-current term.

Further changes to the Cooperative Agreement require the mutual agreement of the DOC and the Company.

ICANN and Verisign are engaged in discussions to satisfy this obligation including modifying the .com Registry Agreement based on changes to the Cooperative Agreement arising from Amendment 35.

We can provide no assurance that any new terms for the .com Registry Agreement that we agree to as a result of these discussions will match the changes permitted in Amendment 35 nor can we provide assurances that certain terms that we agree to will not increase the costs or risks associated with the operation of the .com TLD.

Under Amendment 35, standard renewals of the .com Registry Agreement will not require further DOC approval.

If, in connection with a renewal of the .com Registry Agreement the Company seeks any additional changes to the pricing section other than as approved in Amendment 35, changes to the vertical integration provisions, the functional or performance specifications (including the SLAs), the conditions for renewal or termination, or to the Whois service, as set forth in the Amendment 35, DOC approval is required.

We can provide no assurances that such approval would be obtained.

Under the terms of Amendment 35 to the Cooperative Agreement, the Company and ICANN may agree to amend the terms of the .com Registry Agreement to permit the price of registrations or renewals of .com domain names to be increased by up to 7% per year in each of the final four years of each six-year period beginning on October 26, 2018.

Under Amendment 35, the parties clarified that the restrictions in the .com Registry Agreement relating to vertical integration apply solely to the .com TLD.

Furthermore, even if we obtain such approval, we can provide no assurances that we will enter the domain name retail market, or that we will be successful if we choose to do so.

In addition, ICANN has adopted a Temporary Specification that establishes temporary requirements for registry operators and registrars regarding the collection, display and disclosure of Thick WHOIS data pending ICANN’s establishment of a permanent Consensus Policy.

Technical Standards and ICANN processes.

Our Registry Agreements with ICANN require Verisign 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 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 could have a material adverse effect on our business.

In addition, under Amendment 35, we have agreed to continue to operate the .com TLD in a content-neutral manner and to work within ICANN processes to promote the development of content neutral policies for the operation of the DNS.

Such policies could expose us to compliance costs and substantial liability and result in costly and time-consuming investigations or litigation.

Registry Services in China and could impact the growth or renewal rates of domain name registrations in China.

It is critical to our business strategy as well as fulfilling our obligations as the registry operator for .com and .net, that our facilities and infrastructure remain secure, that we continue to meet our service level agreements and we maintain the public’s trust in the internet services that we provide.

Therefore, attacks against third-party suppliers that provide services to our Registry Services operations could also impact our infrastructure.

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

Particularly since 2016, the size of DDoS attacks has grown rapidly, and we have successfully mitigated DDoS attacks during this time frame that are significantly larger than those we have historically experienced.

We have historically incurred, and will continue to incur, significant costs to enable our infrastructure to process levels of attack traffic that are significant multiples of our normal transaction volume.

Further, we are in the process of transitioning our Security Services customer contracts to Neustar.

During this migration period, we will continue to operate DDoS protection services for customers that have yet to transition.

The resulting decrease in demand and/or renewal rates could negatively impact the volume of new domain name registrations, our renewal rates and our associated revenue growth.

Currently, internet users often navigate to a website either by directly typing its domain name into a

| • | increasing cyber threats; |

gTLDs in anticipation of, or in response to, market trends.

| • | computer viruses, software defects, or hardware defects, both in our systems and those of our service providers and suppliers; |

| • | interconnection and internet routing system vulnerabilities; |

In 2019, we will begin transitioning some of our data center operations to a leased data center facility in Ashburn, Virginia.

| • | economic tensions between governments and changes in international trade policies; |

We are at risk that we will be unable to fully register, build equity in, or

For example, Afilias, a competitor and a losing bidder in the .web auction, filed an arbitration proceeding against ICANN on November 14, 2018, alleging that ICANN’s failure to disqualify Nu DotCo, LLC (“NDC”) from participating in the .web auction violated ICANN’s rules.

The arbitration, which was filed more than two years after the .web auction took place, seeks to compel ICANN to award the .web TLD to Afilias.

Neither Verisign nor NDC currently are parties in the Afilias arbitration, but both have filed requests to participate in the arbitration as interested parties as allowed by ICANN’s rules.

We believe Afilias’ claims against ICANN are without merit.

If Afilias were successful in the arbitration on its claims that ICANN violated its own rules, we believe that ICANN would still need to make a further determination to remedy such a violation.

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.

interest in, any ICANN-accredited registrar.

Furthermore, such vertical integration restrictions do not generally apply to ccTLD registry operators.

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.

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.

It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure.

Further, we sell DDoS protection services to our Security Services customers.

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

| • | computer viruses, software defects, or hardware defects; |

We might also reassess our capital structure, including the amount and composition of our total indebtedness, as a result of the lower tax rate and the limitation on interest deductibility, which could adversely impact our financial condition, results of operations and cash flows.

Income tax expense on accumulated foreign earnings recorded as a result of the Tax Act is a provisional amount and reflects our current best estimate, which may be adjusted over the course of 2018 and materially impact our results of operations.

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

As of December 31, 2017, we had one billion authorized common shares, of which 97.6 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.

In February 2018, we called for the redemption of all the outstanding Subordinated Convertible Debentures.

The debentures will be redeemed on May 1, 2018 and may be converted at any time before the close of business on Monday, April 30, 2018.

If holders elect to convert their debentures, we intend to settle the $1.25 billion principal value in cash, and the excess value will be settled through the issuance of shares of Verisign’s stock.

Issuance of shares to settle the Subordinated Convertible Debentures or under our Equity Plans 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.

We are a global provider of domain name registry services and internet [removed: security,] [added: infrastructure,] enabling internet navigation for many of the world’s most recognized domain [removed: names and providing protection for websites and enterprises around the world.][added: names.]

[removed: Our Registry Services ensure] [added: Verisign enables] the security, [removed: stability] [added: stability,] and resiliency of key internet infrastructure and services, including [removed: the .com and .net domains,] [added: providing root zone maintainer services, operating] two of the [removed: internet’s] [added: 13 global internet] root servers, and [removed: the operation of the root zone maintainer function] [added: providing registration services and authoritative resolution] for the [removed: core of] [added: .com and .net top-level domains, which support] the [removed: internet’s DNS.][added: majority of global e-commerce.]

As of December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: 146.4] [added: 153.0] 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 [removed: third-party] [added: our] registrars.

[removed: 2017] [added: 2018] Business Highlights and Trends

| • | We recorded revenues of [removed: $1,165.1] [added: $1,215.0] million in [removed: 2017,] [added: 2018,] which represents an increase of [removed: 2%] [added: 4%] compared to [removed: 2016.] [added: 2017.] |

| • | We recorded operating income of [removed: $707.7] [added: $767.4] million during [removed: 2017,] [added: 2018,] which represents an increase of [removed: 3%] [added: 8%] as compared to [removed: 2016.] [added: 2017.] |

| • | We finished [removed: 2017] [added: 2018] with [removed: 146.4] [added: 153.0] million .com and .net registrations in the domain name base, which represents a [removed: 3%] [added: 4%] increase from December 31, [removed: 2016.] [added: 2017.] |

| • | The final .com and .net renewal rate for the third quarter of [removed: 2017] [added: 2018] was [removed: 74.4%] [added: 74.8%] compared with [removed: 73.0%] [added: 74.4%] for the same quarter in [removed: 2016.] [added: 2017.] Renewal rates are not fully measurable until 45 days after the end of the quarter. |

| • | We repurchased [removed: 6.3] [added: 4.4] million shares of our common stock for an aggregate cost of [removed: $592.7] [added: $600.0] million in [removed: 2017.] [added: 2018.] As of December 31, [removed: 2017,] [added: 2018,] there was [removed: $477.4] [added: $463.2] million remaining for future share repurchases under the share repurchase program. |

| • | Through February [removed: 8, 2018,] [added: 7, 2019,] we repurchased an additional [removed: 0.6] [added: 0.4] million shares for [removed: $63.2] [added: $66.0] million under our share repurchase program. Effective February [removed: 8, 2018,] [added: 7, 2019,] our Board authorized the repurchase of [removed: approximately $585.8 million of] our common [removed: stock,] [added: stock] in [added: the amount of approximately $602.9 million, in] addition to the [removed: $414.2] [added: $397.1] million [removed: of our common stock] remaining available for repurchase under the previous share repurchase program, for a total repurchase authorization of up to $1.0 billion [removed: of our common stock.] [added: under the share repurchase program.] |

| • | We generated cash flows from operating activities of [removed: $702.8] [added: $697.8] million in [removed: 2017,] [added: 2018,] which represents [removed: an increase] [added: a decrease] of 1% as compared to [removed: 2016.] [added: 2017.] |

[removed: | • |] We increased the annual fee for a .net domain name registration from [added: $7.46 to] $8.20 [added: on February 1, 2017, and from $8.20] to [removed: $9.02, effective] [added: $9.02 on] February 1, 2018. [removed: |]

Such judgments include, but are not limited to, [added: interpretation and application of] the [added: 2017 Tax Act, and related IRS guidance changes, especially related to accumulated and ongoing foreign earnings, the] likelihood we would realize the benefits of carryforwards from net operating losses (“NOLs”), capital losses, domestic and/or foreign tax credits, the adequacy of valuation allowances, and the rates used to measure transactions with foreign subsidiaries.

For further discussion [removed: of this change,] see Note [removed: 10,] [added: 11,] “Income taxes” of our Notes to Consolidated Financial Statements in Item 15 of this Form 10-K.

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Cost of revenues | [removed: 16.6] [added: 15.8] | | | [removed: 17.4] [added: 16.6] | | | [removed: 18.2] [added: 17.4] | |

| Sales and marketing | [removed: 7.0] [added: 5.3] | | | 7.0 | | | [removed: 8.5] [added: 7.0] | |

| Research and development | [removed: 4.5] [added: 4.8] | | | [removed: 5.2] [added: 4.5] | | | [removed: 6.0] [added: 5.2] | |

| General and administrative | [removed: 11.2] [added: 10.9] | | | [removed: 10.3] [added: 11.2] | | | [removed: 10.1] [added: 10.3] | |

| Total costs and expenses | [removed: 39.3] [added: 36.8] | | | [removed: 39.9] [added: 39.3] | | | [removed: 42.8] [added: 39.9] | |

| Operating income | [removed: 60.7] [added: 63.2] | | | [removed: 60.1] [added: 60.7] | | | [removed: 57.2] [added: 60.1] | |

| Interest expense | [removed: (11.7] [added: (9.5] | ) | | [removed: (10.1] [added: (11.7] | ) | | [removed: (10.2] [added: (10.1] | ) |

| Non-operating [removed: income (loss),] [added: income,] net | [removed: 2.4] [added: 6.3] | | | [removed: 0.9] [added: 2.4] | | | [removed: (1.0] [added: 0.9] | [removed: )] |

| Income before income taxes | [removed: 51.4] [added: 60.0] | | | [removed: 50.9] [added: 51.4] | | | [removed: 46.0] [added: 50.9] | |

| Income tax expense | [removed: (12.2] [added: (12.1] | ) | | [removed: (12.3] [added: (12.2] | ) | | [removed: (10.6] [added: (12.3] | ) |

| Net income | [removed: 39.2] [added: 47.9] | % | | [removed: 38.6] [added: 39.2] | % | | [removed: 35.4] [added: 38.6] | % |

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 [removed: registrar customers.][added: registrars.]

Revenues from Security Services [removed: are] [added: were] not significant in relation to our total consolidated revenues.

| | | [removed: 2017] [added: 2018] | | | | % Change | | | [removed: 2016] [added: 2017] | | | | % Change | | | [removed: 2015] [added: 2016] | | |

| Revenues | | $ | [removed: 1,165,095] [added: 1,214,969] | | | [removed: 2] [added: 4] | % | | $ | [removed: 1,142,167] [added: 1,165,095] | | | [removed: 8] [added: 2] | % | | $ | [removed: 1,059,366] [added: 1,142,167] | |

| | | [removed: 2017] [added: 2018] | | % Change | | | [removed: 2016] [added: 2017] | | % Change | | | [removed: 2015] [added: 2016] |

| Domain name base for .com and .net | | [removed: 146.4] [added: 153.0] million | | [removed: 3] [added: 4] | % | | [removed: 142.2] [added: 146.4] million | | [removed: 2] [added: 3] | % | | [removed: 139.8] [added: 142.2] million |

[removed: 2016] [added: 2018] compared to [removed: 2015:] [added: 2017:] Revenues increased by [removed: $82.8] [added: $49.9] million, primarily due to [removed: an] [added: a 5%] increase in the [removed: average number of] domain [removed: names ending in] [added: name base for] .com and [removed: .net and] increases in the .net domain name registration fees in February [removed: 2015] [added: 2017] and [removed: 2016.][added: 2018, partially offset by a 4% decline in the domain name base for .net.]

[removed: Competitive] [added: However, competitive] pressure from ccTLDs, the introduction of new gTLDs, ongoing changes in internet practices and behaviors of consumers and business, as well as the motivation of existing domain name registrants [removed: and how they will manage] [added: managing] their investment in domain names, and historical global economic uncertainty, [removed: have] [added: has] limited the rate of growth of the domain name base in recent years and may continue to do so in [removed: 2018] [added: 2019] and beyond.

We expect revenues will continue to grow in [removed: 2018,] [added: 2019,] as a result of the increased volume of domain registrations in [removed: 2017,] [added: 2018, and] continued growth in the domain name base in [removed: 2018, and increases in] [added: 2019, partially offset by] the [removed: .net domain name registration fees] [added: decrease] in [removed: February 2017 and 2018.][added: revenues resulting from the sale of customer contracts of our Security Services business.]

| | [removed: 2017] [added: 2018] | | | | % Change | | | [removed: 2016] [added: 2017] | | | | % Change | | | [removed: 2015] [added: 2016] | | |

| EMEA | [removed: 211,349] [added: 212,699] | | | | [removed: 2] [added: 1] | % | | [removed: 207,474] [added: 211,349] | | | | [removed: 7] [added: 2] | % | | [removed: 193,623] [added: 207,474] | | |

| China | [removed: 106,526] [added: 106,841] | | | | [removed: (16] [added: —] | [removed: )%] [added: %] | | [removed: 127,298] [added: 106,526] | | | | [removed: 53] [added: (16] | [removed: %] [added: )%] | | [removed: 83,456] [added: 127,298] | | |

| Total revenues | $ | [removed: 1,165,095] [added: 1,214,969] | | | [removed: 2] [added: 4] | % | | $ | [removed: 1,142,167] [added: 1,165,095] | | | [removed: 8] [added: 2] | % | | $ | [removed: 1,059,366] [added: 1,142,167] | |

On December 5, 2018, we completed the sale of our rights, economic benefits, and obligations, in all customer contracts related to our Security Services business, which primarily consisted of DDoS Protection Services, and Managed DNS Services, to Neustar.

As part of the transaction, we will continue to support the Security Services customers during the transition to Neustar over the course of 2019.

| • | During 2018, we processed 38.2 million new domain name registrations for .com and .net compared to 36.7 million in 2017. |

| • | On October 26, 2018, Verisign and the DOC entered into Amendment 35 to the Cooperative Agreement, which, among other items, permits Verisign, without further approval of the DOC, to agree with ICANN to change the .com Registry Agreement to increase wholesale prices for .com domain names up to 7 percent in each of the last four years of each six-year period of the .com Registry Agreement. |

| • | On December 5, 2018, we completed the sale of the rights, economic benefits, and obligations, in all customer contracts related to our Security Services business. We recognized a gain of $54.8 million in 2018, based on the estimated amount of total net consideration we expect to receive from the sale. To the extent that the actual results differ from our estimates, the gain on the sale may be adjusted in 2019. For further information refer to Note 8 “Sale of Security Services Business”of our Notes to Consolidated Financial Statements in Item 15 of this Form 10-K. |

The annual fee for a .com domain name registration has been fixed at $7.85 since 2012.

On October 26, 2018, we entered into an agreement with the DOC to amend the Cooperative Agreement.

The amendment extends the term of the Cooperative Agreement until November 30, 2024 and permits the price of a .com domain name to be increased without further DOC approval by up to 7% in each of the final four years of each 6-year period beginning on October 26, 2018.

| U.S | $ | 756,907 | | | 7 | % | | $ | 707,906 | | | 6 | % | | $ | 667,301 | |

| Other | 138,522 | | | | (1 | )% | | 139,314 | | | | (1 | )% | | 140,094 | | |

The majority of our revenue growth in 2018 and 2017 has come from increased sales to U.S. based registrars.

2018 compared to 2017: Cost of revenues decreased by $1.2 million, primarily due to a decrease in depreciation expenses, partially offset by an increase in telecommunications expenses.

Depreciation expenses decreased by $2.5 million as a result of lower average hardware purchases over the last several years.

Telecommunications expenses increased by $1.5 million as a result of an increase in network costs supporting our operations.

| | 2018 | | | | % Change | | | 2017 | | | | % Change | | | 2016 | | |

We expect sales and marketing expenses as a percentage of revenues to decrease in 2019 as compared to 2018, primarily due to the sale of the customer contracts of our Security Services business and the reduction in headcount from employees supporting the Security Services business.

| | 2018 | | | | % Change | | | 2017 | | | | % Change | | | 2016 | | |

2018 compared to 2017: Research and development expenses increased by $5.5 million, primarily due to a $2.6 million decrease in capitalized labor and a $2.0 million increase in salary and employee benefits expenses, including stock-based compensation expenses.

Capitalized labor and stock-based compensation decreased due to a shift in work from capital projects to security-related and other non-capital projects.

Salary and employee benefits expenses, including stock-based compensation expenses increased due to annual salary increases and an increase in allocated benefit expenses.

| | 2018 | | | | % Change | | | 2017 | | | | % Change | | | 2016 | | |

Professional services expenses decreased by $2.4 million primarily due to decreased external consulting costs related to various projects.

We expect interest expense to decrease in 2019 as compared to 2018 due to the redemption of the Subordinated Convertible Debentures in the second quarter of 2018.

We expect Non-operating income, net to decrease in 2019 as compared to 2018 due to the gain recognized in 2018 related to the sale of the customer contracts of our Security Services business.

Our effective tax rate for 2018 was lower than the statutory federal rate of 21% primarily due to foreign income taxed at lower rates and excess tax benefits related to stock-based compensation, partially offset by state taxes and the U.S. income tax impact of our foreign earnings.

The tax holiday reduced the our income tax expense by $16.9 million in 2018, $12.3 million in 2017, and $21.3 million in 2016.

| | 2018 | | | | 2017 | | |

During the first quarter of 2018 we completed the previously disclosed repatriation of $1.15 billion of cash held by foreign subsidiaries, net of $60.7 million of foreign withholding taxes which were accrued during 2017.

Substantially all of the holders elected to convert their debentures, and upon conversion, we settled the $1.25 billion principal value in cash, and issued 26.1 million shares of common stock for the $3.17 billion excess of the conversion value over the principal amount.

The excess interest deductions on the subordinated convertible debentures that were converted, were not subject to recapture, and accordingly, the $439.2 million deferred tax liability related to the debentures was reversed into Additional paid-in capital upon extinguishment of the debt.

On December 5, 2018, we completed the sale of the rights, economic benefits, and obligations, in all customer contracts related to our Security Services business.

The total purchase price, subject to a cap of $120.0 million, consists of a payment of $50.0 million, which was received at closing, plus an additional contingent amount, due after the first anniversary of closing.

The additional contingent amount, which cannot be negative, is based upon, among other things, the successful transition of customers to Neustar during the 12-month period following closing.

As of December 31, 2018, there were no borrowings outstanding under the $200.0 million unsecured revolving credit facility that will expire in 2020.

The increase in cash paid for income taxes was primarily due to the foreign withholding taxes paid on the repatriation of $1.15 billion cash held by foreign subsidiaries to the U.S. in the first quarter of 2018, and U.S. income taxes paid on accumulated foreign earnings.

Cash paid to suppliers and employees decreased due to timing of certain vendor payments and a decrease in operating expenses.

Cash received from interest income increased due to increases in interest rates on our investments in debt securities.

2018 compared to 2017: We had net cash inflows from investing activities in 2018, compared to net cash outflows during 2017, primarily due to increases in proceeds from sales and maturities of marketable securities, net of purchases, and proceeds from the sale of businesses, and a decrease in purchases of property and equipment.

We expect cash paid for income taxes in 2019 to be between $95.0 million and $115.0 million.

Our product suite also includes Security Services, consisting of DDoS Protection Services, and Managed DNS Services.

On April 1, 2017, we completed the sale of our iDefense business.

| | |

| --- | --- |

| • | On April 1, 2017, we completed the sale of our iDefense business, which resulted in a pre-tax gain of approximately $10.4 million. |

| • | On June 28, 2017, we entered into a renewal of the .net Registry Agreement with ICANN, pursuant to which we will remain the sole registry operator of the .net TLD through June 30, 2023. |

| • | On July 5, 2017, we issued $550.0 million of 4.75% Senior Notes due July 15, 2027. The proceeds are being used for general corporate purposes, including, but not limited to, the repurchase of shares under our share repurchase program. |

Revenue recognition

We generate revenues by providing services over a period of time.

Fees for these services are deferred and recognized as performance occurs.

The majority of our revenue transactions contain standard business terms and conditions.

However, at times, we enter into non-standard arrangements including multiple-element arrangements.

As a result, we must evaluate (1) whether an arrangement exists; (2) how the arrangement consideration should be allocated among the deliverables; (3) when to recognize revenue on the deliverables; and (4) whether all elements of the arrangement have been delivered.

Our revenue recognition policy also requires an assessment as to whether collection is reasonably assured, which requires us to evaluate the creditworthiness of our customers.

As discussed in Note 1, “Description of Business and Summary of Significant Accounting Policies” of our Notes to Consolidated Financial Statements in Item 15 of this Form 10-K, the adoption of the new revenue guidance in Accounting Standards Codification 606 Revenue from Contracts with Customers, is not expected to have a material impact on our revenue recognition when it becomes effective in 2018.

Due to the enactment of the Tax Act, we no longer intend to indefinitely reinvest the earnings of our foreign subsidiaries.

Earnings per Share

We use the treasury stock method to calculate the impact of our Subordinated Convertible Debentures on diluted earnings per share.

Under this method, only a positive conversion spread related to the Subordinated Convertible Debentures is included in the diluted earnings per share calculations.

This is based on our intent and ability to settle the principal amount of the Subordinated Convertible Debentures in cash.

A change in our intent and ability would require us to use the if-converted method, which could have a material impact on our diluted earnings per share.

We increased the annual fee for a .net domain name registration from $6.79 to $7.46 on February 1, 2016, from $7.46 to $8.20 on February 1, 2017, and from $8.20 to $9.02 on February 1, 2018.

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.

The increase in the average number of domain names ending in .com and .net was significantly impacted by the elevated volume of registrations from our registrars in China discussed above.

| U.S | $ | 694,759 | | | 4 | % | | $ | 667,301 | | | 4 | % | | $ | 639,170 | |

| Other | 152,461 | | | | 9 | % | | 140,094 | | | | (2 | )% | | 143,117 | | |

These factors impacted revenues in China and the Other region during 2017.

Additionally, while revenues grew in the U.S., EMEA and Other regions during 2017, revenues from China decreased.

Telecommunications expenses decreased by $1.9 million, primarily due to savings on renewals of colocation agreements.

We expect cost of revenues as a percentage of revenues to decrease slightly in 2018 as compared to 2017 as revenue is expected to grow faster than direct costs.

Allocated overhead expenses decreased by $1.4 million due to the decrease in average headcount relative to other cost types.

2016 compared to 2015: Research and development expenses decreased by $4.6 million, primarily due to decreases in salary and employee benefits expenses, and allocated overhead costs, partially offset by a decrease in capitalized labor.

Salary and employee benefits expenses, allocated overhead expenses, and capitalized labor decreased by $2.4 million, $1.7 million, and $1.5 million, respectively, due to a reduction in average headcount.

2016 compared to 2015: General and administrative expenses increased by $11.3 million, primarily due to increases in salary and employee benefits expenses, stock-based compensation expenses, legal expenses, and a decrease in overhead expenses allocated to other cost types, partially offset by a decrease in depreciation expenses and certain non-income related taxes.

Salary and employee benefits expenses increased by $8.0 million due to increases in bonus expenses and average headcount.

Stock based compensation expenses increased by $4.5 million due to increases in the total value of RSUs granted in 2015 and 2016 and higher projected achievement levels on certain performance-based RSU grants.

Legal expenses increased by $2.6 million primarily due to an increase in services performed by external legal counsel.

Overhead expenses allocated to other cost types decreased by $1.6 million due to lower average headcount for other cost types.

Depreciation expenses decreased by $2.6 million as a result of a decrease in capital expenditures in recent years.

We incurred $2.1 million of certain non-income taxes in 2015, which did not recur in 2016.

As of December 31, [removed: 2017,] [added: 2018,] we had [removed: $2.2] [added: $1.12] billion of fixed income securities, which consisted of U.S. Treasury bills with maturities of less than one year.

As of December 31, [removed: 2017,] [added: 2018,] we held foreign currency forward contracts in notional amounts totaling [removed: $29.7] [added: $28.5] million to mitigate the impact of exchange rate fluctuations associated with certain foreign currencies.

The fair market values of our [removed: Subordinated Convertible Debentures and the] senior notes are subject to interest rate risk.

As of December 31, [removed: 2017, the fair value of the Subordinated Convertible Debentures was approximately $4.2 billion and] [added: 2018,] the fair values of the senior notes issued in 2013, the senior notes issued in 2015, and the senior notes issued in 2017 were [removed: $772.9] [added: $741.3] million, [removed: $544.4] [added: $502.2] million, and [removed: $563.7] [added: $524.2] million, respectively, based on available market information from public data sources.

The Subordinated Convertible Debentures are subject to market risk due to the convertible feature of the debentures.

The fair market value will increase as the market price of our common stock increases, and decrease as the market price of our common stock falls.

We are a global provider of domain name registry services and internet [removed: security,] [added: infrastructure,] enabling internet navigation for many of the world’s most recognized domain names [removed: and providing protection for websites and enterprises around the world] (“Registry Services”).

Our Registry Services [removed: ensure] [added: enable] the security, stability, and resiliency of key internet infrastructure and services, including [removed: the .com and .net domains,] [added: providing root zone maintainer services, operating] two of the [removed: internet’s] [added: 13 global internet] root servers, and [removed: operation of the root zone maintainer function] [added: providing registration services and authoritative resolution] for the [removed: core of] [added: .com and .net top-level domains (“TLDs”), which support] the [removed: internet’s Domain Name System (“DNS”).][added: majority of global e-commerce.]

[removed: Our product suite also includes] Security [removed: Services, consisting of Distributed Denial] [added: Services was primarily comprised] of [removed: Service (“DDoS”)] [added: DDoS] Protection Services and Managed DNS Services.

For certain additional information about our [removed: segment,] [added: business,] including a geographic breakdown of revenues and changes in revenues, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and Note 7, [removed: “Geographic and Customer Information”] [added: “Revenue Recognition”] of our Notes to Consolidated Financial Statements in Item 15 of this Form 10-K.

The domain name base is the active zone plus the number of domain names that are registered but not configured for use in the respective [removed: top level] [added: top-level] domain zone file plus the number of domain names that are in a client or server hold status.

As a registry, we maintain the master directory of all second-level domain names [added: (e.g., johndoe.com and janedoe.net)] in these gTLDs and IDN [removed: gTLDs (e.g., johndoe.com and janedoe.net).][added: gTLDs.]

Our global constellation of [removed: domain name] [added: DNS] servers provides internet protocol (“IP”) address information in response to queries, enabling the use of browsers, email systems, and other systems on the internet.

In addition, we own and maintain the shared registration system that allows [removed: all] [added: ICANN-accredited] registrars to enter new second-level domain names into [removed: the master directory] [added: central directories] and to submit modifications, transfers, [removed: re-registrations] [added: re-registrations,] and deletions for existing second-level domain names (“Shared Registration System”).

[removed: Separate from] [added: In addition to] our [added: registry] agreements with ICANN, we have agreements to [removed: be] [added: operate] the [removed: exclusive] registry for the .tv and .cc country code top-level domains (“ccTLDs”) for Tuvalu and Cocos (Keeling) Islands, respectively, and to operate the back-end registry systems for the .gov, .jobs, and .edu sponsored [removed: TLDs.][added: TLDs, among others.]

These TLDs are also supported by our global constellation of [removed: domain name] [added: DNS] servers and Shared Registration System.

Our gTLDs and ccTLDs can support [removed: standards compliant] [added: standards-compliant] registrations in over 100 different native languages and scripts.

Revenues for .cc and .tv domain names and our IDN gTLDs are based on a similar fee system and registration system, although the fees charged are not subject to the same pricing restrictions as those imposed by [removed: ICANN] [added: the DOC] on .com, [added: or ICANN with respect to] .net and .name.

Historically, we have experienced [added: a] higher [added: volume of] domain name [removed: growth] [added: transactions] in the first quarter of the year compared to other quarters.

Our operations infrastructure consists of three secure data centers in Dulles, Virginia; New Castle, Delaware; and Fribourg, Switzerland as well as more than [removed: 100] [added: 160] resolution sites around the world.

We also perform the root zone maintainer function [added: under an agreement with ICANN] for the core of the internet’s [removed: Domain Name System (“DNS”) and administer] [added: DNS] and operate two of the 13 root zone servers that contain authoritative data for the very top of the DNS hierarchy.

Our domain name servers provide the associated authoritative name servers and IP addresses for every .com and .net domain name on the internet and a large number of other TLD queries, [removed: resulting in an average of approximately 132] [added: processing more than 152] billion [removed: transactions per day.][added: queries daily.]

Call Centers and Help Desk: We provide customer support services through [removed: our] phone-based call centers, email help desks and web-based self-help systems.

Our Virginia call center is staffed [added: with trained customer support agents] 24 hours a day, every day of the [removed: year to support our businesses.][added: year.]

Operations Support and Monitoring: Through our network operations [removed: centers,] [added: center,] we have an extensive monitoring capability that enables us to track the status and performance of our critical database systems and our global resolution systems.

[removed: Our Registry Services business maintains] [added: We maintain] dual mirrored data centers that allow rapid failover with no data loss and no loss of function or capacity, as well as off-continent tertiary [removed: Registry Services capabilities.][added: facilities.]

We believe that timely development of new and enhanced services, including monitoring and visualization, registry provisioning platforms, navigation and resolution services, data services, value added services, and [removed: Security Services, as well as] new and enhanced ways to ensure the security, stability, and resiliency of our services, is necessary to remain competitive in the marketplace.

We compete with numerous companies in [removed: both] the Registry Services [removed: and Security Services businesses.][added: business.]

[removed: Competition in Registry Services:] 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, establish [removed: a web] [added: an online] presence, as well as other uses of domain names, such as branded email.

In addition to the gTLDs and ccTLDs we operate or for which we provide back-end registry services, there are over [removed: 1,000] [added: 1,200] other operational gTLD registries, over 250 Latin script ccTLD registries, more than 50 IDN ccTLD registries, and over [removed: 80] [added: 150] IDN gTLD registries.

To the extent end-users navigate using search engines or social media, [added: or transact on e-commerce platforms,] as opposed to direct navigation, we [removed: may] face competition from search [removed: engine operators] [added: engines] such as Google, [removed: Microsoft,] [added: Bing, Yahoo!,] and [removed: Verizon, operators of] [added: Baidu,] social media networks such as [removed: Facebook, operators of ecommerce] [added: Facebook and WeChat, e-commerce] platforms such as Amazon, eBay and Taobao, and [removed: operators of] microblogging tools such as Twitter.

In addition, we [removed: may] face competition from these social media businesses and [removed: ecommerce] [added: e-commerce] platforms if they are used to [added: establish an online presence by end-users rather than through the use of a domain name.]

Furthermore, to the extent end-users increase the use of web and mobile applications to locate and access content, we [removed: may] face competition from providers of such web and mobile applications.

We also face competition from service providers that offer outsourced domain name registration, resolution and other DNS services to [removed: organizations] [added: registries] that require a reliable and scalable infrastructure.

Among our competitors are [removed: Neustar, Inc.,] Afilias plc, [removed: and] CentralNic [removed: Ltd.][added: Ltd., and Neustar, Inc.]

[removed: In addition, on] [added: On] a quarterly basis, we pay $0.25 to ICANN for each annual increment of a domain name registered or renewed during such quarter.

[removed: The Cooperative Agreement provides that the Maximum Price (as defined in the .com Registry Agreement) of a .com domain name shall not exceed $7.85 for the term of the .com Registry Agreement, except that] [added: Further,] we are entitled to increase the Maximum Price of a .com domain name due to the imposition of any new Consensus Policy or documented extraordinary expense resulting from an attack or threat of attack on the Security or Stability of the DNS as described in the .com Registry Agreement, provided that we may not exercise such right unless the DOC provides prior written approval that the exercise of such right will serve the public interest, such approval not to be unreasonably withheld.

[removed: The Cooperative Agreement also provides that] [added: As was] the [added: case with prior amendments, the] DOC’s approval of [removed: the .com Registry Agreement is] [added: Amendment 35 was] not intended to confer federal antitrust immunity on [removed: us] [added: Verisign] with respect to the .com Registry Agreement.

The RZMA will expire on October 19, 2024, with an automatic [removed: renewal] [added: renewal,] unless earlier terminated.

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | |

| Cost of revenues | [removed: 288] [added: 281] | | | [removed: 324] [added: 288] | | | [removed: 314] [added: 324] | |

| Sales and marketing | [removed: 133] [added: 84] | | | [removed: 143] [added: 133] | | | [removed: 183] [added: 143] | |

| Research and development | [removed: 226] [added: 219] | | | [removed: 228] [added: 226] | | | [removed: 253] [added: 228] | |

| General and administrative | [removed: 305] [added: 316] | | | [removed: 295] [added: 305] | | | [removed: 269] [added: 295] | |

| Total | [removed: 952] [added: 900] | | | [removed: 990] [added: 952] | | | [removed: 1,019] [added: 990] | |

On December 5, 2018, we completed the sale of our rights, economic benefits, and obligations, in all customer contracts related to our Security Services business, which primarily consisted of Distributed Denial of Service (“DDoS”) Protection Services and Managed Domain Name System (“DNS”) Services, to NeuStar, Inc. (“Neustar”).

As part of the transaction, we will continue to support the Security Services customers during the transition to Neustar over the course of 2019.

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.

As described above, the Company sold its Security Services customer contracts to Neustar on December 5, 2018.

ICANN and Verisign are engaged in discussions related to these obligations, including modifying the .com Registry Agreement based on changes to the Cooperative Agreement arising from Amendment 35.

Verisign and the DOC entered into Amendment 35 of the Cooperative Agreement on October 26, 2018, which, among other items, extends the term of the Cooperative Agreement until November 30, 2024.

The Cooperative Agreement will automatically renew on the same terms for successive six-year terms unless the DOC provides written notice of non-renewal 120 days prior to the end of the then-current term.

Under Amendment 35, standard renewals of the .com Registry Agreement with ICANN will not require further DOC approval, although any additional changes to the pricing section other than as approved in Amendment 35, changes to the vertical integration provisions, the functional or performance specifications (including the SLAs), the conditions for renewal or termination, or to the Whois service, as set forth in the Amendment 35, would require further DOC approval.

Under Amendment 35 to the Cooperative Agreement, the Maximum Price (as defined in the .com Registry Agreement) of a .com domain name may be increased without further DOC approval by up to 7% in each of the final four years of each six-year period.

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

The changes to the Maximum Price under Amendment 35 are not effective until such price increases are incorporated in the .com Registry Agreement with ICANN.

Also, under Amendment 35, we clarified that the restrictions in the .com Registry Agreement relating to vertical integration apply solely to the .com TLD.

As to the .com TLD, we are not permitted to acquire, directly or indirectly, control of, or a greater than 15% ownership interest in, any ICANN-accredited registrar that sells .com domain names.

In addition, under Amendment 35, we have agreed to continue to operate the .com TLD in a content-neutral manner and to work within ICANN processes to promote the development of content-neutral policies for the operation of the DNS.

On April 1, 2017, we completed the sale of our iDefense Security Intelligence Services (“iDefense”) business.

We have one reportable segment, which consists of Registry Services and Security Services.

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

With respect to .com, price increases require prior approval by the DOC according to the terms of Amendment 32 of the Cooperative Agreement, as amended, between the DOC and Verisign (“Cooperative Agreement”).

Security Services provides infrastructure assurance to organizations and is comprised of DDoS Protection Services and Managed DNS Services.

We help companies stay online without needing to make significant investments in infrastructure or establish internal DDoS expertise.

As a cloud-based service, DDoS Protection Services can be deployed quickly and easily, with no customer premise equipment required.

This saves time and money through operational efficiencies, support costs, and economies of scale to provide detection and protection against the largest DDoS attacks.

It provides DNS availability through a globally distributed, securely managed, cloud-based DNS infrastructure, allowing enterprises to save on capital expenses associated with DNS infrastructure deployment and reduce operational costs and complexity associated with DNS management.

Managed DNS service provides full support for DNS Security Extensions (“DNSSEC”) compliance features and Geo Location traffic routing capabilities.

DNSSEC is designed to protect the DNS infrastructure from man-in-the-middle attacks that corrupt, or poison, DNS data.

Geo Location allows website owners to customize responses for end-users based on their physical location or IP address, giving them the ability to deliver location-specific content.

As part of our operations infrastructure for our Registry Services business, we operate all authoritative domain name servers that answer domain name queries for the .com and .net zones, as well as for the other TLDs for which we are the registry operator.

These name servers are located in resolution facilities which are in a controlled and monitored environment, incorporating security and system maintenance features.

This network of name servers is one of the cornerstones of the internet’s DNS infrastructure.

All call centers have a staff of trained customer support agents and also provide web-based support services utilizing customized automatic response systems to provide self-help recommendations.

We market our Security Services worldwide through multiple distribution channels, including direct sales and indirect channels.

During 2017, 2016, and 2015 our research and development expenses were $52.3 million, $59.1 million and $63.7 million, respectively.

establish an online presence by end-users rather than through the use of a domain name.

Competition in Security Services: Several of our current and potential competitors have longer operating histories and/or significantly greater financial, technical, marketing, sales, and other resources than we do and therefore may be able to respond more quickly than we can to new or changing opportunities, technologies, standards, and customer requirements.

Many of these competitors also have broader and more established distribution channels that may be used to deliver competing products or services directly to customers through bundling or other means.

If such competitors were to bundle competing products or services for their customers, we may experience difficulty establishing or increasing demand for our products and services or distributing our products successfully.

In addition, it may be difficult to compete against consolidation and partnerships among our competitors which create integrated product suites.

Our Security Services business faces competition from companies such as Akamai Technologies, Inc., Cisco, Neustar, Inc., and Oracle, among others.

The .com Registry Agreement includes pricing restrictions for .com domain name registrations, which sets a maximum price of $7.85 for a .com domain name registration and is consistent with the terms of the Cooperative Agreement as set forth below.

In addition to ICANN’s approval, 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.

See the risk factor “Risks arising from our agreements governing our Registry Services business could limit our ability to maintain or grow our business” in Part 1A for further information.

The Cooperative Agreement will expire on November 30, 2018, unless the DOC, in its sole discretion, extends the term.

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.

The Cooperative Agreement also provides that any renewal or extension of the .com Registry Agreement is subject to prior written approval by the DOC.

The DOC shall approve such renewal if it concludes that approval will serve the public interest in (a) the continued security and stability of the internet DNS and the operation of the .com registry including, in addition to other relevant factors, consideration of Verisign’s compliance with consensus policies and technical specifications, its service level agreements as set forth in the .com Registry Agreement, and the investment associated with improving the security and stability of the DNS, and (b) the provision of Registry Services as defined in the .com Registry Agreement at reasonable prices, terms and conditions.

The parties have an expectancy of renewal of the .com Registry Agreement so long as the foregoing public interest standard is met and Verisign is not in breach of the .com Registry Agreement.

Our Security Services business also depends on proprietary intellectual property.

None.

On January 18, 2017, the Company received a Civil Investigative Demand 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.

On January 9, 2018, the DOJ notified the Company that this investigation was closed.

For the fiscal year ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: 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 [removed: and post] such files).

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act.

The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the Registrant as of June 30, [removed: 2017,] [added: 2018,] was [removed: $3.3] [added: $10.0] billion based upon the last sale price reported for such date on the [removed: NASDAQ] [added: Nasdaq] Global Select Market.

Number of shares of Common Stock, $0.001 par value, outstanding as of the close of business on February [removed: 9, 2018: 97,120,531] [added: 8, 2019: 119,714,949] shares.

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the [removed: 2018] [added: 2019] Annual Meeting of Stockholders are incorporated by reference into Part III

| [Item [removed: 1.](#s07B6A6EA5328DD67BDF8C68233E8D661)] [added: 1.](#s2D01E9ED3BDD22A69514CAA7EC65CAFE)] | [removed: [Business](#s07B6A6EA5328DD67BDF8C68233E8D661)] [added: [Business](#s2D01E9ED3BDD22A69514CAA7EC65CAFE)] | [removed: [3](#s07B6A6EA5328DD67BDF8C68233E8D661)] [added: [3](#s2D01E9ED3BDD22A69514CAA7EC65CAFE)] |

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| [Item [removed: 3.](#s1FDEF7E5DF3E5ABC3331C6827EB73B46)] [added: 3.](#sC0869F786800F61DE8DFCAA818C24BC3)] | [Legal [removed: Proceedings](#s1FDEF7E5DF3E5ABC3331C6827EB73B46)] [added: Proceedings](#sC0869F786800F61DE8DFCAA818C24BC3)] | [removed: [23](#s1FDEF7E5DF3E5ABC3331C6827EB73B46)] [added: [21](#sC0869F786800F61DE8DFCAA818C24BC3)] |

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| | [Executive Officers of the [removed: Registrant](#sE1CDA45CCB6A826CD2D6C6827F06BA90)] [added: Registrant](#sF7EA378DF26DA5B0E538CAA819157682)] | [removed: [24](#sE1CDA45CCB6A826CD2D6C6827F06BA90)] [added: [22](#sF7EA378DF26DA5B0E538CAA819157682)] |

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| [Item [removed: 7.](#sCBF72A4CF97A6FB1666FC6827FC52FDE)] [added: 7.](#sF56A0E5557844E79045BCAA819D6C01A)] | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sCBF72A4CF97A6FB1666FC6827FC52FDE)] [added: Operations](#sF56A0E5557844E79045BCAA819D6C01A)] | [removed: [28](#sCBF72A4CF97A6FB1666FC6827FC52FDE)] [added: [26](#sF56A0E5557844E79045BCAA819D6C01A)] |

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| [Item [removed: 9.](#sBC9404361638BC312839C6828122257D)] [added: 9.](#s3FBBBF6F54BB553463CCCAA81AEABA40)] | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#sBC9404361638BC312839C6828122257D)] [added: Disclosure](#s3FBBBF6F54BB553463CCCAA81AEABA40)] | [removed: [40](#sBC9404361638BC312839C6828122257D)] [added: [38](#s3FBBBF6F54BB553463CCCAA81AEABA40)] |

| [Item [removed: 9A.](#s06760DBCD732038D439AC68233EA02A9)] [added: 9A.](#s7A8DBFBD38CAA996B44ACAA7EC6803D7)] | [Controls and [removed: Procedures](#s06760DBCD732038D439AC68233EA02A9)] [added: Procedures](#s7A8DBFBD38CAA996B44ACAA7EC6803D7)] | [removed: [40](#s06760DBCD732038D439AC68233EA02A9)] [added: [38](#s7A8DBFBD38CAA996B44ACAA7EC6803D7)] |

| [Item [removed: 9B.](#s20505140FEA15CBBAD2EC682814440EC)] [added: 9B.](#s891D15182BE0F3012612CAA81B1C370F)] | [Other [removed: Information](#s20505140FEA15CBBAD2EC682814440EC)] [added: Information](#s891D15182BE0F3012612CAA81B1C370F)] | [removed: [40](#s20505140FEA15CBBAD2EC682814440EC)] [added: [38](#s891D15182BE0F3012612CAA81B1C370F)] |

| | [PART [removed: III](#s73BC339A6D3816CEEDC4C682814DD5B8)] [added: III](#s9A05FF07F6CC30E16F70CAA81B3B4F7E)] | |

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| [Item [removed: 13.](#s03E453767634C1FEB0BAC68281D60647)] [added: 13.](#sF5B9373267526795FB76CAA81BE2526B)] | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s03E453767634C1FEB0BAC68281D60647)] [added: Independence](#sF5B9373267526795FB76CAA81BE2526B)] | [removed: [41](#s03E453767634C1FEB0BAC68281D60647)] [added: [39](#sF5B9373267526795FB76CAA81BE2526B)] |

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| [Financial Statements and Notes to Consolidated Financial [removed: Statements](#sA62BD6E2B5E40277FE6DC68282B6EC92)] [added: Statements](#s27269F7726D2AF5AF0C7CAA81CAA1F80)] | | [removed: [45](#sA62BD6E2B5E40277FE6DC68282B6EC92)] [added: [43](#s27269F7726D2AF5AF0C7CAA81CAA1F80)] |

10-K 1 vrsn-20181231x10k.htm 10-K

| | [PART I](#s3D575680A1ECBF34EA09CAA817FCFB4C) | |

| | [PART II](#s77E2F73ADD6C4853F742CAA81947585E) | |

| | [PART IV](#s40714A5AD4722A664AE3CAA81C35951C) | |

| [Signatures](#sE3A0A0764A983B193819CAA8218E833C) | | [69](#sE3A0A0764A983B193819CAA8218E833C) |

10-K 1 vrsn-20171231x10k.htm 10-K

| | [PART I](#s25E067907F2D5A228D17C6827DEF6154) | |

| | [PART II](#s2B54E9952E2921DD956DC6827F374324) | |

| | [PART IV](#s6DF9C181CC3FD73FB36CC6828229588C) | |

| [Signatures](#s4469F31B8AD3E7EE828CC6828285C3DF) | | [71](#s4469F31B8AD3E7EE828CC6828285C3DF) |

As of December 31, [removed: 2017,] [added: 2018,] we owned approximately 454,000 square feet of space, which includes facilities in Reston and Dulles, Virginia and New Castle, Delaware.

As of December 31, [removed: 2017,] [added: 2018,] we leased approximately 17,000 square feet of space in Europe, Australia and Asia.

The following table lists our major locations and primary use as of December 31, [removed: 2017:][added: 2018:]

| Dulles, Virginia | | [removed: 60,000] [added: 70,000] | | | Data Center |

The table above does not include approximately [removed: 68,000] [added: 58,000] square feet of space owned by us and leased to third parties.

The following table sets forth information regarding our executive officers as of February [removed: 16, 2018:][added: 15, 2019:]

| D. James Bidzos | | [removed: 62] [added: 63] | | | Executive Chairman, President and Chief Executive Officer |

| Todd B. Strubbe | | [removed: 54] [added: 55] | | | Executive Vice President, Chief Operating Officer |

| George E. Kilguss, III | | [removed: 57] [added: 58] | | | Executive Vice President, Chief Financial Officer |

| Thomas C. Indelicarto | | [removed: 54] [added: 55] | | | Executive Vice President, General Counsel and Secretary |

Our common stock is traded on the [removed: NASDAQ] [added: Nasdaq] Global Select Market under the symbol [removed: “VRSN.” The following table sets forth, for the periods indicated, the high and low sales prices per share for our common stock as reported by the NASDAQ Global Select Market:][added: VRSN.]

On February [removed: 9, 2018,] [added: 8, 2019,] there were [removed: 426] [added: 394] holders of record of our common stock.

The following table presents the share repurchase activity during the three months ended December 31, [removed: 2017:][added: 2018:]

| | Total Number of Shares Purchased | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs [added: (1)] | | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)(2) | | |

| (1) | Effective February [removed: 9, 2017,] [added: 8, 2018,] our Board authorized the repurchase of [removed: approximately $640.9 million of] our common [removed: stock,] [added: stock] in [added: the amount of approximately $585.8 million, in] addition to the [removed: $359.1] [added: $414.2] million [removed: of our common stock] remaining available for repurchase under the previous share repurchase program, for a total repurchase authorization of up to $1.0 billion [removed: of our common stock.] [added: under the share repurchase program.] |

| (2) | Effective February [removed: 8, 2018,] [added: 7, 2019,] our Board authorized the repurchase of [removed: approximately $585.8 million of] our common [removed: stock,] [added: stock] in [added: the amount of approximately $602.9 million, in] addition to the [removed: $414.2] [added: $397.1] million [removed: of our common stock] remaining available for repurchase under the previous share repurchase program, for a total repurchase authorization of up to $1.0 billion [removed: of our common stock.] [added: under the share repurchase program.] The share repurchase program has no expiration date. Purchases made under the program could be effected through open market transactions, block purchases, accelerated share repurchase agreements or other negotiated transactions. |

The graph assumes that $100 (and the reinvestment of any dividends thereafter) was invested in our common stock, the S&P 500 Index and the S&P 500 Information Technology Index on December 31, [removed: 2012,] [added: 2013,] and calculates the return annually through December 31, [removed: 2017.][added: 2018.]

[removed: ][added: ]

Market Information

| October 1 – 31, 2018 | 428 | | | | $146.85 | | | 428 | | | $ | 575.4 | million |

| November 1 – 30, 2018 | 376 | | | | $152.63 | | | 376 | | | $ | 518.0 | million |

| December 1 – 31, 2018 | 360 | | | | $152.18 | | | 360 | | | $ | 463.2 | million |

| | 1,164 | | | | | | | 1,164 | | | | | |

| | 12/31/13 | | | 12/31/14 | | | 12/31/15 | | | 12/31/16 | | | 12/31/17 | | | 12/31/18 | | |

| VeriSign, Inc | $ | 100 | | $ | 95 | | $ | 146 | | $ | 127 | | $ | 191 | | $ | 248 | |

| S&P 500 Index | $ | 100 | | $ | 114 | | $ | 115 | | $ | 129 | | $ | 157 | | $ | 150 | |

| S&P 500 Information Technology Index | $ | 100 | | $ | 120 | | $ | 127 | | $ | 145 | | $ | 201 | | $ | 201 | |

Price Range of Common Stock

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Price Range | | | | | | |

| | | High | | | | Low | | |

| Year ended December 31, 2017: | | | | | | | | |

| Fourth Quarter | | $ | 118.28 | | | $ | 106.17 | |

| Third Quarter | | $ | 106.81 | | | $ | 92.91 | |

| Second Quarter | | $ | 94.93 | | | $ | 87.01 | |

| First Quarter | | $ | 88.08 | | | $ | 76.45 | |

| Year ended December 31, 2016: | | | | | | | | |

| Fourth Quarter | | $ | 86.98 | | | $ | 74.46 | |

| Third Quarter | | $ | 87.19 | | | $ | 74.01 | |

| Second Quarter | | $ | 91.99 | | | $ | 80.47 | |

| First Quarter | | $ | 90.61 | | | $ | 70.26 | |

On February 9, 2018, the reported last sale price of our common stock was $109.09 per share as reported by the NASDAQ Global Select Market.

We have not declared or paid any cash dividends on our common stock or any other securities in the last six years.

We continually evaluate the overall cash and investing needs of the business and consider the best uses for our cash, including investments in the strengthening of our infrastructure and growth opportunities for our business, as well as potential share repurchases.

For information regarding securities authorized for issuance under our equity compensation plans, see Note 8, “Employee Benefits and Stock-based Compensation,” of our Notes to Consolidated Financial Statements in Item 15 of this Form 10-K.

| October 1 – 31, 2017 | 468 | | | | $108.28 | | | 468 | | | $ | 571.8 | million |

| November 1 – 30, 2017 | 433 | | | | $111.64 | | | 433 | | | $ | 523.5 | million |

| December 1 – 31, 2017 | 403 | | | | $114.32 | | | 403 | | | $ | 477.4 | million |

| | 1,304 | | | | | | | 1,304 | | | | | |

| | 12/31/12 | | | 12/31/13 | | | 12/31/14 | | | 12/31/15 | | | 12/31/16 | | | 12/31/17 | | |

| VeriSign, Inc | $ | 100 | | $ | 154 | | $ | 147 | | $ | 225 | | $ | 196 | | $ | 295 | |

| S&P 500 Index | $ | 100 | | $ | 132 | | $ | 150 | | $ | 153 | | $ | 171 | | $ | 208 | |

| S&P 500 Information Technology Index | $ | 100 | | $ | 128 | | $ | 154 | | $ | 163 | | $ | 186 | | $ | 258 | |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013 (1)] [added: 2014] | | |

| Revenues | $ | [removed: 1,165] [added: 1,215] | | | $ | [removed: 1,142] [added: 1,165] | | | $ | [removed: 1,059] [added: 1,142] | | | $ | [removed: 1,010] [added: 1,059] | | | $ | [removed: 965] [added: 1,010] | |

| Operating income | $ | [removed: 708] [added: 767] | | | $ | [removed: 687] [added: 708] | | | $ | [removed: 606] [added: 687] | | | $ | [removed: 564] [added: 606] | | | $ | [removed: 528] [added: 564] | |

| [removed: Income from continuing operations] [added: Net income (1)] | $ | [removed: 457] [added: 582] | | | $ | [removed: 441] [added: 457] | | | $ | [removed: 375] [added: 441] | | | $ | [removed: 355] [added: 375] | | | $ | [removed: 544] [added: 355] | |

| Basic | $ | [removed: 4.56] [added: 5.13] | | | $ | [removed: 4.12] [added: 4.56] | | | $ | [removed: 3.29] [added: 4.12] | | | $ | [removed: 2.80] [added: 3.29] | | | $ | [removed: 3.77] [added: 2.80] | |

| Diluted | $ | [removed: 3.68] [added: 4.75] | | | $ | [removed: 3.42] [added: 3.68] | | | $ | [removed: 2.82] [added: 3.42] | | | $ | [removed: 2.52] [added: 2.82] | | | $ | [removed: 3.49] [added: 2.52] | |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Cash, cash equivalents and marketable securities (1) [added: (2)] | $ | [removed: 2,415] [added: 1,270] | | | $ | [removed: 1,798] [added: 2,415] | | | $ | [removed: 1,915] [added: 1,798] | | | $ | [removed: 1,425] [added: 1,915] | | | $ | [removed: 1,723] [added: 1,425] | |

| Total assets (1) [added: (2)] | $ | [removed: 2,941] [added: 1,915] | | | $ | [removed: 2,335] [added: 2,941] | | | $ | [removed: 2,358] [added: 2,335] | | | $ | [removed: 1,901] [added: 2,358] | | | $ | [removed: 2,249] [added: 1,901] | |

| Deferred revenues | $ | [removed: 999] [added: 1,018] | | | $ | [removed: 976] [added: 999] | | | $ | [removed: 961] [added: 976] | | | $ | [removed: 890] [added: 961] | | | $ | [removed: 856] [added: 890] | |

| Subordinated [removed: Convertible Debentures,] [added: convertible debentures,] including contingent interest derivative [added: (2)] | $ | [removed: 628] [added: —] | | | $ | [removed: 630] [added: 628] | | | $ | [removed: 634] [added: 630] | | | $ | [removed: 621] [added: 634] | | | $ | [removed: 613] [added: 621] | |

| Long-term debt (1) | $ | [removed: 1,783] [added: 1,785] | | | $ | [removed: 1,237] [added: 1,783] | | | $ | [removed: 1,235] [added: 1,237] | | | $ | [removed: 740] [added: 1,235] | | | $ | [removed: 739] [added: 740] | |

| Earnings per share: | | | | | | | | | | | | | | | | | | | |

| (1) | Net income for 2018 includes a $52.0 million after-tax gain recognized in 2018 related to the sale of customer contracts of our Security Services business. |

| | |

| --- | --- |

| (2) | All of the outstanding subordinated convertible debentures were called for redemption in 2018. Substantially all of the holders elected to convert their debentures and upon conversion we settled the $1.25 billion principal value in cash, and issued 26.1 million shares of common stock for the excess of the conversion value over the principal amount. The repayment of the principal amount of the subordinated convertible debentures resulted in a decrease in cash, cash equivalents and marketable securities as well as total assets during the same period. |

| Income from continuing operations per share: | | | | | | | | | | | | | | | | | | | |

| (1) | Income from continuing operations for 2013 includes a $375.3 million income tax benefit related to a worthless stock deduction, net of valuation allowances, and accrual for uncertain tax positions, partially offset by $167.1 million of income tax expense related to the repatriation of cash held by foreign subsidiaries. |

The following tables set forth unaudited supplementary quarterly financial data for the two year period ended December 31, [removed: 2017.][added: 2018.]

| | March 31 | | | | June 30 | | | | September 30 | | | | December 31 [added: (2)] | | | | December 31, | | |

| | 2018 | | | | | | | | | | | | | | | | | | |

| Revenues | $ | 299,288 | | | $ | 302,452 | | | $ | 305,777 | | | $ | 307,452 | | | $ | 1,214,969 | |

| Gross Profit | $ | 251,136 | | | $ | 255,087 | | | $ | 257,528 | | | $ | 259,084 | | | $ | 1,022,835 | |

| Operating Income | $ | 185,419 | | | $ | 193,010 | | | $ | 194,997 | | | $ | 193,966 | | | $ | 767,392 | |

| Net income | $ | 134,263 | | | $ | 128,351 | | | $ | 137,680 | | | $ | 182,195 | | | $ | 582,489 | |

| Basic (1) | $ | 1.38 | | | $ | 1.13 | | | $ | 1.13 | | | $ | 1.51 | | | $ | 5.13 | |

| Diluted (1) | $ | 1.09 | | | $ | 1.04 | | | $ | 1.13 | | | $ | 1.50 | | | $ | 4.75 | |

| (2) | Results for the quarter ended December 31, 2018 include a $52.0 million after-tax gain recognized on the sale of the customer contracts of our Security Services business. |

| | |

| --- | --- |

| | 2016 | | | | | | | | | | | | | | | | | | |

| Revenues | $ | 281,876 | | | $ | 286,466 | | | $ | 287,554 | | | $ | 286,271 | | | $ | 1,142,167 | |

| Gross Profit | $ | 231,294 | | | $ | 237,713 | | | $ | 237,747 | | | $ | 237,171 | | | $ | 943,925 | |

| Operating Income | $ | 166,767 | | | $ | 176,267 | | | $ | 174,776 | | | $ | 168,762 | | | $ | 686,572 | |

| Net income | $ | 107,456 | | | $ | 113,210 | | | $ | 114,427 | | | $ | 105,552 | | | $ | 440,645 | |

| Basic | $ | 0.98 | | | $ | 1.05 | | | $ | 1.08 | | | $ | 1.01 | | | $ | 4.12 | |

| Diluted (1) | $ | 0.82 | | | $ | 0.87 | | | $ | 0.90 | | | $ | 0.84 | | | $ | 3.42 | |

Based on our management’s evaluation, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), as of December 31, [removed: 2017,] [added: 2018,] 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 Securities Exchange Act of 1934, as amended, (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.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, [removed: 2017] [added: 2018] using the criteria established in Internal Control-Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

KPMG LLP, an independent registered public accounting firm, has issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

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 December 31, [removed: 2017] [added: 2018] that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

None.

On February 14, 2018, our Board of Directors amended our Bylaws to decrease the aggregate ownership percentage of stockholders needed to call a special meeting from 35% to 25% as described in Article I, Section 2 of the Bylaw.

The amended Bylaws, which were effective upon approval by the Board of Directors, contain certain notice and other requirements relevant to the ability of stockholders to call a special meeting.

This description of the amendment to the Bylaws is qualified in its entirety by reference to the text of the Bylaws, filed as Exhibit 3.02 to this Form 10-K.

The information required by this item relating to our directors and nominees, regarding compliance with Section 16(a) of the Exchange Act, and regarding our Audit Committee, Corporate Governance and Nominating Committee and Compensation Committee will be included under the captions “Proposal No. 1: Election of Directors,” “Security Ownership of Certain Beneficial Owners and Management-Section 16(a) Beneficial Ownership Reporting Compliance,” and “Corporate Governance” in our Proxy Statement related to the [removed: 2018] [added: 2019] Annual Meeting of Stockholders and is incorporated herein by reference [removed: (“2018] [added: (“2019] Proxy Statement”).

Information required by this item is incorporated herein by reference to our [removed: 2018] [added: 2019] Proxy Statement from the discussions under the captions “Compensation of Directors,” “Non-Employee Director Retainer Fees and Equity Compensation Information” and “Non-Employee Director Compensation Table for Fiscal [removed: 2017,”] [added: 2018,”] and “Executive Compensation.”

Information required by this item is incorporated herein by reference from the discussions under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our [removed: 2018] [added: 2019] Proxy Statement.

Information required by this item is incorporated herein by reference to our [removed: 2018] [added: 2019] Proxy Statement from the discussions under the captions “Policies and Procedures with Respect to Transactions with Related Persons,” “Certain Relationships and Related Transactions” and “Independence of Directors.”

Information required by this item is incorporated herein by reference to our [removed: 2018] [added: 2019] Proxy Statement from the discussions under the captions “Principal Accountant Fees and Services” and “Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors.”

| • | Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] |

| • | Consolidated Statements of Comprehensive Income for the Years Ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] |

| • | Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] |

| • | Consolidated Statements of Cash Flows for the Years Ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015] [added: 2016] |

| [removed: [3.02](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex302.htm)] [added: [3.02](http://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex302.htm)] | | [Bylaws of VeriSign, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex302.htm)] [added: Inc.](http://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex302.htm)] | | [added: 10-K] | | [added: 2/16/18] | | [added: 3.02] | | | [removed: X] |

| [removed: [4.01](http://www.sec.gov/Archives/edgar/data/1014473/000119312507195996/dex41.htm)] [added: [4.01](http://www.sec.gov/Archives/edgar/data/1014473/000119312513158777/d522120dex41.htm)] | | [removed: [Indenture] [added: [Indenture,] dated as of [removed: August 20, 2007] [added: April 16, 2013,] between [added: VeriSign, Inc., each of] the [removed: Registrant] [added: subsidiary guarantors party thereto] and U.S. Bank National [removed: Association.](http://www.sec.gov/Archives/edgar/data/1014473/000119312507195996/dex41.htm)] [added: Association, as trustee.](http://www.sec.gov/Archives/edgar/data/1014473/000119312513158777/d522120dex41.htm)] | | [removed: 8-K/A] [added: 8-K] | | [removed: 9/6/07] [added: 4/17/13] | | 4.1 | | | |

| [removed: [4.02](http://www.sec.gov/Archives/edgar/data/1014473/000119312513158777/d522120dex41.htm)] [added: [4.02](http://www.sec.gov/Archives/edgar/data/1014473/000101447315000035/ex41.htm)] | | [removed: [Indenture,] [added: [Indenture] dated as of [removed: April 16, 2013,] [added: March 27, 2015] between VeriSign, [removed: Inc., each of the subsidiary guarantors party thereto] [added: Inc.] and U.S. Bank National Association, as [removed: trustee.](http://www.sec.gov/Archives/edgar/data/1014473/000119312513158777/d522120dex41.htm)] [added: trustee.](http://www.sec.gov/Archives/edgar/data/1014473/000101447315000035/ex41.htm)] | | 8-K | | [removed: 4/17/13] [added: 3/30/15] | | 4.1 | | | |

| [removed: [4.03](http://www.sec.gov/Archives/edgar/data/1014473/000101447315000035/ex41.htm)] [added: [4.03](http://www.sec.gov/Archives/edgar/data/1014473/000101447317000021/form8-k7517xex41.htm)] | | [removed: [Indenture] [added: [Indenture,] dated as of [removed: March 27, 2015] [added: July 5, 2017,] between VeriSign, Inc. and U.S. Bank National Association, as [removed: trustee.](http://www.sec.gov/Archives/edgar/data/1014473/000101447315000035/ex41.htm)] [added: trustee.](http://www.sec.gov/Archives/edgar/data/1014473/000101447317000021/form8-k7517xex41.htm)] | | 8-K | | [removed: 3/30/15] [added: 7/5/17] | | 4.1 | | | |

| [removed: [21.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex2101.htm)] [added: [21.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex2101.htm)] | | [Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex2101.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex2101.htm)] | | | | | | | | | X |

| [removed: [23.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex2301.htm)] [added: [23.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex2301.htm)] | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex2301.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex2301.htm)] | | | | | | | | | X |

| [removed: [24.01](#s4469F31B8AD3E7EE828CC6828285C3DF)] [added: [24.01](#sE3A0A0764A983B193819CAA8218E833C)] | | [Powers of Attorney (Included as part of the signature pages [removed: hereto).](#s4469F31B8AD3E7EE828CC6828285C3DF)] [added: hereto).](#sE3A0A0764A983B193819CAA8218E833C)] | | | | | | | | | X |

| [removed: [31.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3101.htm)] [added: [31.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3101.htm)] | | [Certification of Principal Executive Officer pursuant to Exchange Act Rule [removed: 13a-14(a).](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3101.htm)] [added: 13a-14(a).](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3101.htm)] | | | | | | | | | X |

| [removed: [31.02](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3102.htm)] [added: [31.02](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3102.htm)] | | [Certification of Principal Financial Officer pursuant to Exchange Act Rule [removed: 13a-14(a).](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3102.htm)] [added: 13a-14(a).](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3102.htm)] | | | | | | | | | X |

| [removed: [32.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3201.htm)] [added: [32.01](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3201.htm)] | | [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. [removed: 1350).](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3201.htm)] [added: 1350).](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3201.htm)] * | | | | | | | | | X |

| [removed: [32.02](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3202.htm)] [added: [32.02](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3202.htm)] | | [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. [removed: 1350).](https://www.sec.gov/Archives/edgar/data/1014473/000101447318000018/vrsn-20171231x10kxex3202.htm)] [added: 1350).](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex3202.htm)] * | | | | | | | | | X |

| [10.19](http://www.sec.gov/Archives/edgar/data/1014473/000101447318000042/exhibit101-amendment35.htm) | | [Amendment Thirty-Five (35) to the Cooperative Agreement between VeriSign, Inc. and the U.S. Department of Commerce, entered into on October 26, 2018](http://www.sec.gov/Archives/edgar/data/1014473/000101447318000042/exhibit101-amendment35.htm) | | 8-K | | 11/1/18 | | 10.1 | | | |

| [10.20](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex1020.htm) | | [Asset Purchase Agreement between Verisign, Inc., as the seller and Neustar, Inc., as the buyer, dated as of October 24, 2018](https://www.sec.gov/Archives/edgar/data/1014473/000101447319000005/vrsn-20181231x10kxex1020.htm) | | | | | | | | | X |

| 101 | | Interactive Data File | | | | | | | | | X |

| | | | | | | | | | | | |

| [4.04](http://www.sec.gov/Archives/edgar/data/1014473/000101447317000021/form8-k7517xex41.htm) | | [Indenture, dated as of July 5, 2017, between VeriSign, Inc. and U.S. Bank National Association, as trustee.](http://www.sec.gov/Archives/edgar/data/1014473/000101447317000021/form8-k7517xex41.htm) | | 8-K | | 7/5/17 | | 4.1 | | | |

| 101.INS | | XBRL Instance Document. | | | | | | | | | X |

| 101.SCH | | XBRL Taxonomy Extension Schema. | | | | | | | | | X |

| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase. | | | | | | | | | X |

| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase. | | | | | | | | | X |

| 101.LAB | | XBRL Taxonomy Extension Label Linkbase. | | | | | | | | | X |

| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. | | | | | | | | | X |

| [Reports of Independent Registered Public Accounting [removed: Firm](#sB1118351511AFC902508C68282CF551C)] [added: Firm](#s58E2CE4B7624460BE2F2CAA81CDC2A64)] | [removed: [46](#sB1118351511AFC902508C68282CF551C)] [added: [44](#s58E2CE4B7624460BE2F2CAA81CDC2A64)] |

| [Consolidated Balance [removed: Sheets](#sF6B9AEB0F168E61423C5C68233ECF9DE)] [added: Sheets](#s1890056BE3C5A4BAD4EACAA7EA406D08)] [As of December 31, [removed: 2017] [added: 2018] and December 31, [removed: 2016](#sF6B9AEB0F168E61423C5C68233ECF9DE)] [added: 2017](#s1890056BE3C5A4BAD4EACAA7EA406D08)] | [removed: [48](#sF6B9AEB0F168E61423C5C68233ECF9DE)] [added: [46](#s1890056BE3C5A4BAD4EACAA7EA406D08)] |

| [Consolidated Statements of Comprehensive [removed: Income](#sD1CB6F7D5D153553C7FDC68234394494)] [added: Income](#sCE864C549E4606D12752CAA7EB38B3D7)] [For the Years Ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#sD1CB6F7D5D153553C7FDC68234394494)] [added: 2016](#sCE864C549E4606D12752CAA7EB38B3D7)] | [removed: [49](#sD1CB6F7D5D153553C7FDC68234394494)] [added: [47](#sCE864C549E4606D12752CAA7EB38B3D7)] |

| [Consolidated Statements of Stockholders’ [removed: Deficit](#sB60E5BD24981DC452590C682345B3DE1)] [added: Deficit](#sD815F1F2F51C648B57E1CAA7EC248869)] [For the Years Ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#sB60E5BD24981DC452590C682345B3DE1)] [added: 2016](#sD815F1F2F51C648B57E1CAA7EC248869)] | [removed: [50](#sB60E5BD24981DC452590C682345B3DE1)] [added: [48](#sD815F1F2F51C648B57E1CAA7EC248869)] |

| [Consolidated Statements of Cash [removed: Flows](#s80D2A66B838E9BB34D36C682358823C8)] [added: Flows](#s957EA707C4AEDC04BD80CAA7EAAD1C2D)] [For the Years Ended December 31, [added: 2018,] 2017, [removed: 2016,] and [removed: 2015](#s80D2A66B838E9BB34D36C682358823C8)] [added: 2016](#s957EA707C4AEDC04BD80CAA7EAAD1C2D)] | [removed: [51](#s80D2A66B838E9BB34D36C682358823C8)] [added: [49](#s957EA707C4AEDC04BD80CAA7EAAD1C2D)] |

| [Notes to Consolidated Financial [removed: Statements](#sF9CA3DE5188C1467948EC68284320CB7)] [added: Statements](#sAA11E4BFC7BF158FA709CAA81E3038BD)] | [removed: [52](#sF9CA3DE5188C1467948EC68284320CB7)] [added: [50](#sAA11E4BFC7BF158FA709CAA81E3038BD)] |

We have audited the accompanying consolidated balance sheets of VeriSign, Inc. and subsidiaries (the [removed: “Company”)] [added: Company)] as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for each of the years in the [removed: three‑year] [added: three-year] period ended December 31, [removed: 2017,] [added: 2018,] and the related notes (collectively, the [removed: “consolidated] [added: consolidated] financial [removed: statements”).][added: statements).]

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the years in the three‑year period ended December 31, [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) [removed: (“PCAOB”),] [added: (PCAOB),] the Company’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February [removed: 16, 2018] [added: 15, 2019] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We have audited VeriSign, [removed: Inc.’s] [added: Inc.] and subsidiaries’ (the [removed: “Company”)] [added: Company)] internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) [removed: (“PCAOB”),] [added: (PCAOB),] the consolidated balance sheets of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of comprehensive income, stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 31, [removed: 2017,] [added: 2018,] and the related notes (collectively, the consolidated financial statements), and our report dated February [removed: 16, 2018] [added: 15, 2019] expressed an unqualified opinion on those consolidated financial statements.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial [removed: Reporting.][added: Reporting (Item 9A).]

[removed: | | December] [added: DECEMBER] 31, [added: 2018,] 2017 [removed: | | | | December 31,] [added: AND] 2016 [removed: | | |]

| Cash and cash equivalents | $ | [removed: 465,851] [added: 357,415] | | | $ | [removed: 231,945] [added: 465,851] | |

| Marketable securities | [removed: 1,948,900] [added: 912,254] | | | | [removed: 1,565,962] [added: 1,948,900] | | |

| Other current assets | [removed: 31,402] [added: 47,365] | | | | [removed: 44,435] [added: 31,402] | | |

| Total current assets | [removed: 2,446,153] [added: 1,317,034] | | | | [removed: 1,842,342] [added: 2,446,153] | | |

| Property and equipment, net | [removed: 263,513] [added: 253,905] | | | | [removed: 266,125] [added: 263,513] | | |

| Deferred tax assets | [removed: 15,392] [added: 104,992] | | | | [removed: 9,385] [added: 15,392] | | |

| Other long-term assets | [removed: 18,603] [added: 41,046] | | | | [removed: 19,193] [added: 18,603] | | |

| Total long-term assets | [removed: 495,035] [added: 597,470] | | | | [removed: 492,230] [added: 495,035] | | |

| Total assets | $ | [removed: 2,941,188] [added: 1,914,504] | | | $ | [removed: 2,334,572] [added: 2,941,188] | |

| Accounts payable and accrued liabilities | $ | [removed: 219,603] [added: 215,208] | | | $ | [removed: 203,920] [added: 219,603] | |

| Deferred revenues | [removed: 713,309] [added: 732,382] | | | | [removed: 688,265] [added: 713,309] | | |

| Subordinated convertible debentures, including contingent interest derivative | [removed: 627,616] [added: —] | | | | [removed: 629,764] [added: 627,616] | | |

| Total current liabilities | [removed: 1,560,528] [added: 947,590] | | | | [removed: 1,521,949] [added: 1,560,528] | | |

| Long-term deferred revenues | [removed: 286,097] [added: 285,720] | | | | [removed: 287,424] [added: 286,097] | | |

| Senior notes | [removed: 1,782,529] [added: 1,785,047] | | | | [removed: 1,237,189] [added: 1,782,529] | | |

| Deferred tax liabilities | [removed: 444,108] [added: 134] | | | | [removed: 371,433] [added: 444,108] | | |

| Other long-term tax liabilities | [removed: 128,197] [added: 281,487] | | | | [removed: 117,172] [added: 128,197] | | |

| Total long-term liabilities | [removed: 2,640,931] [added: 2,352,388] | | | | [removed: 2,013,218] [added: 2,640,931] | | |

| Total liabilities | [removed: 4,201,459] [added: 3,299,978] | | | | [removed: 3,535,167] [added: 4,201,459] | | |

| Common stock—par value $.001 per share; Authorized shares: 1,000,000; Issued shares: [removed: 325,218] [added: 352,325] at December 31, [removed: 2017] [added: 2018] and [removed: 324,118] [added: 325,218] at December 31, [removed: 2016;] [added: 2017;] Outstanding shares: [removed: 97,591] [added: 120,037] at December 31, [removed: 2017] [added: 2018] and [removed: 103,091] [added: 97,591] at December 31, [removed: 2016] [added: 2017] | [removed: 325] [added: 352] | | | | [removed: 324] [added: 325] | | |

| Additional paid-in capital | [removed: 16,437,135] [added: 15,706,774] | | | | [removed: 16,987,488] [added: 16,437,135] | | |

| Accumulated deficit | [removed: (17,694,790] [added: (17,089,789] | | ) | | [removed: (18,184,954] [added: (17,694,790] | | ) |

| Accumulated other comprehensive loss | [removed: (2,941] [added: (2,811] | | ) | | [removed: (3,453] [added: (2,941] | | ) |

| Total stockholders’ deficit | [removed: (1,260,271] [added: (1,385,474] | | ) | | [removed: (1,200,595] [added: (1,260,271] | | ) |

| Total liabilities and stockholders’ deficit | $ | [removed: 2,941,188] [added: 1,914,504] | | | $ | [removed: 2,334,572] [added: 2,941,188] | |

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, and several related amendments, issued by the Financial Accounting Standards Board (FASB).

This change was adopted using the modified retrospective method.

February 15, 2019

February 15, 2019

| | December 31, 2018 | | | | December 31, 2017 | | |

| Cumulative adjustment upon adoption of ASU 2014-09 | | — | | | — | | | | — | | | | 22,512 | | | | — | | | | 22,512 | | |

| Conversion of Subordinated Convertible Debentures | | 26,080 | | | 26 | | | | (159,618 | | ) | | — | | | | — | | | | (159,592 | | ) |

| Net income | | — | | | — | | | | — | | | | 582,489 | | | | — | | | | 582,489 | | |

| Other comprehensive income | | — | | | — | | | | — | | | | — | | | | 130 | | | | 130 | | |

| Repurchase of common stock | | (4,661 | ) | | — | | | | (638,152 | | ) | | — | | | | — | | | | (638,152 | | ) |

| Balance at December 31, 2018 | | 120,037 | | | $ | 352 | | | $ | 15,706,774 | | | $ | (17,089,789 | ) | | $ | (2,811 | ) | | $ | (1,385,474 | ) |

| Loss on debt extinguishment | 6,554 | | | | — | | | | — | | |

| Other, net | 955 | | | | 826 | | | | (662 | | ) |

| Proceeds from sale of business | 52,240 | | | | 11,748 | | | | — | | |

| Cash, cash equivalents, and restricted cash at beginning of period | 475,139 | | | | 241,581 | | | | 240,628 | | |

| Cash, cash equivalents, and restricted cash at end of period | $ | 366,753 | | | $ | 475,139 | | | $ | 241,581 | |

As discussed further in Note 8 “Sale of Security Services Business”, the Company completed the sale of the rights, economic benefits, and obligations, in all customer contracts related to its Security Services business to NeuStar, Inc. (“Neustar”) on December 5, 2018.

ASU 2014-09 replaces the previous numerous and disparate revenue recognition guidance, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers.

The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.

The adoption of ASU 2014-09 did not have any impact on our revenue recognition, but did result in a change in the accounting for costs incurred to obtain a contract.

Pursuant to the new guidance, the Company recognizes the fees that it pays to ICANN for each annual increment of .com domain name registrations and renewals, as an asset which is amortized on a straight-line basis over the related domain name term.

This change was adopted using the modified retrospective method.

As a result, the Company recorded current and long-term assets of $19.7 million and $7.6 million, respectively, a deferred tax liability of $4.8 million and a decrease to the opening balance of accumulated deficit of $22.5 million.

ASU 2016-18 requires restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts set forth on the statement of cash flows instead of presenting changes in restricted cash in cash flows from investing activities.

As a result of the adoption, the changes in restricted cash are included with cash and cash equivalents on the statement of cash flows for both periods presented.

The change in the amounts presented for the prior period was not significant.

In July 2018, the FASB issued ASU 2018-11, Targeted Improvements to Topic 842 Leases, which allows for an alternative transition approach, which will not require adjustments to comparative prior period amounts.

This ASU became effective for the Company on January 1, 2019.

Therefore, the goodwill is not subject to impairment.

The Company settled all of the outstanding Subordinated Convertible Debentures during 2018.

For further details, refer to Note 4 “Debt and Interest Expense”.

DECEMBER 31, 2018, 2017 AND 2016

Revenues are recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

Fees for domain name registrations and renewals are generally due at the time of registration or renewal.

Domain name registration terms range from one year up to ten years.

Most customers either maintain a deposit with Verisign or provide an irrevocable letter of credit in excess of the amounts owed.

New customers are subjected to a credit review process that evaluates the customer’s financial condition and, ultimately, their ability to pay.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.

| | |

| --- | --- |

February 16, 2018

VERISIGN, INC.

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Realized foreign currency translation adjustments, included in net income | 530 | | | | 85 | | | | (291 | | ) |

| Unrealized gain (loss) on investments | 385 | | | | 533 | | | | (519 | | ) |

| Realized gain on investments, included in net income | (403 | | ) | | (78 | | ) | | (185 | | ) |

| Balance at December 31, 2014 | | 118,452 | | | $ | 322 | | | $ | 18,120,045 | | | $ | (19,000,835 | ) | | $ | (2,998 | ) | | $ | (883,466 | ) |

| Net income | | — | | | — | | | | — | | | | 375,236 | | | | — | | | | 375,236 | | |

| Other comprehensive loss | | — | | | — | | | | — | | | | — | | | | (995 | | ) | | (995 | | ) |

| Repurchase of common stock | | (9,671 | ) | | — | | | | (643,169 | | ) | | — | | | | — | | | | (643,169 | | ) |

| Unrealized loss (gain) on contingent interest derivative on Subordinated Convertible Debentures | 893 | | | | (2,402 | | ) | | 14,130 | | |

| Other, net | (67 | | ) | | 1,740 | | | | 62 | | |

| Cash and cash equivalents at beginning of period | 231,945 | | | | 228,659 | | | | 191,608 | | |

| Cash and cash equivalents at end of period | $ | 465,851 | | | $ | 231,945 | | | $ | 228,659 | |