Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statement Description			Page
Reports of Independent Registered Public Accounting Firm			33
Consolidated Balance Sheets			36
Consolidated Statements of Comprehensive Income			37
Consolidated Statements of Stockholders’ Deficit			38
Consolidated Statements of Cash Flows			39
Notes to Consolidated Financial Statements			40

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

VeriSign, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of VeriSign, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, 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, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, 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) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, 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 18, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of accounting for income taxes

As discussed in Notes 1 and 10 to the consolidated financial statements, the Company recognized $230.7 million of deferred tax assets, net as of December 31, 2021. The Company’s income tax benefit was $2.6 million for the year ended December 31, 2021. The Company conducts business globally and consequently is subject to U.S. federal, state, as well as foreign income taxes in the jurisdictions it operates. The Company exercises judgment in the application of complex tax regulations in multiple jurisdictions.

We identified the evaluation of the accounting for income taxes as a critical audit matter. Evaluating the Company’s application of complex tax regulations in the domestic and foreign jurisdictions it operates and the impact of those regulations on U.S. federal, state, and foreign income tax provisions required complex auditor judgment, and the use of tax professionals with specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s income tax process, including controls related to the application of complex tax regulations in the Company’s various tax jurisdictions and the impact on

the Company’s U.S. federal, state, and foreign income tax provision. We involved domestic and international tax professionals with specialized skills and knowledge in various tax jurisdictions who assisted in evaluating the Company’s analyses over the application of complex tax regulations in those jurisdictions.

/s/ KPMG LLP

We have served as the Company’s auditor since 1995.

McLean, Virginia

February 18, 2022

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

VeriSign, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited VeriSign, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, 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, 2021, 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) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, 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, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 18, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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 Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

McLean, Virginia

February 18, 2022

VERISIGN, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

			December 31, 2021						December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents			$	223,487					$	401,194
Marketable securities			982,318						765,713
Other current assets			62,930						51,033
Total current assets			1,268,735						1,217,940
Property and equipment, net			251,223						245,571
Goodwill			52,527						52,527
Deferred tax assets			230,719						67,914
Deposits to acquire intangible assets			145,000						145,000
Other long-term assets			35,560						37,958
Total long-term assets			715,029						548,970
Total assets			$	1,983,764					$	1,766,910
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities			$	226,580					$	208,642
Deferred revenues			847,411						780,051
Total current liabilities			1,073,991						988,693
Long-term deferred revenues			305,950						282,838
Senior notes			1,785,709						1,790,083
Long-term tax and other liabilities			78,633						95,494
Total long-term liabilities			2,170,292						2,168,415
Total liabilities			3,244,283						3,157,108
Commitments and contingencies
Stockholders’ deficit:
Preferred stock—par value $0.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none			—						—
Common stock and additional paid-in capital—par value $0.001 per share; Authorized shares: 1,000,000; Issued shares: 354,199 at December 31, 2021 and 353,789 at December 31, 2020; Outstanding shares: 110,519 at December 31, 2021 and 113,470 at December 31, 2020			13,620,038						14,275,160
Accumulated deficit			(14,877,772)						(15,662,602)
Accumulated other comprehensive loss			(2,785)						(2,756)
Total stockholders’ deficit			(1,260,519)						(1,390,198)
Total liabilities and stockholders’ deficit			$	1,983,764					$	1,766,910

See accompanying Notes to Consolidated Financial Statements.

VERISIGN, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

			Year Ended December 31,
			2021						2020						2019
Revenues			$	1,327,576					$	1,265,052					$	1,231,661
Costs and expenses:
Cost of revenues			191,933						180,177						180,467
Sales and marketing			39,877						36,790						46,637
Research and development			80,529						74,671						60,805
General and administrative			148,434						149,213						137,625
Total costs and expenses			460,773						440,851						425,534
Operating income			866,803						824,201						806,127
Interest expense			(83,255)						(90,144)						(90,611)
Non-operating (loss) income, net			(1,329)						16,187						43,260
Income before income taxes			782,219						750,244						758,776
Income tax benefit (expense)			2,611						64,644						(146,477)
Net income			784,830						814,888						612,299
Other comprehensive (loss) income			(29)						(135)						190
Comprehensive income			$	784,801					$	814,753					$	612,489
Earnings per share:
Basic			$	7.01					$	7.08					$	5.17
Diluted			$	7.00					$	7.07					$	5.15
Shares used to compute earnings per share
Basic			112,015						115,058						118,513
Diluted			112,166						115,298						118,968

See accompanying Notes to Consolidated Financial Statements.

VERISIGN, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

			Year Ended December 31,
			2021						2020						2019
Total stockholders’ deficit, beginning of period			$	(1,390,198)					$	(1,490,100)					$	(1,385,474)
Common stock and additional paid-in capital
Beginning balance			14,275,160						14,990,011						15,707,126
Repurchase of common stock			(722,587)						(777,454)						(782,583)
Stock-based compensation			55,061						50,026						52,316
Issuance of common stock under stock plans			12,404						12,577						13,152
Balance, end of period			13,620,038						14,275,160						14,990,011
Accumulated deficit
Beginning balance			(15,662,602)						(16,477,490)						(17,089,789)
Net income			784,830						814,888						612,299
Balance, end of period			(14,877,772)						(15,662,602)						(16,477,490)
Accumulated other comprehensive loss
Beginning balance			(2,756)						(2,621)						(2,811)
Other comprehensive (loss) income			(29)						(135)						190
Balance, end of period			(2,785)						(2,756)						(2,621)
Total stockholders’ deficit, end of period			$	(1,260,519)					$	(1,390,198)					$	(1,490,100)

See accompanying Notes to Consolidated Financial Statements

VERISIGN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

			Year Ended December 31,
			2021						2020						2019
Cash flows from operating activities:
Net income			$	784,830					$	814,888					$	612,299
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment			47,940						46,352						46,330
Stock-based compensation expense			53,439						48,243						50,626
Other, net			6,027						(9,108)						(11,926)
Changes in operating assets and liabilities
Other assets			(14,058)						(9,214)						(3,279)
Accounts payable and accrued liabilities			15,495						2,227						(24)
Deferred revenues			90,471						29,009						16,191
Net deferred income taxes and other long-term tax liabilities			(176,992)						(192,214)						43,675
Net cash provided by operating activities			807,152						730,183						753,892
Cash flows from investing activities:
Proceeds from maturities and sales of marketable securities			2,654,457						2,305,732						2,247,904
Purchases of marketable securities			(2,870,670)						(2,355,405)						(2,030,521)
Purchases of property and equipment			(53,033)						(43,395)						(40,316)
Proceeds (payments) from sale of business			—						20,810						(9,872)
Net cash (used in) provided by investing activities			(269,246)						(72,258)						167,195
Cash flows from financing activities:
Repayment of borrowings			(750,000)						—						—
Proceeds from borrowings, net of issuance costs			741,053						—						—
Repurchases of common stock			(722,587)						(777,454)						(782,583)
Proceeds from employee stock purchase plan			12,404						12,577						13,152
Other financing activities			—						—						(872)
Net cash used in financing activities			(719,130)						(764,877)						(770,303)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(561)						(48)						64
Net (decrease) increase in cash, cash equivalents and restricted cash			(181,785)						(107,000)						150,848
Cash, cash equivalents, and restricted cash at beginning of period			410,601						517,601						366,753
Cash, cash equivalents, and restricted cash at end of period			$	228,816					$	410,601					$	517,601
Supplemental cash flow disclosures:
Cash paid for interest			$	85,578					$	87,354					$	87,683
Cash paid for income taxes, net of refunds received			$	178,351					$	132,683					$	89,974

See accompanying Notes to Consolidated Financial Statements.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021, 2020 AND 2019

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

VeriSign, Inc. (“Verisign” or “the Company”) was incorporated in Delaware on April 12, 1995. The Company has one reportable segment. The Company enables the security, stability, and resiliency of key internet infrastructure and services, including providing root zone maintainer services, operating two of the 13 global internet root servers, and providing registration services and authoritative resolution for the .com and .net top-level domains, which support the majority of global e-commerce.

Basis of Presentation

The accompanying consolidated financial statements of Verisign and its subsidiaries have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”). All significant intercompany accounts and transactions have been eliminated.

The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Reclassifications

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

Significant Accounting Policies

Cash and Cash Equivalents

Verisign considers all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents. Cash and cash equivalents include certain money market funds, debt securities and various deposit accounts. Verisign maintains its cash and cash equivalents with financial institutions that have investment grade ratings and, as part of its cash management process, performs periodic evaluations of the relative credit standing of these financial institutions.

Marketable Securities

Marketable securities primarily consist of debt securities issued by the U.S. Treasury. All marketable securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses, net of taxes, are reported as a component of Accumulated other comprehensive loss. The specific identification method is used to determine the cost basis of the marketable securities sold. The Company classifies its marketable securities as current based on their nature and availability for use in current operations.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets of 35 to 47 years for buildings, 10 years for building improvements and three years to five years for computer equipment, software, office equipment, and furniture and fixtures. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or associated lease terms.

Capitalized Software

Software included in property and equipment includes amounts paid for purchased software and development costs for internally developed software. The Company capitalized $12.1 million and $12.8 million of costs related to internally developed software during 2021 and 2020, respectively.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Goodwill and Other Long-lived Assets

Goodwill represents the excess of purchase consideration over fair value of net assets of businesses acquired. The Company has only one reporting unit, which has a negative carrying value. Therefore, the goodwill is not subject to impairment.

Long-lived assets, such as property, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group, may not be recoverable. Such events or circumstances include, but are not limited to, a significant decrease in the fair value of the underlying business. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset, or asset group, to estimated undiscounted future cash flows expected to be generated by the asset, or asset group. An impairment charge is recognized in the amount by which the carrying amount of the asset exceeds its fair value.

As of December 31, 2021, the Company’s assets include a deposit related to the purchase of the contractual rights to the .web gTLD. The amount paid to date has been recorded as a deposit until such time that the contractual rights are transferred to the Company. This asset would be tested for recoverability if the Company were to determine that it is no longer probable that the rights will be transferred. At the time of the transfer of the contractual rights, the Company will record the amount as an indefinite-lived intangible asset subject to review for impairment on an annual basis or more frequently if events or changes in circumstances indicate that an impairment is more likely than not.

Foreign Currency Remeasurement

Verisign conducts business in several different countries and transacts in multiple currencies. The functional currency for all of Verisign’s international subsidiaries is the U.S. dollar. The Company’s subsidiaries’ financial statements are remeasured into U.S. dollars using a combination of current and historical exchange rates and any remeasurement gains and losses are included in Non-operating (loss) income, net. Remeasurement gains and losses were not significant in each of the last three years.

Verisign maintains a foreign currency risk management program designed to mitigate foreign exchange risks associated with the monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. The primary objective of this program is to minimize the gains and losses resulting from fluctuations in exchange rates. The Company does not enter into foreign currency transactions for trading or speculative purposes, nor does it hedge foreign currency exposures in a manner that entirely offsets the effects of changes in exchange rates. The program may entail the use of forward or option contracts, which are usually placed and adjusted monthly. These foreign currency forward contracts are derivatives and are recorded at fair market value. The Company records gains and losses on foreign currency forward contracts in Non-operating (loss) income, net. Gains and losses related to foreign currency forward contracts were not significant in each of the last three years.

As of December 31, 2021, Verisign held foreign currency forward contracts in notional amounts totaling $30.3 million to mitigate the impact of exchange rate fluctuations associated with certain assets and liabilities held in foreign currencies.

Revenue Recognition

Revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues primarily arise from fixed fees charged to registrars for the initial registration or renewal of .com, .net, and other domain names. 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. Verisign also offers promotional incentive-based discount programs to its registrars based upon market conditions and the business environment in which the registrars operate. Amounts payable for these programs are recorded as a reduction of revenue.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Each domain name registration or renewal is considered a separate optional purchase and represents a single performance obligation, which is to allow its registration and maintain that registration (by allowing updates, Domain Name System (“DNS”) resolution and Whois services, which allow users to find information about registered domain names) through the registration term. These services are provided continuously throughout each registration term, and as such, revenues from the initial registration or renewal of domain names are deferred and recognized ratably over the registration term. Fees for

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

renewals and advance extensions to the existing term are deferred until the new incremental period commences. These fees are then recognized ratably over the renewal term.

Costs Incurred to Obtain a Contract

The Company recognizes the fees payable to ICANN for each annual term of domain name registrations and renewals, as an asset which is amortized on a straight-line basis over the related registration term. These assets are included in Other current assets and Other long-term assets.

Advertising Expenses

Advertising costs are expensed as incurred and are included in Sales and marketing expenses. Advertising expenses were $6.0 million, $7.5 million, and $12.8 million in 2021, 2020, and 2019, respectively.

Income Taxes

Verisign uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance to reduce deferred tax assets to an amount whose realization is more likely than not. For every tax-paying component and within each tax jurisdiction, all deferred tax liabilities and assets are offset and presented as a single net noncurrent asset or liability.

The Company recognizes the U.S. income tax effect of future global intangible low-taxed income inclusions in the period in which they arise.

The Company’s income taxes payable is reduced by the tax benefits from restricted stock unit (“RSU”) vestings equal to the fair market value of the stock at the vesting date. If the income tax benefit at the vesting date differs from the income tax benefit recorded based on the grant date fair value of the RSUs, the excess or shortfall of the tax benefit is recognized within income tax expense.

Verisign operates in multiple tax jurisdictions in the United States and internationally. Tax laws and regulations in these jurisdictions are complex, interrelated, and periodically changing. Significant judgment or interpretation of these laws and regulations is often required in determining the Company’s worldwide provision for income taxes, including, for example, the calculations of taxable income in each jurisdiction, deferred taxes, and the availability and amount of deductions and tax credits. The final taxes payable are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from various tax examinations. The Company only recognizes tax positions taken or expected to be taken on its tax returns that are more likely than not to be sustained upon examination, and records a tax benefit amount that is more likely than not to be realized upon ultimate settlement with the taxing authority. The Company adjusts its estimate of unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in an outcome that is materially different from the estimate. See Note 10, “Income Taxes,” for details of the changes to the Company’s unrecognized tax benefits for the periods presented.

Stock-based Compensation

The Company’s stock-based compensation consists of RSUs granted to employees and the employee stock purchase plan (“ESPP”). Stock-based compensation expense is typically recognized ratably over the requisite service period. Forfeitures of stock-based awards are recognized as they occur. As substantially all of the RSUs granted by the Company are routine annual grants, none of the awards are designed to be spring-loaded, and as such, the Company does not adjust the market price of its common stock when estimating the grant-date fair value of these awards. The Company also grants RSUs which include performance conditions, and in some cases market conditions, to certain executives. The expense for these performance-based RSUs is recognized based on the probable outcome of the performance conditions. The expense recognized for awards with market conditions is based on the grant date fair value of the awards including the impact of the market conditions, using a Monte Carlo simulation model. The Company uses the Black-Scholes option pricing model to determine the fair value of its ESPP offerings. The determination of the fair value of stock-based payment awards using the Monte Carlo simulation model or the Black-Scholes option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Earnings per Share

The Company computes basic earnings per share by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share gives effect to dilutive potential common shares, including unvested RSUs and ESPP offerings, using the treasury stock method.

Fair Value of Financial Instruments

The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3: Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Legal Proceedings

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

While certain legal proceedings and related indemnification obligations to which the Company is a party specify the amounts claimed, such claims may not represent reasonably possible losses. Given the inherent uncertainties of the litigation, the ultimate outcome of these matters cannot be predicted at this time, nor can the amount of possible loss or range of loss, if any, be reasonably estimated, except in circumstances where an aggregate litigation accrual has been recorded for probable and reasonably estimable loss contingencies. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition, results of operations, or cash flows.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Note 2. Financial Instruments

Cash, Cash Equivalents, and Marketable Securities

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

			As of December 31,
			2021						2020
			(In thousands)
Cash			$	25,840					$	28,832
Time deposits			3,693						4,176
Money market funds (Level 1)			165,586						129,627
Debt securities issued by the U.S. Treasury (Level 1)			1,016,015						1,013,679
Total			$	1,211,134					$	1,176,314
Cash and cash equivalents			$	223,487					$	401,194
Restricted cash (included in Other long-term assets)			5,329						9,407
Total Cash, cash equivalents, and restricted cash			228,816						410,601
Marketable securities			982,318						765,713
Total			$	1,211,134					$	1,176,314

The gross and net unrealized gains and losses included in the fair value of the debt securities were not significant for the periods presented. All of the debt securities held as of December 31, 2021 have contractual maturities of less than one year.

Fair Value Measurements

The fair value of the Company’s investments in money market funds approximates their face value. Such instruments are classified as Level 1 and are included in Cash and cash equivalents. The fair value of the debt securities consisting of U.S. Treasury bills is based on their quoted market prices and are classified as Level 1.

As of December 31, 2021, the Company’s other financial instruments include cash, accounts receivable, restricted cash, and accounts payable whose carrying values approximated their fair values. The fair values of the Company’s senior notes due 2025 (the “2025 Senior Notes”), the senior notes due 2027 (the “2027 Senior Notes”), and the senior notes due 2031 (the “2031 Senior Notes”) were $552.3 million, $573.9 million, and $755.5 million, respectively, as of December 31, 2021. The fair values of these debt instruments are based on available market information from public data sources and are classified as Level 2.

Note 3. Selected Balance Sheet Items

Other Current Assets

Other current assets consist of the following:

			As of December 31,
			2021						2020
			(In thousands)
Prepaid expenses			$	24,756					$	17,920
Prepaid registry fees			24,240						22,654
Taxes receivable			7,669						3,572
Accounts receivable, net			5,284						4,642
Other			981						2,245
Total other current assets			$	62,930					$	51,033

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Property and Equipment, Net

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

			As of December 31,
			2021						2020
			(In thousands)
Computer equipment and software			$	400,628					$	415,086
Buildings and building improvements			254,549						250,431
Land			31,141						31,141
Office equipment and furniture			10,104						9,179
Capital work in progress			3,088						4,330
Leasehold improvements			1,476						1,458
Total cost			700,986						711,625
Less: accumulated depreciation			(449,763)						(466,054)
Total property and equipment, net			$	251,223					$	245,571

Substantially all of the Company’s property and equipment were held in the U.S. for both periods presented.

Goodwill

The following table presents the detail of goodwill:

			As of December 31,
			2021						2020
			(In thousands)
Goodwill, gross			$	1,537,843					$	1,537,843
Accumulated goodwill impairment			(1,485,316)						(1,485,316)
Total goodwill			$	52,527					$	52,527

There was no impairment of goodwill or other long-lived assets recognized in any of the periods presented.

Deposits to Acquire Intangible Assets

The Company’s Deposit to acquire intangible assets represents the $145.0 million paid for the future assignment to the Company of contractual rights to the .web gTLD, pending resolution of objections by other applicants, and approval from ICANN. Upon assignment of the contractual rights, the Company will record the total investment as an indefinite-lived intangible asset.

Other Long-Term Assets

Other long-term assets consist of the following:

			As of December 31,
			2021						2020
			(In thousands)
Long-term prepaid expenses			$	10,976					$	7,105
Long-term prepaid registry fees			8,693						7,997
Operating lease right-of-use asset			8,418						11,277
Restricted cash			5,329						9,407
Other			2,144						2,172
Total other long-term assets			$	35,560					$	37,958

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

The prepaid registry fees in the tables above relate to the fees the Company pays to ICANN for each annual term of .com domain name registrations and renewals which are deferred and amortized over the domain name registration term. The amount of prepaid registry fees as of December 31, 2021 reflects amortization of $38.3 million during 2021 which was recorded in Cost of Revenues.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

			As of December 31,
			2021						2020
			(In thousands)
Accounts payable and accrued expenses			$	8,997					$	12,340
Customer deposits			77,329						53,631
Accrued employee compensation			58,499						54,596
Taxes payable			26,793						27,194
Interest payable			19,500						24,408
Customer incentives payable			13,297						12,556
Accrued registry fees			12,844						13,090
Other accrued liabilities			9,321						10,827
Total accounts payable and accrued liabilities			$	226,580					$	208,642

Long-term Tax and Other Liabilities

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

			As of December 31,
			2021						2020
			(In thousands)
Long-term tax liabilities			$	76,148					$	90,335
Long-term operating lease liabilities			2,485						5,159
Long-term tax and other liabilities			$	78,633					$	95,494

Long-term tax liabilities include accruals for unrecognized tax benefits and the long-term portion of the U.S. income taxes payable on the Company’s accumulated foreign earnings (“Transition Tax”) resulting from the 2017 Tax Cuts and Jobs Act.

Note 4. Debt

Senior Notes

The following table summarizes information related to our Senior notes:

						Issuance Date			Maturity Date			Interest Rate			Principal
															As of December 31,
															2021						2020
															(in thousands except interest rates)
Senior notes due 2023						April 16, 2013			May 1, 2023			4.625		%	$	—					$	750,000
Senior notes due 2025						March 27, 2015			April 1, 2025			5.250		%	500,000						500,000
Senior notes due 2027						July 5, 2017			July 15, 2027			4.750		%	550,000						550,000
Senior notes due 2031						June 8, 2021			June 15, 2031			2.700		%	750,000						—
Principal amount of senior notes															1,800,000						1,800,000
Less: unamortized issuance costs															(14,291)						(9,917)
Total senior notes															$	1,785,709					$	1,790,083

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

On June 8, 2021, the Company issued $750.0 million of 2.700% senior unsecured notes due 2031. The 2031 Notes were issued at 99.712% of par value. The total discount and issuance costs of $8.9 million are presented on the balance sheet as a reduction of the debt obligation and are being amortized to Interest expense over the 10-year term of the notes. The 2025 and 2027 notes were issued at par and all outstanding senior notes are senior unsecured obligations of the Company. Interest is payable on each of the senior notes semi-annually. Each of the senior notes issuances is redeemable, in whole or in part, at the Company’s option at times and redemption prices specified in the indentures.

On June 23, 2021, the Company used the net proceeds from the 2031 Notes and cash on hand, to redeem all of its $750.0 million aggregate principal amount of outstanding 4.625% senior notes due 2023 (“2023 Notes”). The redemption of the 2023 Notes resulted in a loss on debt extinguishment of $2.1 million related to the unamortized debt issuance costs on the notes. The loss on extinguishment is included in Non-operating loss (income), net in 2021.

2019 Credit Facility

On December 12, 2019, the Company entered into a credit agreement for a $200.0 million committed unsecured revolving credit facility (the “2019 Credit Facility”). The 2019 Credit Facility includes a financial covenant requiring that the Company’s leverage ratio not exceed 4.0 to 1.0. As of December 31, 2021, there were no borrowings outstanding under the facility and the Company was in compliance with the financial covenants. The 2019 Credit Facility was amended in December 2021 to address the LIBOR transition. The 2019 Credit Facility expires on December 12, 2024 at which time any outstanding borrowings are due. Verisign may from time to time request lenders to agree on a discretionary basis to increase the commitment amount by up to an aggregate of $150.0 million.

Note 5. Stockholders’ Deficit

Treasury Stock

Treasury stock is accounted for under the cost method. Treasury stock includes shares repurchased under stock repurchase programs and shares withheld in lieu of the tax withholding due upon vesting of RSUs.

Effective February 11, 2021, the Company’s Board of Directors (“Board”) authorized the repurchase of its common stock in the amount of approximately $747.0 million, in addition to the $253.0 million that remained available for repurchases under the share repurchase program, for a total repurchase authorization of up to $1.0 billion under the program. The 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. As of December 31, 2021 there was approximately $382.6 million remaining available for repurchases under the program.

Effective February 10, 2022, the Company’s Board authorized the repurchase of its common stock in the amount of $705.4 million, in addition to the $294.6 million that remained available for repurchases under the program, for a total repurchase authorization of up to $1.0 billion under the program.

The summary of the Company’s common stock repurchases for 2021, 2020 and 2019 are as follows:

			2021												2020												2019
Shares						Average Price						Shares						Average Price						Shares						Average Price
			(In thousands, except average price amounts)
Total repurchases under the repurchase plans			3,253						$	215.16					3,674						$	200.06					3,911						$	188.84
Total repurchases for tax withholdings			108						$	209.40					204						$	208.92					243						$	181.07
Total repurchases			3,361						$	214.97					3,878						$	200.48					4,154						$	188.39
Total costs			$	722,587											$	777,454											$	782,583

Since inception, the Company has repurchased 243.7 million shares of its common stock for an aggregate cost of $11.70 billion, which is recorded as a reduction of Additional paid-in capital.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Accumulated Other Comprehensive Loss

The following table summarizes the changes in the components of Accumulated other comprehensive loss for 2021 and 2020:

			Foreign Currency Translation Adjustments Loss						Unrealized Gain (Loss) On Investments						Total Accumulated Other Comprehensive Loss
			(In thousands)
Balance, December 31, 2019			$	(2,836)					$	215					$	(2,621)
Changes			—						(135)						(135)
Balance, December 31, 2020			(2,836)						80						(2,756)
Changes			—						(29)						(29)
Balance, December 31, 2021			$	(2,836)					$	51					$	(2,785)

Note 6. Calculation of Earnings per Share

The following table presents the computation of weighted-average shares used in the calculation of basic and diluted earnings per share:

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
Weighted-average shares of common stock outstanding			112,015						115,058						118,513
Weighted-average potential shares of common stock outstanding:
Unvested RSUs and ESPP			151						240						455
Shares used to compute diluted earnings per share			112,166						115,298						118,968

The calculation of diluted weighted average shares outstanding excludes performance-based RSUs granted by the Company for which the relevant performance criteria have not been achieved. The number of potential shares excluded from the calculation was not significant in any period presented.

Note 7. Revenues

The Company generates revenues in the U.S.; Europe, the Middle East and Africa (“EMEA”); China; and certain other countries, including, but not limited to Canada, Australia, and Japan. The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
U.S			$	851,299					$	804,647					$	772,586
EMEA			231,686						214,204						206,975
China			99,727						113,048						119,291
Other			144,864						133,153						132,809
Total revenues			$	1,327,576					$	1,265,052					$	1,231,661

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

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Major Customers

Our largest customer accounted for approximately 33%, 34%, and 33% of revenues in 2021, 2020, and 2019, respectively. The Company does not believe that the loss of this customer would have a material adverse effect on the Company’s business because, in that event, end-users of this customer would transfer to the Company’s other existing customers.

Deferred Revenues

As payment for domain name registrations and renewals are due in advance of our performance, we record these amounts as deferred revenues. The increase in the deferred revenues balance in 2021 is primarily driven by amounts billed in 2021 for domain name registrations and renewals to be recognized as revenues in future periods, offset by refunds for domain name renewals deleted during the 45-day grace period, and $752.2 million of revenues recognized that were included in the deferred revenues balance at December 31, 2020. The higher deferred revenue balance as of December 31, 2021 also reflects an increase in the volume of early renewal transactions that occurred before the .com price increase became effective on September 1, 2021. The balance of deferred revenues as of December 31, 2021 represents our aggregate remaining performance obligations. Amounts included in current deferred revenues are all expected to be recognized in revenues within 12 months, except for a portion of deferred revenues that relates to domain name renewals that are deleted in the 45-day grace period following the transaction. The long-term deferred revenues amounts will be recognized in revenues over several years and in some cases up to ten years.

Note 8. Employee Benefits and Stock-based Compensation

401(k) Plan

The Company maintains a defined contribution 401(k) plan (the “401(k) Plan”) for substantially all of its U.S. employees. Under the 401(k) Plan, eligible employees may contribute up to 50% of their pre-tax salary, subject to the Internal Revenue Service (“IRS”) annual contribution limits. The Company matches 50% of up to the first 8% of the employee’s annual salary contributed to the plan. The Company contributed $5.2 million in 2021, $5.0 million in 2020, and $4.7 million in 2019 under the 401(k) Plan. The Company can terminate matching contributions at its discretion at any time.

Equity Incentive Plan

The majority of Verisign’s stock-based compensation relates to RSUs granted under the 2006 Equity Incentive Plan (the “2006 Plan”). As of December 31, 2021, a total of 8.1 million shares of common stock remain reserved for issuance upon the vesting of RSUs and for the future grant of equity awards. The 2006 Plan authorizes the award of incentive stock options to employees and non-qualified stock options, restricted stock awards, RSUs, stock bonus awards, stock appreciation rights and performance shares to eligible employees, officers, directors, consultants, independent contractors and advisers. The 2006 Plan is administered by the Compensation Committee which may delegate to a committee of one or more members of the Board or Verisign’s officers the ability to grant certain awards and take certain other actions with respect to participants who are not executive officers or non-employee directors. RSUs are awards covering a specified number of shares of Verisign common stock that may be settled by issuance of those shares (which may be restricted shares). RSUs generally vest over four years. Certain RSUs with performance and market conditions (“PSUs”), granted to the Company’s executives, generally vest over a three year term. Additionally, the Company has granted fully vested RSUs to members of its Board in each of the last three years. The Compensation Committee may authorize grants with a different vesting schedule in the future.

2007 Employee Stock Purchase Plan

Eligible employees of the Company may purchase common stock under the 2007 Employee Stock Purchase Plan through payroll deductions by electing to have between 2% and 25% of their compensation withheld to cover the purchase price. Each participant is granted an option to purchase common stock. This option is automatically exercised on the last day of each six-month purchase period during the offering period. The purchase price for the common stock under the ESPP is 85% of the lesser of the fair market value of the common stock on the first day of the applicable offering period or the last day of the applicable purchase period. Offering periods begin on the first business day of February and August of each year. As of December 31, 2021, 3.0 million shares of the Company’s common stock remain reserved for future issuance under this plan.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Stock-based Compensation

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

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
Cost of revenues			$	6,525					$	6,321					$	6,739
Sales and marketing			4,312						3,453						3,755
Research and development			8,283						7,137						6,370
General and administrative			34,319						31,332						33,762
Stock-based compensation expense			53,439						48,243						50,626
Capitalization (included in Property and equipment, net)			1,622						1,783						1,690
Total stock-based compensation			$	55,061					$	50,026					$	52,316

The following table presents the nature of the Company’s total stock-based compensation:

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
RSUs			$	41,476					$	38,217					$	36,930
PSUs			9,310						7,380						10,522
ESPP			4,275						4,429						4,864
Total stock-based compensation			$	55,061					$	50,026					$	52,316

The income tax benefit that was included within Income tax benefit (expense) related to these stock-based compensation expenses for 2021, 2020, and 2019 was $12.4 million, $11.0 million, and $11.7 million, respectively.

RSUs Information

The following table summarizes unvested RSUs activity for the year ended December 31, 2021:

			Shares						Weighted-Average Grant-Date Fair Value
			(Shares in thousands)
Unvested at beginning of period			661						$	164.83
Granted			316						$	200.64
PSU achievement adjustment			(10)						$	110.57
Vested and settled			(334)						$	147.80
Forfeited			(30)						$	185.99
			603						$	192.88

The RSUs in the table above include PSUs. The unvested RSUs as of December 31, 2021 include less than 0.2 million PSUs. The number of shares received upon vesting of these PSUs may range from zero to 0.3 million depending on the level of performance achieved and whether any market conditions are satisfied.

The closing price of Verisign’s stock was $253.82 on December 31, 2021. As of December 31, 2021, the aggregate market value of unvested RSUs was $152.9 million. The fair values of RSUs that vested during 2021, 2020, and 2019 were $70.3 million, $115.0 million, and $124.1 million, respectively. The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2020 and 2019, was $205.61 and $172.87, respectively. As of December 31, 2021, total unrecognized compensation cost related to unvested RSUs was $82.3 million which is expected to be recognized over a weighted-average period of 2.4 years.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

Note 9. Non-operating (Loss) Income, Net

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

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
Loss on extinguishment of debt			$	(2,149)					$	—					$	—
Interest income			582						7,815						26,596
Gain on sale of business			—						6,402						817
Transition services income			—						2,100						15,600
Other, net			238						(130)						247
Total non-operating (loss) income, net			$	(1,329)					$	16,187					$	43,260

The redemption of the 2023 Notes resulted in a loss on debt extinguishment of $2.1 million related to the unamortized debt issuance costs on the notes. Interest income is earned principally from the Company’s surplus cash balances and marketable securities. The lower interest income in 2021 and 2020 reflects a decline in interest rates on our investments in debt securities. Gain on sale of business and transition services income in 2020 and 2019 relate to the sale of our security services customer contracts.

Note 10. Income Taxes

Income before income taxes is categorized geographically as follows:

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
United States			$	489,395					$	457,830					$	452,793
Foreign			292,824						292,414						305,983
Total income before income taxes			$	782,219					$	750,244					$	758,776

The provision for income taxes consisted of the following:

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
Current expense (benefit):
Federal			$	97,420					$	(123,933)					$	74,283
State			32,188						10,522						2,069
Foreign, including withholding tax			29,834						29,152						31,385
			159,442						(84,259)						107,737
Deferred expense (benefit):
Federal			3,906						4,348						30,462
State			(200)						17,388						22,899
Foreign			(165,759)						(2,121)						(14,621)
			(162,053)						19,615						38,740
Total income tax (benefit) expense			$	(2,611)					$	(64,644)					$	146,477

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

The difference between income tax (benefit) expense and the amount resulting from applying the federal statutory rate of 21% to Income before income taxes is attributable to the following:

			Year Ended December 31,
			2021						2020						2019
			(In thousands)
Income tax expense at federal statutory rate			$	164,266					$	157,551					$	159,343
State taxes, net of federal benefit			25,527						23,167						20,573
Effect of non-U.S. operations			(23,255)						(27,691)						(25,178)
Intercompany non-U.S. intellectual property transfer			(165,517)						—						—
Remeasurement of unrecognized tax benefits			(5,095)						(204,673)						7,365
Stock-based compensation			1,333						(8,643)						(9,204)
Other			130						(4,355)						(6,422)
Total income tax (benefit) expense			$	(2,611)					$	(64,644)					$	146,477

During the fourth quarter of 2021, as part of a legal entity reorganization, the Company completed an internal transfer of certain of its non-U.S. intellectual property which had no book value. This transfer created amortizable tax basis for the receiving entity based on the $1.20 billion fair value of the intellectual property, which resulted in the recognition of a $165.5 million deferred tax asset and a corresponding income tax benefit. During 2020, the Company recognized an income tax benefit as a result of the remeasurement of certain previously unrecognized income tax benefits. The majority of these income tax benefits related to the worthless stock deduction taken in 2013. These remeasurements were based on written confirmations from the IRS, indicating no examination adjustments would be proposed related to the worthless stock deduction or certain other matters reviewed as part of the audit of the Company’s federal income tax returns for 2010 through 2014, and the lapse of statutes of limitations related to other unrecognized income tax benefits. Notwithstanding these written confirmations, the Company’s U.S. federal income tax returns for those years remain under examination by the IRS. Tax years 2015 and 2016 are closed to IRS audit as the statutes of limitations have lapsed.

The Company qualified for a tax holiday in Switzerland until the end of 2019 which lowered tax rates on certain types of income and required certain thresholds of foreign source income. The tax holiday reduced our foreign income tax expense by $17.3 million ($0.15 per share) in 2019. The benefit from the tax holiday is calculated before consideration of any offsetting tax impact in the United States. Effective January 1, 2020, due to Swiss tax law changes, the tax holiday was eliminated, which was partially offset by a lowered statutory tax rate.

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows:

			As of December 31,
			2021						2020
			(In thousands)
Deferred tax assets:
Intellectual property			$	165,517					$	—
Deferred revenues, accruals and reserves			68,574						66,926
Net operating loss carryforwards			4,747						5,623
Tax credit carryforwards			3,514						5,078
Other			1,693						2,379
Total deferred tax assets			244,045						80,006
Valuation allowance			(5,530)						(5,613)
Net deferred tax assets			238,515						74,393
Deferred tax liabilities:
Property and equipment			(6,644)						(4,167)
Other			(1,203)						(2,394)
Total deferred tax liabilities			(7,847)						(6,561)
Total net deferred tax assets			$	230,668					$	67,832

With the exception of deferred tax assets related to certain state net operating loss and foreign tax credit carryforwards, management believes it is more likely than not that the tax effects of the deferred tax liabilities together with future taxable income, will be sufficient to fully recover the remaining deferred tax assets.

As of December 31, 2021, the Company’s deferred tax assets included $75.4 million of state net operating loss carryforwards, before applying tax rates for the respective jurisdictions. The tax credit carryforwards as of December 31, 2021 consisted primarily of foreign tax credit carryforwards. The state net operating loss carryforwards expire in various years from 2022 through 2034. The foreign tax credits will expire in 2028.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

			As of December 31,
			2021						2020
			(In thousands)
Beginning balance			$	23,728					$	231,339
Increases in tax positions for prior years			89						7,138
Decreases in tax positions for prior years			(1,322)						(199,107)
Increases in tax positions for current year			1,115						1,613
Decreases in tax positions due to settlement with taxing authorities			(1,231)						—
Lapse in statute of limitations			(6,384)						(17,255)
Ending balance			$	15,995					$	23,728

As of December 31, 2021, approximately $16.2 million of unrecognized tax benefits, including penalties and interest, could affect the Company’s tax provision and effective tax rate. The Company does not expect the balance of unrecognized tax benefits to change materially during the next twelve months.

In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. These accruals were not material in any period presented.

The Company’s major taxing jurisdictions are the U.S., the Commonwealth of Virginia, and Switzerland. The Company’s U.S. federal income tax returns are currently under examination by the IRS for 2010 through 2014. The U.S. federal statutes of

VERISIGN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2021, 2020 AND 2019

limitations are closed for the 2015 and 2016 tax years. The Company’s other material tax returns are not currently under examination by their respective taxing jurisdictions. Because the Company has previously used net operating loss carryforwards and other tax attributes to offset its taxable income in income tax returns for the U.S. and Virginia, such attributes can be adjusted by these taxing authorities until the statute of limitations closes on the year in which such attributes were utilized. The open years for examination in Switzerland are the 2012 tax year and forward.

Note 11. Commitments and Contingencies

The following table represents the minimum payments required by Verisign under certain purchase obligations, certain U.S. income tax obligations, leases, and the interest payments and principal on the Senior Notes:

			Purchase Obligations						Transition Tax						Operating Leases						Senior Notes						Total
			(In thousands)
2022			$	44,421					$	7,761					$	5,931					$	72,625					$	130,738
2023			10,676						14,573						1,799						72,625						99,673
2024			4,468						19,430						572						72,625						97,095
2025			4,039						24,288						116						559,500						587,943
2026			—						—						—						46,375						46,375
Thereafter			—						—						—						1,417,250						1,417,250
Total			$	63,604					$	66,052					$	8,418					$	2,241,000					$	2,379,074

The amounts in the table above exclude $16.2 million of unrecognized tax benefits, as the Company is unable to reasonably estimate the ultimate amount or time of settlement of those liabilities.

Verisign enters into certain purchase obligations with various vendors. The Company’s significant purchase obligations include firm commitments with telecommunication carriers, other service providers and the fixed portion of registry fees related to the operation of certain top-level domains. Registry fees for top-level domains that we operate where the amounts are variable or passed-through to registrars have been excluded from the table above. The Company does not have any significant purchase obligations beyond 2025.

The Company has an agreement with Internet Corporation for Assigned Names and Numbers (“ICANN”) to be the sole registry operator for domain names in the .com registry through November 30, 2024. Under this agreement, the Company pays ICANN on a quarterly basis, $0.25 for each annual term of a domain name registered or renewed during such quarter. The Company incurred registry fees for the .com registry of $40.6 million in 2021, $36.3 million in 2020, and $34.7 million in 2019.

In connection with the .com Registry Agreement with ICANN, the Company is required to make annual payments of $4.0 million to ICANN from 2021 through 2025 to support efforts to maintain the security and stability of the DNS. The payments for 2022 through 2025 are included in Purchase obligations in the table above.

The Transition Tax in the table above is the remaining installments of U.S. income taxes payable on our accumulated foreign earnings pursuant to the 2017 Tax Cuts and Jobs Act.

Verisign leases a small portion of its office space and a portion of its data center facilities under operating leases, the longest of which extends into 2025. Rental expenses under operating leases were not material in any period presented.