Verisign lowers guidance after lackluster Q2

Company cites factors for falling domain base.

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Verisign (NASDAQ: VRSN), the registry for .com and .net domain names, lowered its 2022 guidance with its earnings release yesterday.

The company now expects the base of .com and .net domains to grow just 0.5% to 1.5% this year, down from guidance of 1.75% to 3.5% at the end of last quarter (and 2.5% to 4.5% when it released last year’s Q4 earnings).

Revenue is now forecasted at $1.415 billion to $1.43 billion, down from $1.42 billion to $1.435 billion.

The company upped its guidance for operating margin, though. It now predicts a full-year operating margin of 65.25% to 66.25%, up from 64.5% to 65.5%.

So what changed?

On the conference call yesterday, Verisign CEO James Bidzos blamed three things for the fall in the domain base.

First is what I wrote about earlier this week: the outsized performance of the first two years of the pandemic. It has subsided, and many of the domains are coming up for renewal.

He also blamed global macroeconomic headwinds and fewer domain registrations in China this year.

China is also to blame for some of the drop in Q2’s renewal rate. The company expects the renewal rate last quarter to come in at 73.6%, down from 75.4% in the same quarter a year ago. Bidzos said there was an outsized number of domains registered in China a year ago, and these renew at lower rates than most first-year renewals.

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