Good day, everyone. Welcome to the VeriSign's Fourth Quarter and Full-Year 2015 Earnings Call. Today's conference is being recorded and any unauthorized recording of this call is not permitted. At this time, I would like to turn the conference over to Mr. David Atchley, Vice President of Investor Relations and Corporate Treasurer. Please go ahead, sir.

Thank you, Operator, and good afternoon, everyone. Welcome to VeriSign's fourth quarter and full-year 2015 earnings call. With me are Jim Bidzos, Executive Chairman, President and CEO; Todd Strubbe, Executive Vice President and COO; George Kilguss, Senior Vice President and CFO; and Pat Kane, Senior Vice President, Naming and Directory Services. This call and our presentation are being webcast from the Investor Relations section of our verisign.com website. There, you will also find our fourth quarter and full-year 2015 earnings release. At the end of this call, the presentation will be available on that site and within a few hours, the replay of the call will be posted. Financial results in our earnings release are unaudited. And our remarks include forward-looking statements that are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically, the most recent report on Forms 10-K and 10-Q, and any applicable amendments which identify risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. VeriSign retains its longstanding policy not to comment on financial performance or guidance during the quarter, unless it is done through a public disclosure. The financial results in today's call and the matters we will be discussing today include GAAP and non-GAAP measures used by VeriSign. GAAP to non-GAAP reconciliation information is appended to our earnings release and slide presentation, as applicable, each of which can be found on the Investor Relations section of our website. In a moment, Jim and George will provide some prepared remarks. And afterward, we will open up the call for your questions. With that, I would like to turn the call over to Jim.

Thanks, David, and good afternoon, everyone. Our fourth quarter and full-year 2015 results were in line with our objectives of offering security and stability to our customers, while generating profitable growth and providing long-term value to our shareholders. During 2015, VeriSign delivered strong financial performance, including reporting $1.059 billion in revenues, expanding free cash flow to $629 million, and producing full-year non-GAAP operating margins of 61.5%. Operationally, 2015 was another strong year for the company. VeriSign processed 38.8 million new .com and .net domain name registrations and finished the year with 139.8 million .com and .net names in the domain name base. During the year, we marked more than 18 years of uninterrupted availability of the VeriSign DNS for .com and .net. As a part of managing our business, during the fourth quarter, we continued our share repurchase program by repurchasing 1.8 million shares for $150 million. During the full-year 2015, we repurchased 9.3 million shares for $622 million. Effective today, the Board of Directors increased the amount of VeriSign common stock authorized for repurchase by approximately $611 million to a total of $1 billion authorized and available under the share buyback program, which has no expiration. Our financial position is strong with $1.9 billion in cash, cash equivalents, and marketable securities at the end of the quarter, of which $753 million was held domestically and the remainder held abroad. We continually evaluate the overall cash and investing needs of the business and consider the best uses for our cash, including potential share repurchases. At the end of December, the domain name base in .com and .net was 139.8 million, consisting of 124 million names for .com and 15.8 million names for .net. This represents an increase of 6.3% year-over-year, as calculated including domain names on hold for both periods.…

Thanks, Jim, and good afternoon, everyone. For the full-year 2015, we recognize revenue of $1.059 billion, up 4.9% from full-year 2014 revenue and delivered GAAP operating income of $606 million, up 7.4% from $564 million for the full-year 2014. During the fourth quarter, we recognized revenue of $273 million, up 6.5% year-over-year and delivered GAAP operating income of $158 million, up 11.3% from $142 million in the fourth quarter of 2014. The GAAP operating margin in the fourth quarter came to 58.1%, compared to 55.6% in the same quarter a year ago. GAAP net income totaled $102 million, compared to $65 million a year earlier, which produced diluted GAAP earnings per share of $0.76 in the fourth quarter this year, compared to $0.48 for the fourth quarter last year. As described last year, our fourth quarter 2014 GAAP net income was decreased by $26 million and diluted EPS was decreased by $0.19, primarily due to a non-U.S. income tax charge related to a reorganization of certain international operations and a charge in estimate for U.S. income tax charges related to the repatriation of offshore assets back in 2014. As of December 31, 2015, the company maintained total assets of $2.4 billion. These assets included $1.9 billion of cash, cash equivalents and marketable securities, of which $753 million were held domestically with the remainder held abroad. Total liabilities were $3.4 billion at year end, up from $2.8 billion at the end of 2014, primarily as a result of the issuance of a new 10-year, 5.25%, $500 million debenture completed in the first quarter of 2015. I'll now review some of our key metrics for our fourth quarter operating metrics, which are revenue, deferred revenue, non-GAAP operating margin, non-GAAP earnings per share, operating cash flow, and free cash flow. I will then…

Thank you, George. I want to take this opportunity to update you on another item. On March 14, 2014, the U.S. National Telecommunications and Information Administration, or NTIA, announced its intent to transition its historic stewardship role related to the Internet's domain name system to the global multistakeholder community. A year later, in March of 2015, in preparation for the implementation phase of the IANA stewardship transition, NTIA asked VeriSign and ICANN to submit a proposal detailing how best to remove NTIA's administrative role associated with root zone management. These related root zone management functions involve our role as Root Zone Maintainer under the Cooperative Agreement with the Department of Commerce. In response to the March 2015 request from NTIA, ICANN and VeriSign submitted a proposal to NTIA, describing how best to remove NTIA's administrative role associated with the root zone management in a manner that maintains the security, stability and resiliency of the Internet's domain name system. NTIA published this joint ICANN-VeriSign proposal on August 17, 2015, noting it was anticipated that performance of the Root Zone Maintainer function would be conducted by VeriSign under a new Root Zone Maintainer Agreement with ICANN once the Root Zone Maintainer function obligations under the Cooperative Agreement were completed. ICANN and VeriSign are in the final stages of drafting the new Root Zone Maintainer Agreement to perform this Root Zone Maintainer role as a commercial service for ICANN upon the successful transition of the IANA functions. The Root Zone Maintainer functions performed by VeriSign are delivered via the secure, stable and resilient purpose-built DNS infrastructure that has delivered .com, .net and A and J RootZone services for an uninterrupted and unparalleled 18 years. To ensure that root operations continue to perform at the same high level during the expected 10-year term of…

Thank you. Our first question comes from Steve Ashley with Robert W. Baird. Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker): Thanks so much; just like to go back to the changing the terms of the .com agreement. And just be clear, can you tell us what, from a practical standpoint, from an investor perspective, is going to change potentially with the new contracting?

Sure, Steve. So, first of all, I think it helps to just understand that we're not actually changing the terms of the .com Registry Agreement. And this is not a renewal. This is an extension. We are negotiating entering into a 10-year contract with ICANN to perform commercial services as the Root Zone Maintainer, services that we now perform under contract to the NTIA. The contemplated or anticipated term of that agreement is 10 years. In order to ensure the same steady, available, uninterrupted, secure and stable environment that we've been providing for three decades as a Root Zone Maintainer, it is also anticipated – we are discussing – the extension of the .com Registry Agreement for 10 years. So at that point, should all of these conditions that I described earlier, for example, approval of ICANN's Board of Directors and VeriSign's Board of Directors, no changes whatsoever can be made to the .com Registry Agreement without the consent of the NTIA. So subject to those approvals and the transition occurring, then we would have 10-year concurrent terms for the Root Zone Maintainer Agreement and the .com Registry Agreement. So what you would see is essentially a change of the date, the term, of the .com Registry Agreement. That's essentially the change. From an investor viewpoint, instead of a renewal in 2018, you would see a 10-year term that starts with the effective date of the two changes, the Root Zone Maintainer Agreement and the extended .com Registry Agreement. So, instead of November 30, 2018, you would see a date that is 10 years from the effective date of those two. Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker): But when would that be executed? When is the date of actually extending the terms?

So, again, qualifying all of this to say that if we conclude our negotiations, we get all the necessary approvals, the triggering event that marks the "effective date" would then be the IANA transition occurring. That process has been underway since March of 2014. I certainly can't say with any definite date when that will happen, but I can tell you that there is steady progress on the transition. The target date is September of 2016. That is the date of the expiration of the IANA contract between NTIA and ICANN. And if everything occurs at that point and it is certainly possible, all of the work that needs to be done can be accomplished by that date, but again I can't, of course, tell you what will happen when. I can simply tell you that that is everyone's goal and that the community, ICANN, NTIA, et cetera, are all driving for that September 2016 date. So, that is the best date that everybody's shooting for. So, if you wanted to know roughly when that might happen, that would be the target date. Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker): Perfect. And then, just my quick follow-up here is on the surge in domain names we saw in China and you called out the fact that just getting some feedback from registrars, that it looked like it was investment. What do you think drove that investment? Is it possible that the new gTLDs, specifically the ones you own, the .coms, are an incentive for people to own, maybe .com in other languages? Well, what might have driven the investment surge?

Well, Steve, this is George. Just to put some more clarification around it, the growth in the fourth quarter was not unique to .com and .net. The local ccTLD .cn reported increased growth in the quarter. We've seen other TLDs report growth. And so, .com and .net has also performed quite well in that year. So it was – we call it – clearly solid investment community in the emerging market performed well. Again, we don't have direct visibility into the end user. Our customers are the registrars in those regions. But again, based on the information that we have, we saw that the investor community performed well across the board. Steve M. Ashley - Robert W. Baird & Co., Inc. (Broker): Thank you.

We'll hear next from Philip Winslow with Credit Suisse. Philip Alan Winslow - Credit Suisse Securities (USA) LLC (Broker): Hi. Thanks, guys, just a couple questions and congrats on a strong quarter. First, to the NTIA announcement that you guys talked about there, the potential 10-year extension, you said sort of negotiations. Are you kind of submitting to the idea that everything sort of remains stable and just gets extended for 10 years on sort of the same price point and the same terms, or is there some sort of, kind of, give and take with this extension? And then, also, just as a follow-up to the quarter itself, you said, obviously, there was a spike out of China. I wonder if you could help us quantify that. Just kind of how many names are we talking about that were sort of over and above, call it, a normal run rate in Q4? Thanks.

This is Jim. Let me take the first part of your question. I would just reiterate again that what we're contemplating here, what we're working towards, is an extension of the .com agreement. So, the terms wouldn't change in the .com agreement. It is literally an extension so that it coincides with the new Root Zone Maintainer Agreement. Essentially, the goal is to make the term of those two contracts to run concurrently. That's the objective. So, we don't anticipate that there will be any substantive change or any change, actually, to the terms of the agreement itself, if that helps. Does that answer your question? Philip Alan Winslow - Credit Suisse Securities (USA) LLC (Broker): Yes, that's perfect. Thank you.

And, Phil, with regard to your question on Q4 net adds, as discussed, net additions in the fourth quarter were 4.6 million, and they were comprised of 12.2 million new adds, new registrations, and 7.6 million deletes from prior periods. The 4.6 million was up about 3.8 million from the 800,000 we achieved in Q4 2014 and up about 2.9 million from the 1.7 million net adds delivered in Q3 2015. The Q4 year-over-year improvement was primarily a result of about 3.5 million incremental registrations coming out of our Asia-Pacific region. As we mentioned, that was primarily China and appear largely to be from the investor community over there.

Phil, this is Jim, too. Just to clarify, I want to make sure I answered entirely your first question. You were asking me about a change in terms of the .com agreement. Did you mean to implicate at all the Cooperative Agreement and the terms, for example, such as the price caps on the price of .coms? Philip Alan Winslow - Credit Suisse Securities (USA) LLC (Broker): Yeah. Yeah, exactly. Both those two, the Cooperative and the .com, exactly. So the price caps, but also just the sort of presumptive right of renewal, things like that.

Yeah. So let me just say that, first of all, the terms of the .com agreement will not change, and the presumptive right of renewal, of course, would remain in the .com agreement. The .com agreement doesn't actually address pricing. That's addressed separately in the Cooperative Agreement. The Amendment 11 of the Cooperative Agreement is the section that describes our contractual relationship with NTIA with respect to the root zone maintainer role. And that is the portion that it's contemplated would essentially move into a new contract, the RZMA that we're negotiating with ICANN. Amendment 32 is a separate part of the Cooperative Agreement that addresses pricing with respect to our ability to seek a price change if we think it's justified by market conditions. So I certainly don't anticipate that that would change. That would remain. So VeriSign's right to seek relief from price controls based on market conditions that would warrant it would remain. Philip Alan Winslow - Credit Suisse Securities (USA) LLC (Broker): Awesome. Thanks, guys. Appreciate the detail.

Sure.

Our next question comes from Walter Pritchard with Citi.

Hi. Just three quick questions, one on the agreements, so you did mention that it is not a renewal, it'a an extension. But I'm assuming that the Department of Commerce review would be similar to what the review would be during a renewal? I just wanted to make sure I understood what the difference was technically between an extension and renewal for those purposes.

Yeah. I don't believe that's the case. I think the extension means that the date changes on the agreement. But any change to the agreement requires the consent of the NTIA. And so, I can't speak for NTIA. This is their process. The part of the process we're involved in would be to negotiate the Root Zone Maintainer Agreement with ICANN to present that along with a .com contract that has the date extended and present that to NTIA. This is, of course, in response to their March 2015 request for a way to transition the root zone maintainer role and to take NTIA out of that process. So that will be up to them when they see it. So I think that's what they asked for and that's what they're looking for. This is not a renewal in the sense that all of the normal things that happen during a renewal would happen. So I don't quite see it that way. I see this is precisely what NTIA has called it. It's a parallel process to address the issue of the root and parallel to the IANA transition process, which began in March of 2014.

Got it. And then, George, on your end, there's been a lot of activity in the TLD space and you've had a lot of marketing dollars, I think, come into the market. And I think you even in your lawsuit with XYZ talked about having to spend more money from a – I can't remember what you called it – remedial marketing, something like that, to make sure your brand was positioned right. I'm wondering. Your guidance really doesn't seem to imply any kind of uptick in marketing spend. I'm wondering if you could just help us understand what the environment looks like, what you decided to bake in to your guide from a marketing expense perspective.

Yeah. So, from a sales and marketing perspective, we would expect that sales and marketing expense to be similar as a percent of revenue as it has been this year.

Okay. Okay. And then just lastly, you guys obviously did divestitures for a number of years. You haven't really done any M&A. Is there any update on how you're thinking about inorganic activities as it relates to your strategy in 2016 and beyond?

This is Jim. So, in a word, no, but let me just say this. During my earlier remarks, I mentioned that the next big thing for VeriSign is more of the same. What we did for the last five years in efficiently running our business, providing security and stability, generating value, and efficiently returning that value to our shareholders; that's what you're going to see for the next five years. So, some sort of inorganic growth strategy to try to grow in other businesses or non-core businesses is not part of our plan. And I certainly don't see that happening. And we've been very consistent about that messaging. Now, I've also consistently said something else over the last year or two, which is that, for example, the new gTLD program could present some inorganic opportunities in our core business. And that's certainly still true. In fact, just recently, a group of observers of that marketplace, who are heavily involved in, all sort of opined that 2016 could be the year of consolidation in that business. And certainly those opportunities to acquire growth in our core business would be something we'd look at, and we've been very consistent about all of that. Since completing the divestitures, our position on acquisitions is essentially unchanged. But again, if we see opportunities that come along, we're not opposed to looking at those, as long as they're consistent with our core business, consistent with our commitment to deliver profitable growth. Again, the opportunity to participate in a consolidation in 2016, that's an opportunity for us. As a significant part of our corporate strategy for 2016 we have evaluated, and we are pursuing, and we'll continue to evaluate and pursue, acquisitions of TLDs that are currently in operation, those that have not yet been awarded, in support of our growth strategy as long as they fit with that strategy.

Okay, great. That makes sense. Thanks, Jim.

Sure.

We'll now take our last question from Gregg Moskowitz with Cowen & Company. Gregg Moskowitz - Cowen & Co. LLC: Okay. Thank you very much and good afternoon, guys. Jim, just, I guess, to start off to follow on to Phil's question, I just want to make sure we're on the same page here. Should the .com agreement and Cooperative Agreement get sort of rolled into this 10-year extension? If that does come to fruition, is the expectation that there would be no built-in price escalators, but that VeriSign would be able to petition if there was a change in market power or if there were some sort of unusual expense that was required of VeriSign from a security perspective to secure the DNS? Do I have that correctly?

Almost. Yes. For the most part, you have it correct. But let me just point out the .com – so the short answer to your question is yes. I don't expect any of that to change. I anticipate that we would have our Amendment 32 rights to petition based on changing market conditions for price relief. And also that, certainly, the agreement calls for the ability for VeriSign to seek so-called cost-justified price increases and that includes things like cost of implementing Consensus Policies or specific threats to the DNS that are extraordinary that we have to respond to – unanticipated expenses associated with responding to threats. So I don't see those changing at all. But in the front part of your question, you sort of lumped the .com Registry Agreement and the Cooperative Agreement together, and those are different agreements. What we're doing here is we're seeking an extension to the .com Registry Agreement. The Cooperative Agreement expires in 2018, and we are not seeking any change to that. That is up to NTIA. That is their process, their contract, so I would certainly defer to them. But we are not rolling up those two together for a 10-year extension. We are just simply ensuring that the .com Registry Agreement, which, I might add, has the most stringent SLAs, the most stringent security performance requirements of any Registry Agreement, run concurrently with the Root Zone Maintainer Agreement, because remember, our performance as the Root Zone Maintainer and Publisher, essentially you can think of it as the bootstrapping process of the Internet, which we do at least twice a day. And it is critically important to the secure operation of the global Internet that that process be done in an uninterrupted, secure way. And so in order to achieve that,…

Well, I think it is factored in. I'll let George offer you some more color on that. But I will just say that Q4 is a ways off. It is unique. We had basically roughly a 50% increase from the year ago quarter in Q4 of 2015. I think we had 8-point-something million gross adds in Q4 of 2014 and we went to 12.2 million in Q4 of 2015. So it was extraordinary in that sense. And it's technically possible that a wide range of outcomes could result. And so, I just wanted to point out that one possibility certainly is that deletes could exceed adds just because of the sheer volume of gross adds that occurred in Q4 of 2015. That is a mathematical fact and I just wanted to point it out and maybe George can add some color.

Yeah. I think that's exactly right. I mean, as Jim pointed out, last year in the fourth quarter of 2014, 8.2 million adds versus the 12.2 million adds in the fourth quarter of this year, so 4 million increase in the additions. As we historically know, first-time renewal rates are typically around 50%, so that would mathematically suggest that there's maybe a 2 million unit increase in deletions. We've also said that when we look around the world from a renewal rate perspective, we do see emerging markets having a slightly lower renewal rate, on average. So that could impact the number as well. Clearly, what would dictate Q4 net adds would be the other side of that equation as to what gross adds would be. But clearly, as we said in our prepared remarks, the renewing name base is going to be large. I mean, we had a great, great fourth quarter. And so we'll have those names come up for renewal, and we'll keep an eye on what the renewal rate is. But historically, our first-time renewal rate has been 50%. Gregg Moskowitz - Cowen & Co. LLC: Okay, great. And if I could just ask one last one, George, can you just walk through why expected cash taxes for 2016 are likely to be quite a bit lower than 2015?

Sure. I'd be happy to. In 2015 last year, we did have some expense related to a small restructuring of a portion of our international operations, and the primary difference is that restructuring amount. Again, from a U.S. perspective, we have our convertible debenture that produces a tax shield. Last year, it was about $165 million, as we said. That convertible debenture tax shield tends to grow about 6% year-over-year. We also have approximately $173 million of foreign tax credits that we expect to utilize before they expire over the next seven or eight years. And so we don't expect to pay very much U.S. tax based on our attributes. So really we would look to the $10 million to $20 million to be primarily foreign taxes, but, again, we had a small restructuring. We talked about it last year, where we did pay some cash taxes as a result of that international restructuring. Gregg Moskowitz - Cowen & Co. LLC: Okay, very helpful. Thank you, guys.

Thank you.

At this time, I'll turn the call back over to David Atchley for final comments.

Thank you, Operator. Please call the Investor Relations Department with any follow-up questions from this call. Thank you for your participation. This concludes our call. Have a good evening.