Good day, everyone. Welcome to VeriSign's First Quarter 2017 Earnings Call. Today's conference is being recorded, and unauthorized recording of this call is not permitted. At this time, I will 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 first quarter 2017 earnings call. With me are Jim Bidzos, Executive Chairman, President and CEO; Todd Strubbe, Executive Vice President and COO; and George Kilguss, Executive Vice President and CFO. This call and our presentation are being webcast from the Investor Relations section of our verisign.com website. There, you will also find our first quarter 2017 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 reports on Forms 10-K and 10-Q, 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 the call for your questions. With that, I would like to turn the call over to Jim.

Thanks, David, and good afternoon, everyone. I'm pleased to report another solid quarter for VeriSign. First quarter results are 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. We reported revenue of $289 million, up 2.4% year-over-year and delivered strong financial performance, including non-GAAP EPS of $0.96, up 12% year-over-year, and $139 million in free cash flow. As part of managing our business during the first quarter, we continued our share repurchase program by repurchasing 1.8 million shares for $150 million. Our financial position is strong with $1.8 billion in cash, cash equivalents and marketable securities at the end of the quarter. 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 March, the domain name base in .com and .net was 143.6 million, consisting of 128.4 million names for .com and 15.2 million names for .net. The domain name base increased by 1.4 million net names during the first quarter, after processing 9.5 million new gross registrations. The U.S. market contributed to the better-than-expected performance. Although renewal rates are not fully measurable until 45 days after the end of the quarter, we believe that the renewal rate for the first quarter of 2017 will be approximately 72.2%. This preliminary rate compares to 74.4% achieved in the first quarter of 2016. In the fourth quarter of 2016, the final renewal rate was 67.6%, compared with 73.3% for the same quarter of 2015. As noted in our prior conference calls, the portion of registrations associated with the China name search that occurred in the first quarter of 2016 continued to renew at lower-than-historic first time renewal rates in…

Thank you, Jim, and good afternoon, everyone. Revenue for the first quarter totaled $289 million, up 2.4% year-over-year and up 0.8% sequentially. During the quarter, 60% of our revenue was from customers in the United States and 40% was from foreign customers. As it relates to our GAAP results, operating income in the first quarter totaled $175 million, up 5.1% from $167 million in the first quarter of 2016. The operating margin in the quarter came to 60.7%, compared to 59.2% in the same quarter a year ago. Net income totaled $116 million compared to $107 million a year earlier, which produced diluted earnings per share of $0.94 in the first quarter this year compared to $0.82 for the first quarter last year. As of March 31, 2017, the company maintained total assets of $2.3 billion and total liabilities of $3.5 billion. Assets included $1.8 billion of cash, cash equivalents and marketable securities, of which $316 million were held domestically, with the remainder held abroad. I'll now review some additional first quarter financial metrics, which include non-GAAP operating margin, non-GAAP earnings per share, diluted share count, operating cash flow and free cash flow. I will then discuss our 2017 full-year guidance. As it relates to non-GAAP metrics, first quarter operating expense, which excludes $13 million of stock-based compensation, totaled $101 million as compared to $103 million in both the fourth quarter of 2016 and in the same quarter a year ago. The sequential decrease was primarily a result of lower marketing spend in the first quarter compared to the fourth quarter. Non-GAAP operating margin for the first quarter was 65.1%, compared to 63.3% in the same quarter of 2016. Non-GAAP net income for the first quarter was $119 million, resulting in non-GAAP diluted earnings per share of $0.96 based on…

Thank you, George. In closing, during the first quarter, we expanded our work to protect, grow and manage the business, while continuing our focus to provide long-term value to our shareholders. We think that our focus on profitable growth and disciplined execution will extend the long trend lines of growth in our top and bottom line, and allow us to continue our consistent track record of generating and returning value to our shareholders in the most efficient manner. We will now take your questions. And, Operator, we're ready for the first question.

Thank you. Our first question today will come from Sterling Auty with JPMorgan.

Yeah. Thanks. Hi, guys. Just a couple of questions, I want to start with – I think I saw the gross additions in the quarter were 9.5 million [name registrations]. And if I compare that to pre-uplift from China, that's still pretty good. That's still up from, I want to say, like the high 8.8 million, somewhere in that range. Just wondering what you're seeing as the factors that are helping the gross additions in the quarter?

Yeah. Thanks, Sterling. This is George. In short, we saw increased demand from the U.S.-based registrars in the quarter, which was aided, in part, by what we call domain name-centric advertising by several channel partners in and around the Super Bowl, which happened in the February timeframe.

Okay, great. And looking at it, any change in duration of those names? I think you used to talk about maybe kind of 15, 16 month average durations when you average everything together. Is that still the same across the .com and .net base?

Yes. That hasn't changed too much over the years. That's still very consistent.

And you mentioned lower marketing spend in the quarter versus the fourth quarter. How should we think about the marketing spend seasonality-wise through the rest of the year, so we could think about the shape of the margins towards the guidance goal?

You are correct, Sterling. That marketing spend was down sequentially. The reason behind that is partly because Q4 was so high, we had a large amount of marketing spend going into the market in Q4. And then, with regard to our marketing spend this year, the timing of our marketing activities are more heavily weighted toward events later in the year than last year. So, as we've outlined in our 10-Q, our expectation for marketing expense is to increase as a percent of sales in the subsequent quarters.

Okay. And very last question, if I could sneak it in, I didn't get a chance to look through, but how much did you actually get? What were the proceeds for iDefense?

We're not disclosing the sale proceeds from iDefense.

They were not material.

Okay.

I think there might be some more information available in the next quarter since the sale actually closed in Q2, but the sale of iDefense was not a material event.

All right. Got it. Thank you, guys.

Thank you. And our last question will come from Gray Powell with Wells Fargo.

Great. Thanks for taking the questions. Just a couple, if I may. So I might be looking at this wrong, but when I look at the zone files, it looks like domain additions have turned negative so far in April. Your guidance is flat to plus 400,000 [domain additions]. So, I guess, is there anything going on in the first few weeks of the new quarter? Is there any like residual churn from China or just something that I'm potentially missing? Thanks.

I think you're seeing the final sort of move out of the China search names. There were some that carried over into April and we're seeing the final deletions of the so-called China search names from late 2015 and 2016.

Okay. That's helpful. And then can you give us an update on the international transliterations of .com and .net that you have up and running today? And then just what are your expectations for additional launches over the course of the next year?

We have three of the transliterations in market, two in Korea and one in Japan. At this point, we don't have any additional details on any additional launches. In China, we are still going through the licensing process to operate our Chinese IDNs, but no additional details to share at this time and we'll provide more information on these and future roll-outs as appropriate.

Great. And then last one, if I may. Just any update on the .web antitrust investigation?

No substantive update. We continue to cooperate with the Department of Justice relative to the CID that we discussed last quarter. Those interactions and dialogues have been constructive. We're producing documents and information and answering their questions as needed. So it's an ongoing process. Nothing substantive to update now. But, of course, as soon as there is, we'll share it with you.

Okay. Thank you very much.

Thank you.

Thank you. And ladies and gentlemen, that concludes today's question-and-answer session. Mr. David Atchley, at this time, I'll turn the conference back over to you for any additional or closing remarks.

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.