Verisign Financial Model
IT Services Company Financials Example (Free Excel Download)
Verisign is the global provider of domain name registry services and internet infrastructure, acting as the sole authoritative registry for the .com and .net top-level domains (TLDs).
professionals from Deloitte
Used by professionals from
About this model
This model evaluates the equity value and cash flow generation capacity of Verisign to determine its intrinsic value, focusing on its highly predictable, subscription-like revenue streams and its ability to fund aggressive share repurchase programmes and dividends.
Verisign is the global provider of domain name registry services and internet infrastructure, acting as the sole authoritative registry for the .com and .net top-level domains (TLDs). The company operates a monopolistic, asset-light business model under exclusive contracts with the Internet Corporation for Assigned Names and Numbers (ICANN) and the US Department of Commerce. Verisign operates as a single business segment generating 100% of its revenue from Registry Services. The company enjoys an exceptionally strong competitive position with an effective monopoly over the world's most valuable digital real estate (.com), resulting in operating margins exceeding 67%. Recent major events include the renewal of the .com Registry Agreement with ICANN through November 2030, the initiation of a quarterly dividend in 2025, and the continuation of massive share repurchase programmes that have resulted in a deeply negative book equity position.
The downloadable Verisign financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsVerisign financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $1.33B | $1.42B | $1.49B | $1.56B | $1.66B |
| Gross profit | $1.14B | $1.22B | $1.30B | $1.37B | $1.46B |
| Operating income | $866.8M | $943.1M | $1.00B | $1.06B | $1.12B |
| Net income | $784.8M | $673.8M | $817.6M | $785.7M | $825.7M |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
See 8 moreSee less
How to build a detailed financial model for Verisign
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Registry Services
- Segment name: Registry Services (reported as a single consolidated revenue line).
- Revenue driver formula: Average Domain Name Base x Average Revenue Per Domain (ARPU).
- Historical growth rate: 4% to 7% CAGR over the last 5 years (revenue reached $1.66 billion in 2025).
- Key growth levers and headwinds: Growth is driven by new domain registrations, renewal rates of existing domains, and contractual price increases. Headwinds include macroeconomic weakness in international markets (particularly China) and shifting registrar promotional strategies.
- Pricing dynamics: Highly regulated and contractual. Under the ICANN agreement, Verisign is historically permitted to increase the price of a .com domain by up to 7% in four out of every six years. For .net, the company is permitted to increase prices by up to 10% annually.
- Revenue recognition notes: Customers (registrars) pay upfront for domain registrations spanning one to ten years. Verisign records these payments as deferred revenue and recognises the revenue rateably on a daily basis over the term of the registration.
- Seasonality: Q1 typically sees the highest volume of domain expirations and renewals due to historical registration patterns, though the rateable revenue recognition smooths out the income statement impact. Cash flow is highly seasonal, peaking in Q1.
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Cost of revenues consists primarily of salaries and employee benefits for infrastructure personnel, data centre costs, telecommunications connectivity, depreciation of infrastructure hardware, and allocated overhead.
- Gross margin range: 85% to 87% over the last 5 years.
- Key input costs and commodity exposures: Server hardware, electricity, and telecommunications bandwidth. The company has virtually no commodity exposure.
- How COGS scales with revenue: High operating leverage. The cost to maintain the registry infrastructure is largely fixed; adding additional domain names incurs near-zero marginal cost.
Operating Expenses
- R&D: Typically 5% to 6% of revenue. It covers the development of registry systems, security enhancements, and root zone management technologies.
- SG&A: Typically 10% to 12% of revenue. This includes sales and marketing (which is minimal since registrars do the retail marketing), legal, finance, and administrative headcount.
- Depreciation & Amortisation: Typically 2% to 3% of revenue, primarily related to tangible network infrastructure.
- Stock-Based Compensation: Typically 3% to 4% of revenue, a relatively modest figure compared to other technology companies.
- Restructuring / one-time charges: Very rare and historically immaterial.
Margin Profile
- Gross margin: 85% to 87%.
- EBITDA margin: 70% to 72%.
- Operating margin: 65% to 68% (reached $1.12 billion operating income on $1.66 billion revenue in 2025).
- Net margin: 48% to 50%.
- Margin trend: Stable to slightly expanding. The fixed-cost nature of the infrastructure combined with contractual price increases naturally drives margin expansion, though the company reinvests some of this into security and network resiliency.
Balance Sheet Structure
- Total assets: Approximately $1.5 billion to $1.8 billion.
- Key asset categories: Cash and marketable securities (typically $500 million to $600 million), Property and Equipment, and Deferred Tax Assets.
- Goodwill & intangibles: Minimal (less than 5% of total assets) as Verisign relies on organic growth rather than acquisitions.
- Working capital profile:
- Days Sales Outstanding (DSO): Near zero. Registrars must maintain deposit accounts with Verisign to register domains.
- Days Inventory Outstanding (DIO): Zero (digital service).
- Days Payable Outstanding (DPO): 30 to 45 days.
- Net working capital as % of revenue: Deeply negative due to massive deferred revenue balances.
- Working capital funding: The company benefits from a massive negative working capital position. Customers pay upfront for multi-year registrations, providing Verisign with an interest-free float.
- PP&E: Consists of data centre equipment, servers, and office leases. Useful lives are typically 3 to 5 years for hardware.
- Right-of-use assets / operating leases: Material but manageable, representing data centre and office space leases.
Capital Expenditure & Investment
- Capex as % of revenue: 2% to 4% historically.
- Maintenance capex vs. growth capex: Almost entirely maintenance and security-driven capex to ensure 100% uptime of the root servers and registry.
- Major capex programmes underway or planned: Ongoing investments in AI-related infrastructure and network security to defend against DDoS attacks.
- Capitalised software / development costs: Minimal.
- M&A pattern: Organic grower. The company rarely engages in M&A.
Debt & Capital Structure
- Total debt: Approximately $1.7 billion to $1.8 billion in senior unsecured notes.
- Debt/EBITDA ratio: 1.4x to 1.6x (highly conservative given the cash flow profile).
- Credit rating: BBB- / Baa3 (Investment Grade).
- Key debt instruments: Fixed-rate senior unsecured notes with staggered maturities.
- Maturity profile: Well-laddered with maturities typically spanning 5 to 10 years out.
- Interest rate profile: 100% fixed rate on the senior notes.
- Covenants: Standard investment-grade incurrence covenants; no restrictive financial maintenance covenants.
- Share repurchase programme: Extremely active. The company routinely spends 100% or more of its free cash flow on buybacks. In 2025, the company returned over $1.1 billion to shareholders.
- Dividend policy: Initiated in 2025. The quarterly dividend was increased to $0.81 per share in early 2026 (yielding approximately 1.3%).
Cash Flow Characteristics
- Operating cash flow conversion: OCF / Net Income is typically 1.1x to 1.2x.
- Free cash flow margin: 60% to 65% of revenue ($1.068 billion FCF on $1.66 billion revenue in 2025).
- Major non-cash items: Depreciation, stock-based compensation, and the change in deferred revenue.
- Working capital cash flow impact: The continuous growth in deferred revenue acts as a perpetual source of operating cash flow.
- Capex intensity: Extremely low, resulting in free cash flow that nearly mirrors operating cash flow.
- Cash tax rate vs. GAAP effective tax rate: Cash taxes are generally aligned with the GAAP effective tax rate (around 22% to 24%), though timing differences from stock-based compensation can create minor variances.
Sheet Structure
- Assumptions: Hardcoded drivers for domain base growth, renewal rates, pricing, margins, and capital returns.
- Domain Roll-Forward: The operational engine of the model. Tracks Beginning Domain Base, New Registrations, Expiring Domains, Renewals, and Ending Domain Base for both .com and .net.
- Income Statement: Standard GAAP view. Revenue, Cost of Revenues, Gross Profit, Sales and Marketing, R&D, G&A, Operating Income, Interest Expense, Tax, and Net Income.
- Balance Sheet: Assets (Cash, PP&E, Deferred Tax Assets), Liabilities (Deferred Revenue, Long-Term Debt), and Stockholders' Deficit (Treasury Stock, Retained Earnings).
- Cash Flow Statement: Operating, Investing, and Financing cash flows. Must explicitly link the change in deferred revenue from the balance sheet.
- Debt Schedule: Tranches of senior notes, interest expense calculations, and maturity walls.
- Deferred Revenue Waterfall: Calculates cash bookings versus recognised revenue to accurately forecast the deferred revenue liability balance.
- DCF Valuation: Unlevered free cash flow build, WACC calculation, terminal value, and bridge from enterprise value to equity value (accounting for negative equity).
Key Financial Relationships
- Ending Domain Base = Beginning Domain Base + New Registrations - Deleted/Non-Renewed Domains
- Non-Renewed Domains = Expiring Domains x (1 - Renewal Rate)
- Average Domain Base = (Beginning Domain Base + Ending Domain Base) / 2
- Blended ARPU = Total Registry Revenue / Average Domain Base
- Cash Bookings = Recognised Revenue + (Ending Deferred Revenue - Beginning Deferred Revenue)
- Cost of Revenues = Total Revenue x (1 - Gross Margin %)
- Operating Expenses = (R&D % x Revenue) + (SG&A % x Revenue)
- Operating Income = Total Revenue - Cost of Revenues - Operating Expenses
- Interest Expense = Average Debt Balance x Weighted Average Interest Rate
- Share Count = Beginning Shares - (Share Repurchase Spend / Average Share Price)
- Dividends Paid = Shares Outstanding x Annualised Dividend Per Share
- Free Cash Flow = Operating Cash Flow - Capital Expenditures
Cross-Sheet Dependencies
- The Domain Roll-Forward sheet is the critical foundation. It feeds the average domain base and ARPU calculations on the Income Statement to generate Revenue.
- Revenue and Cash Bookings assumptions feed the Deferred Revenue Waterfall, which outputs the deferred revenue liability to the Balance Sheet and the change in deferred revenue to the Cash Flow Statement.
- The Cash Flow Statement determines the cash available for share repurchases and dividends, which feeds the Balance Sheet (Treasury Stock) and the Income Statement (Interest Income on cash balances and EPS denominator).
- The Debt Schedule feeds Interest Expense to the Income Statement and Debt balances to the Balance Sheet.
Sign Convention
- Revenue, assets, and cash inflows are positive.
- Expenses, capital expenditures, and cash outflows (including share repurchases and dividends) are negative.
- Liabilities and equity are positive balances on the balance sheet.
- In the cash flow statement, an increase in an asset is negative, and an increase in a liability (like deferred revenue) is positive.
Things Most Likely to Go Wrong
- Negative Equity Confusion: Verisign has a massive stockholders' deficit due to years of aggressive share buybacks funding treasury stock. Builders often assume the balance sheet is broken or try to force equity to be positive. The model must allow for negative total equity.
- Deferred Revenue Disconnect: Failing to properly link cash bookings, recognised revenue, and the deferred revenue balance will break the cash flow statement. OCF relies heavily on the cash collected upfront.
- ARPU vs Pricing Rules: Assuming a flat ARPU growth rate ignores the ICANN contract rules. The model must account for the fact that .com prices can only be raised in four out of six years.
- Share Count Circularity: Calculating share repurchases based on free cash flow, which changes EPS, which changes the share price assumption, can cause circular references. Use a hardcoded average share price for buyback calculations.
- Renewal Rate Misinterpretation: The renewal rate applies to *expiring* domains, not the total domain base. Applying the renewal rate to the total base will drastically understate domain deletions.
- Ignoring .net Dynamics: While .com is the primary driver, .net has different pricing rules (10% annual increases allowed) and different growth dynamics (often shrinking slightly while .com grows).
- Tax Benefit Anomalies: Historical net income includes one-time tax benefits (e.g., $69.3 million in Q4 2023). The model must normalise the effective tax rate going forward rather than using a historical average that includes these anomalies.
- Dividend Cash Drain: Verisign initiated a dividend in 2025. Failing to model this cash outflow will overstate the cash available for share repurchases.
Validation Checks
- Operating Margin: Must remain between 65% and 69%. Flag if it drops below 65%.
- Free Cash Flow Conversion: FCF should be roughly 60% to 65% of total revenue.
- Balance Sheet Check: Total Assets must exactly equal Total Liabilities + Stockholders' Deficit in every period.
- Domain Base Growth: Should align with management guidance of 1.5% to 3.5% for 2026. Flag if growth exceeds 5%.
- Renewal Rate: Should remain tightly bound between 73% and 76% (actual Q4 2025 was 75.0%).
- Debt to EBITDA: Should remain below 2.0x. Flag if leverage spikes, as the company manages the balance sheet conservatively.
- Effective Tax Rate: Should normalise around 22% to 24%.
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Domain Base Growth Rate | 2.5 | % | Midpoint of management's 2026 guidance (1.5% to 3.5%). |
| Blended ARPU Growth | 3.5 | % | Reflects contractual price increases blended across .com and .net bases. |
| Renewal Rate | 75.0 | % | Based on actual Q4 2025 preliminary renewal rate. |
| Gross Margin | 86.0 | % | Consistent with historical 3-year average. |
| R&D as % of Revenue | 5.5 | % | Consistent with historical run-rate. |
| SG&A as % of Revenue | 11.5 | % | Consistent with historical run-rate. |
| Capex as % of Revenue | 3.0 | % | Reflects slight increase for AI-related infrastructure needs. |
| Effective Tax Rate | 23.0 | % | Normalised statutory and state blended rate. |
| Annual Dividend Per Share | 3.24 | $ | Based on Q1 2026 declared quarterly dividend of $0.81. |
| Share Repurchase Allocation | 85.0 | % | Percentage of Free Cash Flow (after dividends) allocated to buybacks. |
| Weighted Average Interest Rate | 4.5 | % | Based on current outstanding senior notes profile. |
| WACC | 7.5 | % | Low beta, highly predictable cash flows, and low cost of debt. |
| Terminal Growth Rate | 2.0 | % | Reflects long-term GDP growth and mature internet infrastructure status. |
Data Sources & Benchmarks
- SEC Filings: Verisign Investor Relations website (investor.verisign.com) for 10-K, 10-Q, and 8-K filings.
- Industry Data: ICANN registry reports (icann.org) for monthly domain zone file data and contract terms.
- Key Peers: GoDaddy (GDDY) as the largest registrar and primary customer; Wix (WIX) and Squarespace (SQSP) for broader website creation trends.
- Macro Indicators: Global broadband penetration and SMB business formation statistics.
- Consensus Estimates: FactSet or Bloomberg for forward-looking revenue and EPS estimates.
Sources
Do more with the Verisign model
Frequently asked
What does Verisign do and what is its business model?+
Verisign is the global provider of domain name registry services, acting as the sole authoritative registry for the .com and .net top-level domains. It operates a monopolistic, asset-light business model under exclusive contracts, generating 100% of its revenue from Registry Services. This results in an exceptionally strong competitive position and high operating margins.
How does Verisign generate its revenue?+
Verisign generates revenue primarily from Registry Services, driven by the Average Domain Name Base multiplied by the Average Revenue Per Domain (ARPU). Growth is influenced by new domain registrations, renewal rates of existing domains, and contractual price increases. Revenue is recognized ratably over the term of the registration, as customers pay upfront for multi-year services.
What are Verisign's typical operating margins?+
Verisign enjoys exceptionally strong operating margins, which typically exceed 67% due to its effective monopoly and asset-light business model. The financial model assumes COGS as a percentage of revenue at approximately 14.13%. This high profitability contributes significantly to its cash flow generation capacity.
What is Verisign's capital expenditure strategy?+
Verisign's capital expenditure (Capex) historically ranges from 2% to 4% of revenue and is almost entirely maintenance and security-driven. These investments ensure 100% uptime of its root servers and registry, including ongoing investments in AI-related infrastructure and network security. The financial model assumes Capex as a percentage of revenue at approximately 3.14%.
How does Verisign's negative working capital position impact its finances?+
Verisign benefits from a massive negative working capital position because customers pay upfront for multi-year domain registrations. This provides the company with an interest-free float, enhancing its cash flow generation capacity. The financial model assumes Net Working Capital as a percentage of revenue at -0.5.
Can I download a financial model for Verisign and what is its forecast horizon?+
Yes, a downloadable Excel model is available for Verisign to evaluate its equity value and cash flow generation capacity. This model focuses on the company's predictable revenue streams and its ability to fund share repurchases and dividends. The forecast horizon for the model is from FY2026 to FY2030.
Have more financial modelling questions? Contact us
Created by ex-finance professionals
Hey, I’m Alex and I created Finamodel.
Over my years in the finance industry I kept building the same models over and over again. Same structure, same assumptions, different logo. So I started building frameworks to turn them into clean, reusable templates.
Every model here is one I’d actually use for a client, and I personally vet each one before it goes up.
I’m not an expert in every industry, but I’ve built enough models to know what belongs in one. And when something is completely foreign to me, I reach out to my network for experts to work on our models with us.
Having a template library on hand cuts a first build from hours to minutes.
Need help finding your model? You’ll find me in the Finamodel app!
Other IT Services Company Financial Models
Browse another company in the same sector.
Accenture
Accenture is a global professional services company providing strategy, consulting, technology, and operations services to enterprise clients.
CDW
CDW Corporation is a leading multi-brand provider of information technology solutions to business, government, education, and healthcare customers in the United States, the United Kingdom, and Canada.
Cognizant
Cognizant is a multinational information technology services and consulting company that helps clients modernise technology, reimagine processes, and transform experiences.
EPAM Systems
EPAM Systems is a global provider of digital platform engineering and software development services, helping clients navigate complex digital and AI transformations.
GoDaddy
GoDaddy is a global provider of cloud-based products and personalised guidance for small businesses, individuals, and everyday entrepreneurs.
IBM
International Business Machines Corporation (IBM) is a global technology company that provides hybrid cloud and AI solutions, software, consulting, and infrastructure hardware.
Explore more Tech & Software financial model templates.
