Good day, everyone, and welcome to VeriSign's First Quarter 2021 Earnings Call. Today's conference is being recorded. Recording of this call is not preprinted unless preauthorized. At this time, I would like to turn the conference over to Mr. David Attachley, Vice President of Investor Relations and Corporate Treasurer.
Please go ahead, sir.
Thank you, operator. Welcome to VeriSign's 1st quarter And George Kilgus, Executive Vice President and CFO. This call and presentation are being webcast from the Investor Relations 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 And are documents filed with the SEC, specifically the most recent report on Forms 10 ks. VeriSign does not update financial The financial results in today's call and the matters we will be discussing today Include GAAP results and 2 non GAAP measures used by VeriSign, adjusted EBITDA and free cash flow.
GAAP to non GAAP reconciliation information is appended to the slide presentation, which can be found on the Investor Relations section of our website available after this call. 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 of performance for VeriSign. During the Q1, we saw increased demand for our domain names across most regions as businesses continued to expand their online presence. During the Q1, we processed 11,600,000 new registrations and the domain name base increased by 2,800,000 names. At the end of March, the domain name base in dotcomand.net totaled 168,000,000 consisting of 154,600,000 names .com and 13,400,000 names for dotnet with a year over year growth rate of 4.6%.
Although renewal rates are not fully measurable until 45 days after the end of the quarter, we believe that the renewal rate for the Q1 of 2021 will 75.9 percent. This preliminary rate compares to 75.4% achieved in the Q1 of 2020 And 73.5 percent last quarter. As we look forward for fiscal 2021, We now expect a domain name base growth rate of between 4.0% and 5.5%. This updated range reflects the strength we witnessed in new additions to the base and our outlook for the balance of the year. During the quarter, we continued to deliver solid financial results while maintaining, investing in and evolving our critical infrastructure And complying with high operational standards required by our ICANN agreements.
Our critical infrastructure enables us to reliably and accurately provide Our financial and liquidity position remains stable with $1,180,000,000 in cash, cash equivalents and marketable securities at the end of the quarter. Share repurchases during the Q1 totaled $173,000,000 or 876,000 shares. At quarter end, dollars910,000,000 remained available and authorized under the current share repurchase program, which has no expiration. We continually evaluate the overall liquidity and investing needs of the business and consider the best uses for our cash, including potential share repurchases. Regarding Dotweb, we have been informed that the independent review process panel formally Clear the IRP hearing closed on April 7, 2021.
Under the applicable arbitration rules, The IRP panel should now issue a final decision within 60 days from that date. As a reminder, an IRP under ICANN's bylaws It's for the purpose of ensuring that ICANN followed its own policies and procedures when making decisions. Our expectation is that Following the resolution of the IRP, the ICANN Board will make a final decision on the delegation of the .webtld. The updated guidance we're providing today does not include any revenue or expenses related to .web. And now I'd like to turn the call over to George.
Thanks, Jim, and good afternoon, everyone. For the quarter ended March 31, 2021, The company generated revenue of $324,000,000 up 3.6% from the same quarter in 2020 And delivered operating income of $210,000,000 up 2% from $206,000,000 in the same quarter a year ago. Operating expense totaled $113,000,000 compared to $116,000,000 last quarter $106,000,000 in the Q1 a year ago. The year over year increase in operating expense is primarily a result of incremental and continued operational investments in personnel and infrastructure. The operating margin in the quarter was 65% compared to 66% for the same quarter a year ago.
Net income totaled $150,000,000 compared to $334,000,000 a year earlier, which Diluted earnings per share of $1.33 in the Q1 this year compared to $2.86 for the same quarter last year. As noted in our earnings release, net income for the Q1 last year included the recognition of 168,000,000 Operating cash flow for the Q1 was $198,000,000 and free cash flow was $192,000,000 compared with $180,000,000 and 100 and $69,000,000 respectively for the Q1 last year. The year over year increase in operating cash flow Was primarily driven by the increased volume of new registrations and renewals, partially offset by higher cash payments for operating expenses. I'll now discuss our updated full year 2021 guidance. Revenue is now This narrowed and increased revenue range forecast Reflects the updated domain name base growth rate expectation of between 4% 5.5% that Jim mentioned earlier.
The operating margin is still expected to be between 64% 65%. This guidance reflects expectation of incremental and continued investment in our operational infrastructure and personnel in 2021. Interest expense and non operating income net It's still expected to be an expense of between $88,000,000 to $92,000,000 Capital expenditures Are also still expected to be between $55,000,000 $65,000,000 The GAAP effective tax rate It is still expected to be between 20% 23%, and we expect the cash tax rate for our 2021 fiscal year to also be within the same guidance range. In summary, VeriSign continued to demonstrate sound financial performance during the Q1 and we look forward to continuing our focused execution throughout 2021. Now I'll turn the call back to Jim for his closing remarks.
Thank you, George. In closing, I want to acknowledge the team here at VeriSign for their Hard work in maintaining and operating our critical Internet infrastructure even during the challenges of working remotely during the pandemic. Now we'll open the call for your questions. Operator, we're ready for the first question.
Thank you. We will go first to Rob Oliver of Baird.
Great. Good afternoon. Thank you very much for taking my question. First one, Jim for you, just clearly macro trends It appear better with you guys taking up the range on domains on the revenue side. I know you mentioned in your prepared remarks that, that was sort of strength across And I was wondering if you could add a little more context to that, maybe both from a geographic perspective to see if there are any particular pockets of strength, As well as maybe to talk about some of the dynamics that you believe are driving or what you guys are seeing driving that increased domain activity?
Then I had a follow-up.
Okay, thanks. Well, first of all, I think the recovering economy is certainly contributing to Increased Internet use and that includes additional domain name use. A good part of the strength came from the U. S, but it was very broad based In virtually all geographic regions, we do have limited visibility recall through our channel, but certainly The adds this quarter were broad based across all regions, driven I think primarily by recovering Economy and the economic activity that comes with it, but also recall that CommonNet, our trusted brands and as people Continue to get online. Our ads are certainly going to benefit from it and they did this quarter.
Got it. Okay. Thank you. And then, George, just one follow-up for you. I know you guys going back a couple of quarters have A bit about the need for increased operational spend for your infrastructure and RD and security and things like that.
I guess a couple of questions. How do you feel you are in that trajectory? And I guess by your implied increased revenue guide for the year, but maintaining the margin you guys are looking to probably spend a little bit more and just wanted to get a sense for Are you spending on the same things and how you're thinking about that this year? Thank you.
Yes. Thanks, Rob. Similar to last year and continued this year, we continue to spend as you indicate and invest in areas of cybersecurity as well as structure areas and those are both in personnel as well as new software tools and you can see that Our headcount for the year for the quarter ended at 918 people. We're continuing to execute on our plans this year. We'll continue to make investments in those areas, and hence, the guidance range of 64% to 65% for Operating margin is still appropriate.
Okay, great. Thank you, guys.
We will now go to our next question and that will be from Nick Jones with Citi.
Great. Thanks for taking the questions. I have 2. I guess the first one, could you just expand a little bit on the timelines For Dot Webb, 60 days from 7th, a decision needs to be made and then it sounds like there potentially is additional Time after that, I guess, how should we be thinking about the 60 day timeline in the context of when .web will be delegated and then when
Well, first of all, so the announcement from the RFP panel was that they had Concluded their hearing on April 7, and that started the 60 day clock that you're referring to. So, they have concluded the hearing. We assume that in that Time frame, their final report will be issued. So that being the Hopefully, final step in the litigation part of this process, we don't comment on that pending litigation. I'll just simply say that According to their announcement, by the time we're talking again next quarter, we should have quite a bit more to say.
So I think until that happens, it's Premature to discuss exactly when and how .web will be delegated, and then we get it launched and into the hands of consumers. It's just simply too early to I'll tell you about exactly how that will play out. As I mentioned, we do expect that at the conclusion here when we do see the IRP report That the ICANN Board will then proceed to determine the delegation of Dot When we get to that point, I think we'll be able to say more about the timing of our own efforts, but until then it would be premature. So At least we know now that we'll have hopefully a lot more to say the next time we talk to you next quarter.
Great, Great. And then I guess, I look at the domain name Industry Brief, total deal TLDs Klein, I think it's like $4,500,000 or a little less sequentially. Dotcom continues to grow. Can you talk about kind of what's underpinning, I guess, what would be share gains in terms of Dotcom gaining in TLDs and maybe why others are declining? Any thoughts on those trends?
Thanks.
Well, so let me just say, first of all, that we did understand that this Broad based bit of growth in ads that we had this quarter. The registrars are reporting this is growth from small businesses and individuals and it's broad based. The competitive registries, we don't have insights into their particular businesses and their exact numbers. I'll just simply say that as people are getting online, CommonNet are trusted brands, and we continue to see that growth. The registrars are having success with them, and we're pleased with that growth in the quarter.
Great. Thank you.
And we will take our last question from Sterling Auty of JPMorgan.
Yes, thanks. Hi, guys. So just following along that line of questioning, the $11,600,000 gross new registration in the quarter was up nicely versus what you saw last year. You pointed to both small business and consumers, but I'm wondering what you might be hearing back from the registrars in terms of the mix. How much of this might be tied to the continued elevated new business application data that we see Versus maybe other types of consumer use cases for domains.
Yes. George, do you want to comment there?
Yes. I would say, Sterling, we don't quite get a detailed mix of all the registrars. I can tell you that From what we do here, they're seeing good demand for consumers, I mean businesses wanting to get online. As you know, over the last couple of years, registrars have invested a lot of money in increasing the utility of a domain name and making it much easier to Build a website and get online for consumers. And as a result, We're seeing registrar spending a lot more money advertising and marketing to these small businesses to bring them online.
And I think that has been Helpful for the domain name industry. As far as the economy, the only insight we have there is that Registars just believe that this trend is a pretty good trend and it will continue for the rest of the year. And when we query it to that, they just reply back that they feel the economy is opening up and And that's supporting some of that optimism on their part.
And then if you look at the total number of New TLDs, it's been in kind of steady decline from what it hit the peak back in, let's say, September of 2020, how much of that is just kind of failed marketing programs? And have you I heard from the registrars that they just kind of back to Jim your comment.comand.netaretrusteddomains. Are you just feeling like you're starting to regain share? And is there more marketing dollars being put behind .comand.net@thispoint?
Well, let me I'll ask George to comment on that. But first, let me just add this and it sort of goes to Nick's question earlier as well. I think what we're not mentioning here is this is a very competitive marketplace and we haven't mentioned the CountryCo TLDs, especially the ones that have Then commercialized, for example, .co.tv, many of these CountryCode TLDs that are not New G TLDs, not legacy TLDs. So the market is a little bit bigger than all of that. I just wanted to make sure that we understood that there's a bigger There that we normally don't talk about and have limited visibility into, but many of them have been commercialized and so they certainly need to be factored in.
George, did you want to comment further? I think, Sterling, the other half of your question was about marketing.
Sure. So I don't really have any insight into the marketing activities of the new gTLDs. But if you go to ICANN's records, which are public and you Look at some of that data for new gTLDs, I think the decline in the new gTLDs is really centered in a few TLDs that had some very rapid rise a year or 2 ago, and I As they come up for renewal, maybe they're not renewing as well. I don't have any specific insight into them unless what I see or Based on what I see here in the ICANN data, but I think that decline is really specific to just a few TLDs that had Very strong growth in prior years.
Got you. And then for your own marketing programs here for 2021, Can you give us a sense within the context of the guidance you've given around margins, how should we think about The marketing spend and in light of a potential favorable ruling on .web, What should we be thinking about the plans to put the marketing muscle behind the launch of .web?
So, this is George Sterling. So as far as .web and marketing muscle, I just think it's too early At that point, the guidance that we provided this year for both revenue expense, as Jim mentioned, doesn't include any Revenue or expense associated with .web, once we have The ToD delegated and we've got our plans in place, then we'll be able to communicate that. As far as our own sales and marketing programs, You saw us spend a little bit more in sales and marketing in the Q1 compared to last year. We had I think that's more about some of the programs we curtailed in 2020 in the Q1 As a result of the pandemic coming on and people working toward home working from home. This year, we're continuing to Our direct marketing plans as well as the other programs that we roll out at the beginning of the year.
And as far as I can tell, it's really business as usual for us here This year as well.
All right, great. And last question, because I get it quite a bit. I kind of know Probably how you're going to answer, but I want to ask in the public forum anyway. .Netandpricing. So you've made a price decision here on dotcom.
It's been announced, But it's been a little bit since you last took a price action on dotnet. What are your thoughts around What you might be doing here with pricing for dot net in 2021 or 2022?
Yes, Sterling, and I'll give you the you've asked the same question. I have to give you the same answer. We don't guide to pricing, of course. I'll just Point out that, .net is competitively priced. .Com is, of course, below it at this But we don't guide to future pricing decisions.
And as you pointed out, we do have a price increase for dotcom that will be effective in September.
Understood. Thank you, guys. Appreciate it. Sure.
Thank you.
And with that, that does conclude today's question and answer session. I'd like to turn things back to David Eckley for any additional or closing 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. And again, everyone, that does conclude today's call. We'd like to thank you again for your participation. You may now disconnect.