Verisign Reports Fourth Quarter and Full Year 2018 Results
RESTON, Va.--(BUSINESS WIRE)--Feb 7, 2019--VeriSign, Inc. (NASDAQ: VRSN), a leader in domain names and internet infrastructure, today reported financial results for the fourth quarter and full year 2018.
Fourth Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries (“Verisign”) reported revenue of $307 million for the fourth quarter of 2018, up 4.0 percent from the same quarter in 2017. Verisign reported net income of $182 million and diluted earnings per share (diluted “EPS”) of $1.50 for the fourth quarter of 2018, compared to net income of $103 million and diluted EPS of $0.83 for the same quarter in 2017. The operating margin was 63.1 percent for the fourth quarter of 2018 compared to 59.7 percent for the same quarter in 2017.
Fourth Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $191 million and diluted EPS of $1.58 for the fourth quarter of 2018, compared to net income of $119 million and diluted EPS of $0.96 for the same quarter in 2017. The non-GAAP operating margin was 66.7 percent for the fourth quarter of 2018 compared to 64.1 percent for the same quarter in 2017. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.
2018 GAAP Financial Results
For the year ended Dec. 31, 2018, Verisign reported revenue of $1.21 billion, up 4.3 percent from $1.17 billion in 2017. Verisign reported net income of $582 million and diluted EPS of $4.75 in 2018, compared to net income of $457 million and diluted EPS of $3.68 in 2017. The operating margin for 2018 was 63.2 percent compared to 60.7 percent in 2017.
2018 Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $620 million and diluted EPS of $5.05 for 2018, compared to net income of $492 million and diluted EPS of $3.96 for 2017. The non-GAAP operating margin for 2018 was 67.5 percent compared to 65.3 percent for 2017.
On Dec. 5, 2018, Verisign completed the previously announced sale of the rights, economic benefits, and obligations, in all customer contracts related to its Security Services business to NeuStar, Inc. The sale resulted in a pre-tax, non-operating gain of $54.8 million, which for fourth quarter and full year 2018, increased GAAP net income, and non-GAAP net income by $52.0 million and $42.8 million, respectively. The gain increased GAAP diluted EPS and non-GAAP diluted EPS by $0.43 and $0.36 in the fourth quarter and by $0.43 and $0.35 for full year 2018. These increases are included in the results above.
“2018 was a strong year for Verisign. The domain name base and revenues grew; we divested non-core assets; and we repurchased 4.4 million of our shares. Significantly, in October, we executed an amendment to the Cooperative Agreement with the Department of Commerce, which gives Verisign the approval to engage with ICANN to amend the .com Registry Agreement to allow Verisign to increase .com domain name registration and renewal fees. The amendment also provides regulatory reduction that allows for a standard renewal of the .com Registry Agreement, which occurs every six years, to proceed without review and approval by the Department of Commerce,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
Financial HighlightsVerisign ended 2018 with cash, cash equivalents, and marketable securities of $1.27 billion, a decrease of $1.15 billion from year-end 2017. Cash flow from operations was $219 million for the fourth quarter of 2018 and $698 million for the full year 2018 compared with $199 million for the same quarter in 2017 and $703 million for the full year 2017. Deferred revenues on Dec. 31, 2018, totaled $1.02 billion, an increase of $19 million from year-end 2017. During the fourth quarter, Verisign repurchased 1.2 million shares of its common stock for $175 million. During the full year 2018, Verisign repurchased 4.4 million shares of its common stock for $600 million. Effective Feb. 7, 2019 the Board of Directors approved an additional authorization for share repurchases of approximately $603 million of common stock, which brings the total amount to $1.0 billion authorized and available under Verisign’s share repurchase program, which has no expiration.
Business HighlightsOn Oct. 26, 2018, Verisign and the U.S. Department of Commerce (“DOC”) entered into Amendment 35 to the Cooperative Agreement, which, among other items, permits Verisign, without further approval of the DOC, to agree with the Internet Corporation for Assigned Names and Numbers (“ICANN”) to change the .com Registry Agreement to increase wholesale prices for .com domain names up to 7 percent in each of the last four years of each six-year period of the .com Registry Agreement. Verisign ended the fourth quarter with 153.0 million .com and .net domain name registrations in the domain name base, a 4.5 percent increase from the end of the fourth quarter of 2017, and a net increase of 1.29 million registrations during the fourth quarter of 2018. In the fourth quarter, Verisign processed 9.5 million new domain name registrations for .com and .net, as compared to 9.0 million for the same quarter in 2017. The final .com and .net renewal rate for the third quarter of 2018 was 74.8 percent compared with 74.4 percent for the same quarter in 2017. Renewal rates are not fully measurable until 45 days after the end of the quarter.
Non-GAAP Financial Measures and Adjusted EBITDA
Verisign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with this information, management typically discloses and discusses certain non-GAAP financial information in quarterly earnings news releases, on investor conference calls and during investor conferences and related events. This non-GAAP financial information does not include the following types of financial measures that are included in GAAP: stock-based compensation, unrealized gain/loss on the contingent interest derivative on the subordinated convertible debentures, non-cash interest expense through June 30, 2018, and loss on debt extinguishment. Non-GAAP net income is decreased by amounts accrued for contingent interest payable through Aug. 15, 2017, related to the subordinated convertible debentures, and is adjusted for an income tax rate of 22 percent starting from the first quarter of 2018, 25 percent for the second through the fourth quarters of 2017, and 26 percent for the first quarter of 2017, all of which differ from the GAAP income tax rate.
On a quarterly basis, Verisign also provides Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure and is calculated in accordance with the terms of the indentures governing Verisign’s senior notes. Adjusted EBITDA refers to net income before interest, taxes, depreciation and amortization, stock-based compensation, unrealized gain/loss on hedging agreements, gain on the sale of a business, and loss on debt extinguishment.
Management believes that this non-GAAP financial data supplements the GAAP financial data by providing investors with additional information that allows them to have a clearer picture of Verisign’s operations and financial performance and the comparability of Verisign’s operating results from period to period. The presentation of this additional information is not meant to be considered in isolation nor as a substitute for results prepared in accordance with GAAP.
The tables appended to this release include a reconciliation of the non-GAAP financial information to the comparable financial information reported in accordance with GAAP for the given periods.
Today’s Conference Call
Verisign will host a live conference call today at 4:30 p.m. (EST) to review the fourth quarter and full year 2018 results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (786) 789-4776 (international), conference ID: Verisign. A listen-only live web cast of the conference call and accompanying slide presentation will also be available at https://investor.verisign.com. An audio archive of the call will be available at https://investor.verisign.com/events.cfm. This news release and the financial information discussed on today’s conference call are available at https://investor.verisign.com.
Verisign, a leader in domain names and internet infrastructure, enables internet navigation for many of the world’s most recognized domain names. Verisign enables the security, stability, and resiliency of key internet infrastructure and services, including providing root zone maintainer services, operating two of the 13 global internet root servers, and providing registration services and authoritative resolution for the .com and .net top-level domains, which support the majority of global e-commerce. To learn more about what it means to be Powered by Verisign, please visit Verisign.com.
Statements in this announcement other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These statements involve risks and uncertainties that could cause our actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, whether an amended .com Registry Agreement will include any or all of the changes permitted in Amendment 35; the failure to renew key agreements on similar terms, or at all; new or existing governmental laws and regulations in the U.S. or other applicable foreign jurisdictions; system interruptions, security breaches, attacks on the internet by hackers, viruses, or intentional acts of vandalism; the uncertainty of the impact of changes to the multi-stakeholder model of internet governance; risks arising from our operation of two root zone servers and our performance of the Root Zone Maintainer functions; changes in internet practices and behavior and the adoption of substitute technologies; the success or failure of the evolution of our markets; the highly competitive business environment in which we operate; whether we can maintain strong relationships with registrars and their resellers to maintain their marketing focus on our products and services; the possibility of system interruptions or failures; challenging global economic conditions; economic, legal and political risk associated with our international operations; our ability to protect and enforce our rights to our intellectual property and ensure that we do not infringe on others’ intellectual property; the outcome of legal or other challenges resulting from our activities or the activities of registrars or registrants, or litigation generally; the impact of our new strategic initiatives, including our IDN gTLDs; whether we can retain and motivate our senior management and key employees; and the impact of unfavorable tax rules and regulations. More information about potential factors that could affect our business and financial results is included in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended Dec. 31, 2017, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Verisign undertakes no obligation to update any of the forward-looking statements after the date of this announcement.
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KEYWORD: UNITED STATES NORTH AMERICA VIRGINIA
INDUSTRY KEYWORD: TECHNOLOGY INTERNET NETWORKS SOFTWARE SECURITY
SOURCE: VeriSign, Inc.
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PUB: 02/07/2019 04:05 PM/DISC: 02/07/2019 04:05 PM