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Verisign Reports First Quarter 2019 Results

April 25, 2019

RESTON, Va.--(BUSINESS WIRE)--Apr. 25, 2019-- VeriSign, Inc. (NASDAQ: VRSN), a global provider of domain name registry services and internet infrastructure, today reported financial results for the first quarter of 2019.

First Quarter GAAP Financial Results

VeriSign, Inc. and its subsidiaries (“Verisign”) reported revenue of $306 million for the first quarter of 2019, up 2.4 percent from the same quarter in 2018. Verisign reported net income of $163 million and diluted earnings per share (diluted “EPS”) of $1.35 for the first quarter of 2019, compared to net income of $134 million and diluted EPS of $1.09 for the same quarter in 2018. The operating margin was 65.4 percent for the first quarter of 2019 compared to 62.0 percent for the same quarter in 2018.

First Quarter Non-GAAP Financial Results

Verisign reported, on a non-GAAP basis, net income of $158 million and diluted EPS of $1.31 for the first quarter of 2019, compared to net income of $132 million and diluted EPS of $1.07 for the same quarter in 2018. The non-GAAP operating margin was 69.4 percent for the first quarter of 2019 compared to 66.3 percent for the same quarter in 2018. A table reconciling the GAAP to the non-GAAP results (which excludes the items described under “Non-GAAP Financial Measures and Adjusted EBITDA” below) is appended to this news release.

“We’re pleased to deliver another solid quarter,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.

Financial Highlights

  • Verisign ended the first quarter of 2019 with cash, cash equivalents and marketable securities of $1.25 billion, a decrease of $17 million from the end of 2018.
  • During the first quarter of 2019, Verisign repatriated $249 million of cash held by foreign subsidiaries, net of foreign withholding taxes.
  • Cash flow from operating activities was $187 million for the first quarter of 2019, compared with $90 million for the same quarter in 2018.
  • Deferred revenues as of March 31, 2019 totaled $1.05 billion, an increase of $29 million from the end of 2018.
  • During the first quarter of 2019, Verisign repurchased 1.0 million shares of its common stock for an aggregate cost of $175 million. As of March 31, 2019, there was $891 million remaining for future share repurchases under the share repurchase program which has no expiration date.

Business Highlights

  • Verisign ended the first quarter of 2019 with 154.8 million .com and .net domain name registrations in the domain name base, a 4.4 percent increase from the end of the first quarter of 2018, and a net increase of 1.82 million during the first quarter of 2019.
  • During the first quarter of 2019, Verisign processed 9.8 million new domain name registrations for .com and .net, compared to 9.6 million for the same quarter in 2018.
  • The final .com and .net renewal rate for the fourth quarter of 2018 was 74.3 percent compared with 72.2 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 measures in quarterly earnings news releases, on investor conference calls and during investor conferences and related events. These non-GAAP financial measures do not include the following items that are included in the comparable GAAP financial measures: stock-based compensation, non-cash interest expense through June 30, 2018, and loss on debt extinguishment. Non-GAAP net income is adjusted for an income tax rate of 22 percent which differs 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 these non-GAAP financial measures supplement the GAAP financial measures 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 these non-GAAP financial measures is not meant to be considered in isolation nor as a substitute for financial measures prepared in accordance with GAAP.

The tables appended to this release include a reconciliation of the non-GAAP financial measures to the comparable financial measures 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. (EDT) to review the first quarter 2019 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.

About Verisign

Verisign, a global provider of domain name registry services 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.

VRSNF

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, risks arising from the agreements governing our Registry Services business; 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, 2018, 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.

©2019 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN logo, and other trademarks, service marks, and designs are registered or unregistered trademarks of VeriSign, Inc. and its subsidiaries in the United States and in foreign countries. All other trademarks are property of their respective owners.

 
VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
         
   

March 31,
2019

 

December 31,
2018

ASSETS

       
Current assets:        
Cash and cash equivalents   $ 779,625     $ 357,415  
Marketable securities   473,365     912,254  
Other current assets   62,277     47,365  
Total current assets   1,315,267     1,317,034  
Property and equipment, net   252,237     253,905  
Goodwill   52,527     52,527  
Deferred tax assets   120,192     104,992  
Deposits to acquire intangible assets   145,000     145,000  
Other long-term assets   34,453     41,046  
Total long-term assets   604,409     597,470  
Total assets   $ 1,919,676     $ 1,914,504  

LIABILITIES AND STOCKHOLDERS’ DEFICIT

       
Current liabilities:        
Accounts payable and accrued liabilities   $ 183,996     $ 215,208  
Deferred revenues   757,284     732,382  
Total current liabilities   941,280     947,590  
Long-term deferred revenues   289,730     285,720  
Senior notes   1,785,676     1,785,047  
Long-term tax and other liabilities   309,119     281,621  
Total long-term liabilities   2,384,525     2,352,388  
Total liabilities   3,325,805     3,299,978  
Commitments and contingencies        
Stockholders’ deficit:        
Preferred stock—par value $.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none        
Common stock—par value $.001 per share; Authorized shares: 1,000,000; Issued shares: 352,872 at March 31, 2019 and 352,325 at December 31, 2018; Outstanding shares: 119,391 at March 31, 2019 and 120,037 at December 31, 2018   353     352  
Additional paid-in capital   15,523,542     15,706,774  
Accumulated deficit   (16,927,262 )   (17,089,789 )
Accumulated other comprehensive loss   (2,762 )   (2,811 )
Total stockholders’ deficit   (1,406,129 )   (1,385,474 )
Total liabilities and stockholders’ deficit   $ 1,919,676     $ 1,914,504  
                 
 
VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
     
    Three Months Ended March 31,
    2019   2018
Revenues   $ 306,408     $ 299,288  
Costs and expenses:        
Cost of revenues   45,504     48,152  
Sales and marketing   10,519     17,275  
Research and development   16,132     15,375  
General and administrative   34,001     33,067  
Total costs and expenses   106,156     113,869  
Operating income   200,252     185,419  
Interest expense   (22,631 )   (40,788 )
Non-operating income, net   12,203     7,804  
Income before income taxes   189,824     152,435  
Income tax expense   (27,297 )   (18,172 )
Net income   162,527     134,263  
Other comprehensive income   49     243  
Comprehensive income   $ 162,576     $ 134,506  
         
Earnings per share:        
Basic   $ 1.36     $ 1.38  
Diluted   $ 1.35     $ 1.09  
Shares used to compute earnings per share        
Basic   119,757     97,250  
Diluted   120,317     123,506  
             
 
VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
     
    Three Months Ended March 31,
    2019   2018
Cash flows from operating activities:        
Net income   $ 162,527     $ 134,263  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation of property and equipment   11,593     12,117  
Stock-based compensation   12,462     12,978  
Amortization of discount on investments in debt securities   (3,854 )   (4,128 )
Other, net   (147 )   4,005  
Changes in operating assets and liabilities:        
Other assets   (226 )   (987 )
Accounts payable and accrued liabilities   (31,609 )   (36,271 )
Deferred revenues   29,219     27,120  
Net deferred income taxes and other long-term tax liabilities   7,365     (59,108 )
Net cash provided by operating activities   187,330     89,989  
Cash flows from investing activities:        
Proceeds from maturities and sales of marketable securities   939,561     1,931,930  
Purchases of marketable securities   (496,779 )   (631,456 )
Purchases of property and equipment   (9,133 )   (7,662 )
Other investing activities   (2,958 )   (160 )
Net cash provided by investing activities   430,691     1,292,652  
Cash flows from financing activities:        
Proceeds from employee stock purchase plan   8,253     7,811  
Repurchases of common stock   (204,302 )   (152,741 )
Net cash used in financing activities   (196,049 )   (144,930 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash   255     167  
Net increase in cash, cash equivalents, and restricted cash   422,227     1,237,878  
Cash, cash equivalents, and restricted cash at beginning of period   366,753     475,139  
Cash, cash equivalents, and restricted cash at end of period   $ 788,980     $ 1,713,017  
Supplemental cash flow disclosures:        
Cash paid for interest   $ 13,063     $ 43,326  
Cash paid for income taxes, net of refunds received   $ 14,185     $ 72,959  
                 
 
VERISIGN, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND ADJUSTED EBITDA
(In thousands, except per share data)
(Unaudited)
     
    Three Months Ended March 31,
    2019   2018
   

Operating
Income

  Net Income  

Operating
Income

  Net Income
GAAP as reported   $ 200,252     $ 162,527     $ 185,419     $ 134,263  
Adjustments:                
Stock-based compensation   12,462     12,462     12,978     12,978  
Non-cash interest expense               3,918  
Tax adjustment       (17,206 )       (19,081 )
Non-GAAP   $ 212,714     $ 157,783     $ 198,397     $ 132,078  
                 
Revenues   $ 306,408         $ 299,288      
Non-GAAP operating margin   69.4 %       66.3 %    
Diluted shares       120,317         123,506  
Diluted EPS, non-GAAP       $ 1.31         $ 1.07  
                         

The following table presents the classification of stock-based compensation:

     
   

Three Months Ended
March 31,

    2019   2018
Cost of revenues   $ 1,598     $ 1,609
Sales and marketing   983     1,448
Research and development   1,589     1,721
General and administrative   8,292     8,200
Total stock-based compensation expense   $ 12,462     $ 12,978
               

The following table reconciles GAAP net income to non-GAAP Adjusted EBITDA:

     
   

Year Ended
March 31, 2019

Net Income   $ 610,753  
Interest expense   96,689  
Income tax expense   156,152  
Depreciation and amortization   47,844  
Stock-based compensation   51,988  
Unrealized loss on hedging agreements   119  
Gain on sale of business   (55,550 )
Loss on debt extinguishment   6,554  
Non-GAAP Adjusted EBITDA   $ 914,549  
         

 

Source: VeriSign, Inc.

Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643
Media Relations: Deana Alvy, dalvy@verisign.com, 703-948-3800