Verisign Reports Fourth Quarter and Full Year 2019 Results
Fourth Quarter GAAP Financial Results
Fourth Quarter Non-GAAP Financial Results
2019 GAAP Financial Results
2019 Non-GAAP Financial Results
Fourth quarter and full year 2018 GAAP net income and non-GAAP net income included
“Focused execution yielded another solid quarter that caps off not only a solid year but a strong decade in which we’ve focused on our core business, expanded the domain name base and returned value to our shareholders. In 2019 we marked more than 22 years of uninterrupted availability of the Verisign DNS for .com and .net,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
Financial Highlights
-
Verisign ended 2019 with cash, cash equivalents, and marketable securities of$1.22 billion , a decrease of$52 million from year-end 2018. -
Cash flow from operations was
$194 million for the fourth quarter of 2019 and$754 million for the full year 2019 compared with$219 million for the same quarter in 2018 and$698 million for the full year 2018. -
Deferred revenues on
Dec. 31, 2019 , totaled$1.03 billion , an increase of$16 million from year-end 2018. -
During the fourth quarter,
Verisign repurchased 1.0 million shares of its common stock for$195 million . During the full year 2019,Verisign repurchased 3.9 million shares of its common stock for$738 million . -
Effective
Feb. 6, 2020 the Board of Directors approved an additional authorization for share repurchases of approximately$743 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 Highlights
-
Verisign ended the fourth quarter with 158.8 million .com and .net domain name registrations in the domain name base, a 3.9 percent increase from the end of the fourth quarter of 2018, and a net increase of 1.46 million registrations during the fourth quarter of 2019. -
In the fourth quarter,
Verisign processed 10.3 million new domain name registrations for .com and .net, as compared to 9.5 million for the same quarter in 2018. - The final .com and .net renewal rate for the third quarter of 2019 was 73.7 percent compared with 74.8 percent for the same quarter in 2018. Renewal rates are not fully measurable until 45 days after the end of the quarter.
Non-GAAP Financial Measures and Adjusted EBITDA
On a quarterly basis,
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 these non-GAAP financial measures 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
About
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 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
©2020
VERISIGN, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) |
|||||||
|
December 31,
|
|
December 31,
|
||||
ASSETS |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
508,196 |
|
|
$ |
357,415 |
|
Marketable securities |
709,863 |
|
|
912,254 |
|
||
Other current assets |
60,530 |
|
|
47,365 |
|
||
Total current assets |
1,278,589 |
|
|
1,317,034 |
|
||
Property and equipment, net |
250,283 |
|
|
253,905 |
|
||
Goodwill |
52,527 |
|
|
52,527 |
|
||
Deferred tax assets |
87,798 |
|
|
104,992 |
|
||
Deposits to acquire intangible assets |
145,000 |
|
|
145,000 |
|
||
Other long-term assets |
39,812 |
|
|
41,046 |
|
||
Total long-term assets |
575,420 |
|
|
597,470 |
|
||
Total assets |
$ |
1,854,009 |
|
|
$ |
1,914,504 |
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable and accrued liabilities |
$ |
209,988 |
|
|
$ |
215,208 |
|
Deferred revenues |
755,178 |
|
|
732,382 |
|
||
Total current liabilities |
965,166 |
|
|
947,590 |
|
||
Long-term deferred revenues |
278,702 |
|
|
285,720 |
|
||
Senior notes |
1,787,565 |
|
|
1,785,047 |
|
||
Long-term tax and other liabilities |
312,676 |
|
|
281,621 |
|
||
Total long-term liabilities |
2,378,943 |
|
|
2,352,388 |
|
||
Total liabilities |
3,344,109 |
|
|
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: 353,157 at December 31, 2019 and 352,325 at December 31, 2018; Outstanding shares: 116,715 at December 31, 2019 and 120,037 at December 31, 2018 |
353 |
|
|
352 |
|
||
Additional paid-in capital |
14,989,658 |
|
|
15,706,774 |
|
||
Accumulated deficit |
(16,477,490 |
) |
|
(17,089,789 |
) |
||
Accumulated other comprehensive loss |
(2,621 |
) |
|
(2,811 |
) |
||
Total stockholders’ deficit |
(1,490,100 |
) |
|
(1,385,474 |
) |
||
Total liabilities and stockholders’ deficit |
$ |
1,854,009 |
|
|
$ |
1,914,504 |
|
VERISIGN, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except per share data) (Unaudited) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Revenues |
$ |
310,543 |
|
|
$ |
307,452 |
|
|
$ |
1,231,661 |
|
|
$ |
1,214,969 |
|
Costs and expenses: |
|
|
|
|
|
|
|
||||||||
Cost of revenues |
46,454 |
|
|
48,368 |
|
|
180,467 |
|
|
192,134 |
|
||||
Sales and marketing |
13,862 |
|
|
17,179 |
|
|
46,637 |
|
|
64,891 |
|
||||
Research and development |
15,101 |
|
|
15,042 |
|
|
60,805 |
|
|
57,884 |
|
||||
General and administrative |
36,560 |
|
|
32,897 |
|
|
137,625 |
|
|
132,668 |
|
||||
Total costs and expenses |
111,977 |
|
|
113,486 |
|
|
425,534 |
|
|
447,577 |
|
||||
Operating income |
198,566 |
|
|
193,966 |
|
|
806,127 |
|
|
767,392 |
|
||||
Interest expense |
(22,712 |
) |
|
(22,634 |
) |
|
(90,611 |
) |
|
(114,845 |
) |
||||
Non-operating income, net |
9,123 |
|
|
62,570 |
|
|
43,260 |
|
|
76,969 |
|
||||
Income before income taxes |
184,977 |
|
|
233,902 |
|
|
758,776 |
|
|
729,516 |
|
||||
Income tax expense |
(36,652 |
) |
|
(51,707 |
) |
|
(146,477 |
) |
|
(147,027 |
) |
||||
Net income |
148,325 |
|
|
182,195 |
|
|
612,299 |
|
|
582,489 |
|
||||
Other comprehensive (loss) income |
(202 |
) |
|
192 |
|
|
190 |
|
|
130 |
|
||||
Comprehensive income |
$ |
148,123 |
|
|
$ |
182,387 |
|
|
$ |
612,489 |
|
|
$ |
582,619 |
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share: |
|
|
|
|
|
|
|
||||||||
Basic |
$ |
1.27 |
|
|
$ |
1.51 |
|
|
$ |
5.17 |
|
|
$ |
5.13 |
|
Diluted |
$ |
1.26 |
|
|
$ |
1.50 |
|
|
$ |
5.15 |
|
|
$ |
4.75 |
|
Shares used to compute earnings per share |
|
|
|
|
|
|
|
||||||||
Basic |
117,169 |
|
|
120,591 |
|
|
118,513 |
|
|
113,452 |
|
||||
Diluted |
117,658 |
|
|
121,329 |
|
|
118,968 |
|
|
122,661 |
|
VERISIGN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
|||||||
|
Year Ended December 31, |
||||||
|
2019 |
|
2018 |
||||
Cash flows from operating activities: |
|
|
|
||||
Net income |
$ |
612,299 |
|
|
$ |
582,489 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
Depreciation of property and equipment |
46,330 |
|
|
48,367 |
|
||
Stock-based compensation |
50,626 |
|
|
52,504 |
|
||
Amortization of discount on investments in debt securities |
(14,777 |
) |
|
(18,259 |
) |
||
Gain on sale of business |
(817 |
) |
|
(54,840 |
) |
||
Other, net |
3,668 |
|
|
14,646 |
|
||
Changes in operating assets and liabilities: |
|
|
|
||||
Other assets |
(3,279 |
) |
|
1,041 |
|
||
Accounts payable and accrued liabilities |
(24 |
) |
|
(2,130 |
) |
||
Deferred revenues |
16,191 |
|
|
19,825 |
|
||
Net deferred income taxes and other long-term tax liabilities |
43,675 |
|
|
54,124 |
|
||
Net cash provided by operating activities |
753,892 |
|
|
697,767 |
|
||
Cash flows from investing activities: |
|
|
|
||||
Proceeds from maturities and sales of marketable securities |
2,247,904 |
|
|
4,031,809 |
|
||
Purchases of marketable securities |
(2,030,521 |
) |
|
(2,976,752 |
) |
||
Purchases of property and equipment |
(40,316 |
) |
|
(37,007 |
) |
||
(Payments) Proceeds from sale of business |
(9,872 |
) |
|
52,240 |
|
||
Other investing activities |
— |
|
|
(160 |
) |
||
Net cash provided by investing activities |
167,195 |
|
|
1,070,130 |
|
||
Cash flows from financing activities: |
|
|
|
||||
Repurchases of common stock |
(782,583 |
) |
|
(638,152 |
) |
||
Proceeds from employee stock purchase plan |
13,152 |
|
|
12,836 |
|
||
Repayment of principal on subordinated convertible debentures |
— |
|
|
(1,250,009 |
) |
||
Other financing activities |
(872 |
) |
|
— |
|
||
Net cash used in financing activities |
(770,303 |
) |
|
(1,875,325 |
) |
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
64 |
|
|
(958 |
) |
||
Net increase (decrease) in cash, cash equivalents and restricted cash |
150,848 |
|
|
(108,386 |
) |
||
Cash, cash equivalents, and restricted cash at beginning of period |
366,753 |
|
|
475,139 |
|
||
Cash, cash equivalents, and restricted cash at end of period |
$ |
517,601 |
|
|
$ |
366,753 |
|
Supplemental cash flow disclosures: |
|
|
|
||||
Cash paid for interest |
$ |
87,683 |
|
|
$ |
117,956 |
|
Cash paid for income taxes, net of refunds received |
$ |
89,974 |
|
|
$ |
84,906 |
|
VERISIGN, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) |
|||||||||||||||
|
Three Months Ended December 31, |
||||||||||||||
|
2019 |
|
2018 |
||||||||||||
|
Operating
|
|
Net Income |
|
Operating
|
|
Net Income |
||||||||
GAAP as reported |
$ |
198,566 |
|
|
$ |
148,325 |
|
|
$ |
193,966 |
|
|
$ |
182,195 |
|
Adjustments: |
|
|
|
|
|
|
|
||||||||
Stock-based compensation |
12,389 |
|
|
12,389 |
|
|
11,098 |
|
|
11,098 |
|
||||
Tax adjustment |
|
|
(6,768 |
) |
|
|
|
(2,193 |
) |
||||||
Non-GAAP |
$ |
210,955 |
|
|
$ |
153,946 |
|
|
$ |
205,064 |
|
|
$ |
191,100 |
|
|
|
|
|
|
|
|
|
||||||||
Revenues |
$ |
310,543 |
|
|
|
|
$ |
307,452 |
|
|
|
||||
Non-GAAP operating margin |
67.9 |
% |
|
|
|
66.7 |
% |
|
|
||||||
Diluted shares |
|
|
117,658 |
|
|
|
|
121,329 |
|
||||||
Diluted EPS, non-GAAP |
|
|
$ |
1.31 |
|
|
|
|
$ |
1.58 |
|
|
Year Ended December 31, |
||||||||||||||
|
2019 |
|
2018 |
||||||||||||
|
Operating
|
|
Net Income |
|
Operating
|
|
Net Income |
||||||||
GAAP as reported |
$ |
806,127 |
|
|
$ |
612,299 |
|
|
$ |
767,392 |
|
|
$ |
582,489 |
|
Adjustments: |
|
|
|
|
|
|
|
||||||||
Stock-based compensation |
50,626 |
|
|
50,626 |
|
|
52,504 |
|
|
52,504 |
|
||||
Non-cash interest expense |
|
|
— |
|
|
|
|
5,719 |
|
||||||
Loss on debt extinguishment |
|
|
— |
|
|
|
|
6,554 |
|
||||||
Tax adjustment |
|
|
(31,591 |
) |
|
|
|
(27,717 |
) |
||||||
Non-GAAP |
$ |
856,753 |
|
|
$ |
631,334 |
|
|
$ |
819,896 |
|
|
$ |
619,549 |
|
|
|
|
|
|
|
|
|
||||||||
Revenues |
$ |
1,231,661 |
|
|
|
|
$ |
1,214,969 |
|
|
|
||||
Non-GAAP operating margin |
69.6 |
% |
|
|
|
67.5 |
% |
|
|
||||||
Diluted shares |
|
|
118,968 |
|
|
|
|
122,661 |
|
||||||
Diluted EPS, non-GAAP |
|
|
$ |
5.31 |
|
|
|
|
$ |
5.05 |
|
VERISIGN, INC. RECONCILIATION OF NON-GAAP ADJUSTED EBITDA (In thousands) (Unaudited) |
|||
The following table reconciles GAAP net income to non-GAAP Adjusted EBITDA for the period shown below: |
|||
|
Year Ended
|
||
Net Income |
$ |
612,299 |
|
Interest expense |
90,611 |
|
|
Income tax expense |
146,477 |
|
|
Depreciation and amortization |
46,330 |
|
|
Stock-based compensation |
50,626 |
|
|
Unrealized gain on hedging agreements |
(235 |
) |
|
Gain on sale of business |
(817 |
) |
|
Non-GAAP Adjusted EBITDA |
$ |
945,291 |
|
VERISIGN, INC. STOCK-BASED COMPENSATION CLASSIFICATION (In thousands) (Unaudited) |
|||||||||||||||
The following table presents the classification of stock-based compensation: |
|||||||||||||||
|
Three Months Ended
|
|
Year Ended
|
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Cost of revenues |
$ |
1,675 |
|
|
$ |
1,652 |
|
|
$ |
6,739 |
|
|
$ |
6,835 |
|
Sales and marketing |
889 |
|
|
579 |
|
|
3,755 |
|
|
4,972 |
|
||||
Research and development |
1,626 |
|
|
1,696 |
|
|
6,370 |
|
|
6,728 |
|
||||
General and administrative |
8,199 |
|
|
7,171 |
|
|
33,762 |
|
|
33,969 |
|
||||
Total stock-based compensation expense |
$ |
12,389 |
|
|
$ |
11,098 |
|
|
$ |
50,626 |
|
|
$ |
52,504 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20200206005770/en/
Source:
Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643
Media Relations: David McGuire, dmcguire@verisign.com, 703-948-3800