Verisign Reports Third Quarter 2019 Results
Third Quarter GAAP Financial Results
Third Quarter Non-GAAP Financial Results
“Our third quarter results are the product of focused execution and our commitment to delivering shareholder value,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
Financial Highlights
-
Verisign ended the third quarter of 2019 with cash, cash equivalents and marketable securities of$1.23 billion , a decrease of$40 million from the end of 2018. -
Cash flow from operating activities was
$208 million for the third quarter of 2019, compared to$187 million for the same quarter in 2018. -
Deferred revenues as of
Sept. 30, 2019 totaled$1.04 billion , an increase of$24 million from the end of 2018. -
During the third quarter of 2019,
Verisign repurchased 1.0 million shares of its common stock for an aggregate cost of$194 million . As ofSept. 30, 2019 , there was$522 million remaining for future share repurchases under the share repurchase program which has no expiration date.
Business Highlights
-
Verisign ended the third quarter of 2019 with 157.4 million .com and .net domain name registrations in the domain name base, a 3.8 percent increase from the end of the third quarter of 2018, and a net increase of 1.27 million during the third quarter of 2019. -
During the third quarter of 2019,
Verisign processed 9.9 million new domain name registrations for .com and .net, compared to 9.5 million for the same quarter in 2018. - The final .com and .net renewal rate for the second quarter of 2019 was 74.2 percent compared with 75.0 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 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
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 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
©2019
VERISIGN, INC. |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
(In thousands, except par value) |
||||||||
(Unaudited) |
||||||||
|
||||||||
|
September 30,
|
|
December 31,
|
|||||
ASSETS |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash and cash equivalents |
$ |
109,288 |
|
|
$ |
357,415 |
|
|
Marketable securities |
1,120,723 |
|
|
912,254 |
|
|||
Other current assets |
68,135 |
|
|
47,365 |
|
|||
Total current assets |
1,298,146 |
|
|
1,317,034 |
|
|||
Property and equipment, net |
250,159 |
|
|
253,905 |
|
|||
Goodwill |
52,527 |
|
|
52,527 |
|
|||
Deferred tax assets |
100,564 |
|
|
104,992 |
|
|||
Deposits to acquire intangible assets |
145,000 |
|
|
145,000 |
|
|||
Other long-term assets |
40,334 |
|
|
41,046 |
|
|||
Total long-term assets |
588,584 |
|
|
597,470 |
|
|||
Total assets |
$ |
1,886,730 |
|
|
$ |
1,914,504 |
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Accounts payable and accrued liabilities |
$ |
200,361 |
|
|
$ |
215,208 |
|
|
Deferred revenues |
760,517 |
|
|
732,382 |
|
|||
Total current liabilities |
960,878 |
|
|
947,590 |
|
|||
Long-term deferred revenues |
281,735 |
|
|
285,720 |
|
|||
Senior notes |
1,786,935 |
|
|
1,785,047 |
|
|||
Long-term tax and other liabilities |
309,101 |
|
|
281,621 |
|
|||
Total long-term liabilities |
2,377,771 |
|
|
2,352,388 |
|
|||
Total liabilities |
3,338,649 |
|
|
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: 353,084 at September 30, 2019 and 352,325 at December 31, 2018; Outstanding shares: 117,705 at September 30, 2019 and 120,037 at December 31, 2018 |
353 |
|
|
352 |
|
|||
Additional paid-in capital |
15,175,962 |
|
|
15,706,774 |
|
|||
Accumulated deficit |
(16,625,815 |
) |
|
(17,089,789 |
) |
|||
Accumulated other comprehensive loss |
(2,419 |
) |
|
(2,811 |
) |
|||
Total stockholders’ deficit |
(1,451,919 |
) |
|
(1,385,474 |
) |
|||
Total liabilities and stockholders’ deficit |
$ |
1,886,730 |
|
|
$ |
1,914,504 |
|
VERISIGN, INC. |
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||||||||||
(In thousands, except per share data) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||
Revenues |
$ |
308,421 |
|
|
$ |
305,777 |
|
|
$ |
921,118 |
|
|
$ |
907,517 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|||||||||
Cost of revenues |
44,443 |
|
|
48,249 |
|
|
134,013 |
|
|
143,766 |
|
|||||
Sales and marketing |
9,857 |
|
|
13,868 |
|
|
32,775 |
|
|
47,712 |
|
|||||
Research and development |
14,619 |
|
|
13,712 |
|
|
45,704 |
|
|
42,842 |
|
|||||
General and administrative |
33,886 |
|
|
34,951 |
|
|
101,065 |
|
|
99,771 |
|
|||||
Total costs and expenses |
102,805 |
|
|
110,780 |
|
|
313,557 |
|
|
334,091 |
|
|||||
Operating income |
205,616 |
|
|
194,997 |
|
|
607,561 |
|
|
573,426 |
|
|||||
Interest expense |
(22,633 |
) |
|
(22,631 |
) |
|
(67,899 |
) |
|
(92,211 |
) |
|||||
Non-operating income, net |
10,498 |
|
|
5,935 |
|
|
34,137 |
|
|
14,399 |
|
|||||
Income before income taxes |
193,481 |
|
|
178,301 |
|
|
573,799 |
|
|
495,614 |
|
|||||
Income tax expense |
(39,568 |
) |
|
(40,621 |
) |
|
(109,825 |
) |
|
(95,320 |
) |
|||||
Net income |
153,913 |
|
|
137,680 |
|
|
463,974 |
|
|
400,294 |
|
|||||
Other comprehensive income (loss) |
308 |
|
|
(322 |
) |
|
392 |
|
|
(62 |
) |
|||||
Comprehensive income |
$ |
154,221 |
|
|
$ |
137,358 |
|
|
$ |
464,366 |
|
|
$ |
400,232 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Earnings per share: |
|
|
|
|
|
|
|
|||||||||
Basic |
$ |
1.30 |
|
|
$ |
1.13 |
|
|
$ |
3.90 |
|
|
$ |
3.60 |
|
|
Diluted |
$ |
1.30 |
|
|
$ |
1.13 |
|
|
$ |
3.89 |
|
|
$ |
3.25 |
|
|
Shares used to compute earnings per share |
|
|
|
|
|
|
|
|||||||||
Basic |
118,194 |
|
|
121,682 |
|
|
118,966 |
|
|
111,046 |
|
|||||
Diluted |
118,569 |
|
|
122,261 |
|
|
119,410 |
|
|
123,079 |
|
VERISIGN, INC. |
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(In thousands) |
||||||||
(Unaudited) |
||||||||
|
||||||||
|
Nine Months Ended
|
|||||||
|
2019 |
|
2018 |
|||||
Cash flows from operating activities: |
|
|
|
|||||
Net income |
$ |
463,974 |
|
|
$ |
400,294 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|||||
Depreciation of property and equipment |
34,327 |
|
|
36,450 |
|
|||
Stock-based compensation |
38,237 |
|
|
41,406 |
|
|||
Amortization of discount on investments in debt securities |
(10,271 |
) |
|
(12,746 |
) |
|||
Other, net |
2,126 |
|
|
14,752 |
|
|||
Changes in operating assets and liabilities: |
|
|
|
|||||
Other assets |
(12,123 |
) |
|
(6,917 |
) |
|||
Accounts payable and accrued liabilities |
(7,110 |
) |
|
(29,478 |
) |
|||
Deferred revenues |
24,563 |
|
|
24,844 |
|
|||
Net deferred income taxes and other long-term tax liabilities |
26,571 |
|
|
10,662 |
|
|||
Net cash provided by operating activities |
560,294 |
|
|
479,267 |
|
|||
Cash flows from investing activities: |
|
|
|
|||||
Proceeds from maturities and sales of marketable securities |
1,523,862 |
|
|
3,081,702 |
|
|||
Purchases of marketable securities |
(1,721,661 |
) |
|
(2,067,498 |
) |
|||
Purchases of property and equipment |
(31,498 |
) |
|
(29,597 |
) |
|||
Other investing activities |
(8,530 |
) |
|
(160 |
) |
|||
Net cash (used in) provided by investing activities |
(237,827 |
) |
|
984,447 |
|
|||
Cash flows from financing activities: |
|
|
|
|||||
Repayment of principal on subordinated convertible debentures |
— |
|
|
(1,250,009 |
) |
|||
Proceeds from employee stock purchase plan |
13,152 |
|
|
12,836 |
|
|||
Repurchases of common stock |
(583,485 |
) |
|
(459,803 |
) |
|||
Net cash used in financing activities |
(570,333 |
) |
|
(1,696,976 |
) |
|||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
(208 |
) |
|
(985 |
) |
|||
Net decrease in cash, cash equivalents, and restricted cash |
(248,074 |
) |
|
(234,247 |
) |
|||
Cash, cash equivalents, and restricted cash at beginning of period |
366,753 |
|
|
475,139 |
|
|||
Cash, cash equivalents, and restricted cash at end of period |
$ |
118,679 |
|
|
$ |
240,892 |
|
|
Supplemental cash flow disclosures: |
|
|
|
|||||
Cash paid for interest |
$ |
57,074 |
|
|
$ |
87,184 |
|
|
Cash paid for income taxes, net of refunds received |
$ |
75,197 |
|
|
$ |
84,433 |
|
VERISIGN, INC. |
||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND ADJUSTED EBITDA |
||||||||||||||||
(In thousands, except per share data) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
|
||||||||||||||||
|
Three Months Ended September 30, |
|||||||||||||||
|
2019 |
|
2018 |
|||||||||||||
|
Operating Income |
|
Net Income |
|
Operating Income |
|
Net Income |
|||||||||
GAAP as reported |
$ |
205,616 |
|
|
$ |
153,913 |
|
|
$ |
194,997 |
|
|
$ |
137,680 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|||||||||
Stock-based compensation |
12,620 |
|
|
12,620 |
|
|
15,130 |
|
|
15,130 |
|
|||||
Tax adjustment |
|
|
(5,774 |
) |
|
|
|
(1,933 |
) |
|||||||
Non-GAAP |
$ |
218,236 |
|
|
$ |
160,759 |
|
|
$ |
210,127 |
|
|
$ |
150,877 |
|
|
|
|
|
|
|
|
|
|
|||||||||
Revenues |
$ |
308,421 |
|
|
|
|
$ |
305,777 |
|
|
|
|||||
Non-GAAP operating margin |
70.8 |
% |
|
|
|
68.7 |
% |
|
|
|||||||
Diluted shares |
|
|
118,569 |
|
|
|
|
122,261 |
|
|||||||
Diluted EPS, non-GAAP |
|
|
$ |
1.36 |
|
|
|
|
$ |
1.23 |
|
The following table presents the classification of stock-based compensation: |
||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
|||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||
Cost of revenues |
$ |
1,725 |
|
|
$ |
1,755 |
|
|
$ |
5,064 |
|
|
$ |
5,183 |
|
|
Sales and marketing |
864 |
|
|
1,451 |
|
|
2,866 |
|
|
4,393 |
|
|||||
Research and development |
1,513 |
|
|
1,623 |
|
|
4,744 |
|
|
5,032 |
|
|||||
General and administrative |
8,518 |
|
|
10,301 |
|
|
25,563 |
|
|
26,798 |
|
|||||
Total stock-based compensation expense |
$ |
12,620 |
|
|
$ |
15,130 |
|
|
$ |
38,237 |
|
|
$ |
41,406 |
|
The following table reconciles GAAP net income to non-GAAP Adjusted EBITDA: |
||||
|
Four Quarters Ended
|
|||
Net Income |
$ |
646,169 |
|
|
Interest expense |
90,534 |
|
||
Income tax expense |
161,532 |
|
||
Depreciation and amortization |
46,244 |
|
||
Stock-based compensation |
49,335 |
|
||
Unrealized loss on hedging agreements |
134 |
|
||
Gain on sale of business |
(55,657 |
) |
||
Non-GAAP Adjusted EBITDA |
$ |
938,291 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20191024005836/en/
Source:
Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643
Media Relations: David McGuire, dmcguire@verisign.com, 703-948-3800