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VeriSign (VRSN) Surpasses Q3 Earnings and Sales Estimates
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VeriSign Inc. (VRSN - Free Report) , a global provider of domain name registry services, recently reported third-quarter 2016 adjusted earnings of 83 cents a share, surpassing the Zacks Consensus Estimate of 79 cents, and up from 72 cents reported in the year-ago quarter.
Quarter Details
Revenues increased 8.2% year over year to $287.6 million, marginally ahead of the Zacks Consensus Estimate of $287 million.
In the quarter, VeriSign Registry Services added 0.9 million net new names. Domain names in the zone for .com and .net together grew 6.6% year over year in the reported quarter to 144.1 million. VeriSign processed 8.3 million new domain name registrations for .com and .net, a decrease from 9.2 million processed in the year-ago quarter.
VeriSign’s renewal rate for the last quarter was 73.8%, up 110 basis points (bps) year over year. For the reported quarter, the exact renewal rate figures will be available after 45 days from Sep 30, 2016. The company estimates it to be 72.3% compared with 71.9% in the year-ago quarter.
Margins
VeriSign reported non-GAAP operating income of $187.6 million, up 12.6% over the prior-year quarter. The company’s non-GAAP operating margin was 65.3% in the quarter, up from 62.7% in the prior-year quarter.
Non-GAAP adjusted EBITDA was $204.6 million, an increase of 12.6% year over year.
Other Financial Details
Exiting the quarter, the company’s cash and cash equivalents (including marketable securities) were approximately $1.8 billion compared with over $1.9 billion at the end of 2015.
Operating cash flow in the quarter was approximately $168 million, down 8.4% year over year.
VeriSign repurchased approximately $177 million worth of shares in the quarter. As of Sep 30, 2016, the company had $589 million available under its current share repurchase program.
Guidance
The company updated its outlook for 2016. VeriSign now expects revenues to lie between $1.135 billion to $1.140 billion compared with earlier projection of $1.130 billion to $1.140 billion. Non-GAAP operating margin is now expected within a range of 63.5% to 64.5% compared with the earlier guidance of 62.5% to 64%.
To Conclude
VeriSign holds a prime position in the highly regulated .com and .net domain industry. The renewal of the .com contract and price hikes for the .com and .net domain names will continue to drive VeriSign’s top line. Also, we believe that gTLD prospects, international expansion through IDNs and investments in intellectual properties will boost results over the long run. Additionally, VeriSign has significant growth opportunities in the Distributed Denial of Service (DDoS) security market.
VeriSign also has significant growth opportunities in the network security products space. In Aug 2016, VeriSign secured a bid for the .web top-level domain (TLD) from Nu Dot Co LLC, which bodes well for its growth. In Oct 2016, the company also announced that it has received the approval from the U.S. Department of Commerce for the extension amendment to the .com Registry Agreement with the Internet Corporation for Assigned Names and Numbers. Once this comes into effect, Verisign will remain the sole registry operator for the .com registry till Nov 30, 2024.
Furthermore, a company executive stated “In addition to solid third quarter financial results, we are pleased to report that the .com Registry Agreement extension to 2024 has been approved by NTIA and the Root Zone Maintainer Agreement with ICANN is now in effect. Security and stability of the critical root zone publication process has been prioritized and addressed with these steps.”
However, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to marketing remain the primary near-term headwinds.
Some better-ranked stocks in the wider technology sector include Veeco Instruments Inc. (VECO - Free Report) , Mercadolibre, Inc. (MELI - Free Report) and Boyd Gaming Corporation (BYD - Free Report) . Both Veeco and Mercadolibre sport a Zacks Rank #1 (Strong Buy) and have an Earnings ESP of +17.86% and +8.24%, respectively. Boyd Gaming has a Zacks Rank #2 (Buy) and an Earnings ESP of +16.67%.
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VeriSign (VRSN) Surpasses Q3 Earnings and Sales Estimates
VeriSign Inc. (VRSN - Free Report) , a global provider of domain name registry services, recently reported third-quarter 2016 adjusted earnings of 83 cents a share, surpassing the Zacks Consensus Estimate of 79 cents, and up from 72 cents reported in the year-ago quarter.
Quarter Details
Revenues increased 8.2% year over year to $287.6 million, marginally ahead of the Zacks Consensus Estimate of $287 million.
In the quarter, VeriSign Registry Services added 0.9 million net new names. Domain names in the zone for .com and .net together grew 6.6% year over year in the reported quarter to 144.1 million. VeriSign processed 8.3 million new domain name registrations for .com and .net, a decrease from 9.2 million processed in the year-ago quarter.
VeriSign’s renewal rate for the last quarter was 73.8%, up 110 basis points (bps) year over year. For the reported quarter, the exact renewal rate figures will be available after 45 days from Sep 30, 2016. The company estimates it to be 72.3% compared with 71.9% in the year-ago quarter.
Margins
VeriSign reported non-GAAP operating income of $187.6 million, up 12.6% over the prior-year quarter. The company’s non-GAAP operating margin was 65.3% in the quarter, up from 62.7% in the prior-year quarter.
Non-GAAP adjusted EBITDA was $204.6 million, an increase of 12.6% year over year.
Other Financial Details
Exiting the quarter, the company’s cash and cash equivalents (including marketable securities) were approximately $1.8 billion compared with over $1.9 billion at the end of 2015.
Operating cash flow in the quarter was approximately $168 million, down 8.4% year over year.
VeriSign repurchased approximately $177 million worth of shares in the quarter. As of Sep 30, 2016, the company had $589 million available under its current share repurchase program.
Guidance
The company updated its outlook for 2016. VeriSign now expects revenues to lie between $1.135 billion to $1.140 billion compared with earlier projection of $1.130 billion to $1.140 billion. Non-GAAP operating margin is now expected within a range of 63.5% to 64.5% compared with the earlier guidance of 62.5% to 64%.
To Conclude
VeriSign holds a prime position in the highly regulated .com and .net domain industry. The renewal of the .com contract and price hikes for the .com and .net domain names will continue to drive VeriSign’s top line. Also, we believe that gTLD prospects, international expansion through IDNs and investments in intellectual properties will boost results over the long run. Additionally, VeriSign has significant growth opportunities in the Distributed Denial of Service (DDoS) security market.
VeriSign also has significant growth opportunities in the network security products space. In Aug 2016, VeriSign secured a bid for the .web top-level domain (TLD) from Nu Dot Co LLC, which bodes well for its growth. In Oct 2016, the company also announced that it has received the approval from the U.S. Department of Commerce for the extension amendment to the .com Registry Agreement with the Internet Corporation for Assigned Names and Numbers. Once this comes into effect, Verisign will remain the sole registry operator for the .com registry till Nov 30, 2024.
Furthermore, a company executive stated “In addition to solid third quarter financial results, we are pleased to report that the .com Registry Agreement extension to 2024 has been approved by NTIA and the Root Zone Maintainer Agreement with ICANN is now in effect. Security and stability of the critical root zone publication process has been prioritized and addressed with these steps.”
However, the negative impact of search engine adjustments on domain monetization and increasing operating expenses related to marketing remain the primary near-term headwinds.
Currently, VeriSign has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some better-ranked stocks in the wider technology sector include Veeco Instruments Inc. (VECO - Free Report) , Mercadolibre, Inc. (MELI - Free Report) and Boyd Gaming Corporation (BYD - Free Report) . Both Veeco and Mercadolibre sport a Zacks Rank #1 (Strong Buy) and have an Earnings ESP of +17.86% and +8.24%, respectively. Boyd Gaming has a Zacks Rank #2 (Buy) and an Earnings ESP of +16.67%.
VERISIGN INC Price and Consensus
VERISIGN INC Price and Consensus | VERISIGN INC Quote
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>