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VeriSign Banks on Domain Name Registration, Reports Q1 Data

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VeriSign’s (VRSN - Free Report) latest The Domain Name Industry Brief stated that domain name registrations increased 0.4% sequentially to 333.8 million across top-level domains (TLDs) at the end of the first quarter. Domain name registrations increased 3.2 million or 1% year over year.

Country Code Top-Level Domains (“ccTLDs”) increased 2.2% year over year and 0.1% sequentially to 146.3 million in the December quarter. On a combined basis, .com and .net domain names increased 3.2% year over year to approximately 148.3 million in the first quarter.

Reportedly, new .com and .net registrations were 9.6 million compared with 9.5 million in the year-ago quarter. VeriSign reported that .com continued to maintain its position as the largest TLD, followed by .cn (China) and .tk (Tokelau).

The company notes that growth of .com and .net domain names redirecting to Facebook (FB - Free Report) , Snap’s (SNAP - Free Report) Snapchat, Twitter (TWTR - Free Report) was 12%, 11% and 9%, respectively, from the year-ago period. Facebook owned Instagram garnered highest growth of 70%.

New gTLD (“ngTLD”) registrations decreased 2% year over year to 20.2 million, representing 6% of total domain name registrations. ngTLD declined 20.7% year over year.

Domain Registration Scenarios

Verisign is the exclusive registrar of the .com, .net and .name domains per its agreements with The Internet Corporation for Assigned Names and Numbers (ICANN).

The company's top line is driven by increasing domain name registration coupled with price hikes for domain names. Notably, per its agreement with ICANN, the annual fee for a .net domain name registration has been increased from $8.20 to $9.02 effective Feb. 1, 2018.

VeriSign is also currently engaged in the ICANN process regarding the further delegation of .web. Management noted that the guidance for 2018 does not take into consideration .web as it is still uncertain whether operations will commence this year.

On the last conference call, VeriSign provided a raised guidance for its domain name base growth rate for 2018. The company now anticipates the same to grow between 2.5-3.3%, up from the prior guidance of 2-3%. For the second quarter, VeriSign projects domain name base registration to increase in the range of 0.7 million to 1.2 million.

The company continues to benefit from strong demand in the United States as well as in international markets. Management noted that growing penetration of Internet and sustained growth of e-commerce were the key growth drivers.

However, a significant headwind for VeriSign is soft growth in active domain name business for .com and .net TLDs.

VeriSign currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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