A month has gone by since the last earnings report for VeriSign (VRSN - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is VeriSign due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
VeriSign Q2 Earnings & Revenues Top Estimates, Up Y/Y
VeriSign reported second-quarter 2019 non-GAAP earnings of $1.33 per share that beat the Zacks Consensus Estimate by 4 cents and increased 12.7% from the year-ago quarter.
Revenues increased 1.3% year over year to $306.3 million and were in line with the consensus mark.
VeriSign ended the reported quarter with 156.1 million .com and .net domain name registrations, up 4.3% year over year. The figure reflects a net increase of 1.34 million registrations during the quarter.
The company processed 10.3 million new domain name registrations for .com and .net compared with 9.6 million in the year-ago quarter.
Notably, renewal rates are not fully measurable until 45 days after the end of the quarter. The final .com and .net renewal rate for the first quarter of 2019 was 75% compared with 75.3% for the same quarter in 2018.
VeriSign’s research and development expenses (4.9% of total revenues) increased 8.6% from the year-ago quarter to $14.95 million.
General and administrative expenses (10.8% of total revenues) increased 4.5% year over year to $33.2 million.
However, sales and marketing expenses (4% of total revenues) declined 25.2% year over year to $12.4 million primarily due to a $2.1 million decrease in salary and employee benefits expenses as a result of a reduction in average headcount.
Non-GAAP operating income was $214.8 million, up 4.1% from the year-ago quarter. Non-GAAP operating margin expanded 190 basis points (bps) year over year to 70.1%.
Balance Sheet & Cash Flow
As of Jun 30, 2019, the company’s cash and cash equivalents (including marketable securities) were approximately $1.23 billion compared with $1.25 billion as of Mar 31, 2019.
Cash flow from operating activities was $165 million in the second quarter compared with $202 million at the end of the year-ago quarter.
During the three months ended Jun 30, 2019, Verisign repurchased 0.9 million shares for an aggregate cost of $175.0 million.
The company expects the domain name base growth rate to be between 2.5% and 4.25%.
Moreover, revenues are expected to be $1.225-$1.235 billion versus the earlier-guided figure of $1.22-$1.235 billion. Non-GAAP operating margin is expected to be 67.5-68.5%.
Capital expenditure is anticipated at $45-$55 million.
How Have Estimates Been Moving Since Then?
Estimates review followed a flat path over the past two months.
Currently, VeriSign has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
VeriSign has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.