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VeriSign's (VRSN) Q2 Earnings & Revenues Exceed Estimates

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VeriSign's (VRSN) Q2 Earnings & Revenues Exceed Estimates

VeriSign (VRSN) second-quarter 2018 results benefit from increasing domain name registrations and renewal rates.

VeriSign VRSN reported non-GAAP earnings of $1.18 per share for second-quarter 2018, which beat the Zacks Consensus Estimate by 4 cents and increased 12.4% from the year-ago quarter.

Revenues increased 4.8% year over year to $302.5 million and came slightly ahead of the Zacks Consensus Estimate of $302 million. The improvement was primarily driven by growing renewal rates and increased domain name registrations mainly in the United States and China.

Quarter Details

In the quarter, domain name registrations for .com and .net together grew 3.7% year over year to 149.7 million, of which 135.6 million registrations were for .com and the rest for .net. Domain name base increased 1.39 million in the quarter.

VeriSign processed 9.6 million new domain name registrations for .com and .net, an increase from 9.2 million processed in the year-ago quarter.

For the reported quarter, the exact renewal rate figures will be available after 45 days from Jun 30, 2018. The company expects it to be 74.9%. The renewal rate for first-quarter 2018 was 75.3%.

VeriSign, Inc. Price, Consensus and EPS Surprise

 

VeriSign, Inc. Price, Consensus and EPS Surprise | VeriSign, Inc. Quote

Operating Details

VeriSign’s sales and marketing, research and development and general and administrative expenses contracted 127 basis points (bps), 13 bps and 93 bps respectively, from the year-ago quarter.

In the second quarter, non-GAAP operating income was $206.3 million compared with $188.3 million in the prior-year quarter. The company’s non-GAAP operating margin was 68.2% in the quarter, up 290 basis points (bps) from the prior-year quarter.

Non-GAAP adjusted EBITDA was $225.4 million, up 10.7% from the year-ago quarter.

Balance sheet

As of Jun 30, 2018, the company’s cash and cash equivalents (including marketable securities) were approximately $1.17 billion compared with $2.36 billion as of Mar 30, 2018. The decrease was mainly attributable to the settlement of convertible debentures in the quarter.

Operating cash flow in the quarter was approximately $202 million while free cash flow came in at $191 million.

VeriSign repurchased 1 million shares for $125 million in the quarter.

Guidance

For fiscal 2018, VeriSign now expects revenues in the range of $1.205-$1.215 billion, compared with the earlier guidance of $1.2-$1.215 billion.  Non-GAAP operating margin is expected to be in the range of 66%-67%, up from earlier projection of 65.5%-66.5%.

Capital expenditure is still anticipated to increase in the range of $45-$55 million.

For the third quarter, VeriSign projects domain name base registration to increase in the range of 1.3 million to 1.8 million.

Increase in marketing expense is expected to remain an overhang on margins in the third-quarter.

Zacks Rank & Other Stocks to Consider

Currently, VeriSign carries a Zacks Rank #2 (Buy).

Momo MOMO, Vishay Intertechnology VSH and Science Applications International Corporation SAIC are other top-ranked stocks in the broader computer and technology sector. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long term growth rates for Momo, Vishay and SAIC is projected to be 22%, 8% and 5%, respectively.

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