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VeriSign (VRSN) Q1 Earnings & Revenues Beat Estimates, Up Y/Y

Zacks Equity Research

VeriSign VRSN reported first-quarter 2019 non-GAAP earnings of $1.31 that increased 22.4% from the year-ago quarter. The figure also beat the Zacks Consensus Estimate of $1.24.

Revenues increased 2.4% year over year to $306.4 million and beat the consensus mark of $302.4 million.

VeriSign, Inc. Price, Consensus and EPS Surprise

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

Quarter Details

VeriSign ended the reported quarter with 154.8 million .com and .net domain name registrations, up 4.4% year over year. The figure reflects a net increase of 1.82 million registrations during the quarter.

Notably, there were 141 million .com and 13.8 million .net domain name registrations in first-quarter 2019.

In the reported quarter, VeriSign processed 9.8 million new domain name registrations for .com and .net compared with 9.6 million in the year-ago quarter.

The final .com and .net renewal rate for the fourth quarter of 2018 was 74.3% compared with 72.2% in the year-ago quarter. Renewal rates are not fully measurable until 45 days from the end of the quarter.

Management anticipates the renewal rate for first-quarter of 2019 to be about 75% compared with 75.3% in the year-ago period.

Operating Details

VeriSign’s research and development expenses (5.3% of total revenues) increased 4.9% from the year-ago quarter to $16 million.

General and administrative expenses (11.1% of total revenues) increased 2.8% to $34 million. However, sales and marketing expenses (3.4% of total revenues) declined 39.1% to $11 million. Total operating expenses also declined 6.8% year over year to $106 million.

In the reported quarter, non-GAAP operating income was $212.7 million, up 7.2% from the year-ago quarter. Non-GAAP operating margin expanded 310 basis points (bps) year over year to 69.4%.

Balance Sheet & Cash Flow

As of Mar 31, 2019, the company’s cash and cash equivalents (including marketable securities) were approximately $1.25 billion compared with $1.27 billion in the prior quarter.

Operating cash flow in the quarter was approximately $187 million compared with $90 million in the year-ago quarter. Moreover, free cash flow was $178 million compared with $82 million in the year-ago quarter.

VeriSign repurchased 1 million shares for $175 million in the quarter.

2019 Guidance

The company expects the domain name base growth rate to be between 2.5% and 4.25%. Moreover, revenues are expected to be $1.22-$1.235 billion from the earlier guided figure of $1.215-$1.235 billion. Non-GAAP operating margin is expected to be 67.5-68.5%.

Capital expenditure is anticipated to be $45-$55 million.

Zacks Rank & Stocks to Consider

VeriSign currently has a Zacks Rank #3 (Hold).

Fujifilm Holdings Corp. FUJIY, Paycom Software, Inc. PAYC and Intuit Inc. INTU are some better-ranked stocks in the broader computer and technology sector. While Fujifilm and Paycom sport a Zacks Rank #1 (Strong Buy), Intuit carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term growth rate for Fujifilm, Paycom and Intuit is pegged at 8%, 25% and 16%, respectively.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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