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VeriSign (VRSN) Q1 Earnings and Revenues Surpass Estimates

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VeriSign Inc. VRSN reported non-GAAP earnings per share of $1.07 for the first quarter of 2018, which beat the Zacks Consensus Estimate by a penny and increased 11.5% from the year-ago quarter.

Revenues increased 3.7% year over year to $299.3 million and came slightly ahead of the Zacks Consensus Estimate of $298 million. The year-over-year improvement was primarily driven by increase in domain name registrations in the global market mainly U.S., China and Europe.

Management noted that growing penetration of Internet and sustained growth of e-commerce  were the key growth drivers.

Quarter Details

In the quarter, domain name registrations for .com and .net together grew 3.2% year over year to 148.3 million. Domain name base increased 1.91 million in the quarter.

VeriSign processed 9.6 million new domain name registrations for .com and .net, an increase from 9.5 million processed in the year-ago quarter.

Per management, during the quarter, 59% of the revenues came from U.S. customers while international customers contributed the rest.

For the reported quarter, the exact renewal rate figures will be available after 45 days from Dec 31, 2017. The company estimates it to be 72.2%. However, management noted that second time renewal rate in China was disappointing.

VeriSign, Inc. Price, Consensus and EPS Surprise

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

Margins

VeriSign reported non-GAAP operating income of $198.4 million compared with $187.8 million in the prior-year quarter. The company’s non-GAAP operating margin was 66.3 % in the quarter, up 120 basis points (bps) from the prior-year quarter.

Non-GAAP adjusted EBITDA was $218.2 million, up 7.2% from the year-ago quarter.

Other Financial Details

As of Mar 31, 2018, the company’s cash and cash equivalents (including marketable securities) were approximately $2.36 billion compared with $2.41 billion as of Dec 31, 2017.

Operating cash flow in the quarter was approximately $89.99 million while free cash flow came in at $82 million.

VeriSign repurchased 1.1 million shares for $125 million in the quarter.

Outlook

For fiscal 2018, VeriSign now expects revenues in the range of $1.200-$1215 billion, compared with the earlier guidance of $1.195-$1.215 billion. Management noted that the revenue guidance does not take into consideration .web top-level domain as it is still uncertain whether the operation of .web will commence this year.

Non-GAAP operating margin is expected to be in the range of 65.5%-66.5%.

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

VeriSign also provided domain name base growth rate guidance for 2018. The company now anticipates the same to grow between 2.5-3.25%, 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.

Zacks Rank & Stocks to Consider

VeriSign carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Lam Research Corporation LRCX, Micron Technology MU and Western Digital WDC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Lam Research, Micron and Western Digital is projected to be 17.7%, 10% and 19%, respectively.

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