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VeriSign (VRSN) Q1 Earnings Top Estimates, Revenues Rise Y/Y

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VeriSign VRSN reported first-quarter 2021 adjusted earnings of $1.33 per share, which beat the Zacks Consensus Estimate by 3.1% but declined 53.5% year over year.

Revenues increased 3.6% year over year to $323.6 million and were in line with the Zacks Consensus Estimate.

VeriSign, Inc. Price, Consensus and EPS Surprise

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

VeriSign, Inc. price-consensus-eps-surprise-chart | VeriSign, Inc. Quote

Quarter Details

VeriSign ended the reported quarter with 168 million .com and .net domain name registrations, up 4.6% year over year. The uptick was driven by increase in demand for domain names across most regions as businesses continued to expand their online presence.

The company processed 11.6 million new domain name registrations for .com and .net compared with 10 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 fourth quarter of 2020 was 73.5% compared with 73.8% in the year-ago quarter.

The company expects the renewal rate for first-quarter 2021 to be around 75.9%. The renewal rate in the first quarter of 2020 was 75.4%.

VeriSign’s research and development (R&D) expenses rose 17% from the year-ago quarter’s levels to $20.3 million. As a percentage of revenues, R&D expenses increased 70 basis points (bps) year over year to 6.3%.

General and administrative (G&A) expenses increased 2% year over year to $37.5 million. As a percentage of revenues, G&A expenses contracted 20 bps year over year to 11.6%.

Sales and marketing expenses (S&M) increased 28.5% year over year to $8.5 million. As a percentage of revenues, S&M expenses expanded 50 bps year over year to 2.6%.

Operating income was $210.4 million, up 2% from the year-ago quarter. Operating margin contracted 98 bps year over year to 65.02%.

Balance Sheet & Cash Flow

As of Mar 31, 2021, the company’s cash and cash equivalents (including marketable securities) were approximately $1.18 billion compared with $1.17 billion as of Dec 31, 2020.

Cash flow from operating activities was $198 million in the first quarter compared with $195.2 million in the previous quarter. Free cash flow was $192 million in the reported quarter compared with $188.8 million in the previous quarter.

In the first quarter, VeriSign repurchased 0.9 million shares for $173 million. As of March 31, 2021, there was $910 million remaining for future share repurchases under the share repurchase program that has no expiration date.

2021 Guidance

Domain name base is expected to increase between 4% and 5.5%.

Moreover, VeriSign expects full-year revenues between $1.315 billion and $1.330 billion.

GAAP operating margin is expected in the 64-65% range.

Capital expenditure is anticipated in the range of $55-$65 million.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader technology sector are Advanced Micro Devices AMD, Avnet AVT and CGI Group GIB. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Advanced Micro Devices is set to report its quarter earnings on Apr 27, while both Avnet and CGI are scheduled to report the same on Apr 28.

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