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VeriSign VRSN reported second-quarter 2022 adjusted earnings of $1.54 per share, which beat the Zacks Consensus Estimate by 1.3% and increased 17.5% year over year. Our estimate for second-quarter earnings was pegged at $1.52 per share.
Revenues jumped 6.8% year over year to $351.9 million and beat the Zacks Consensus Estimate by 0.9%. We projected revenues to be $348.8 million for the second quarter.
However, Verisign tweaked its full-year guidance due to uncertainty prevailing over global macro conditions. VeriSign expects full-year revenues between $1.415 billion and $1.43 billion compared with the earlier guided range of $1.415-$1.435 billion. VeriSign’s Domain name base growth is now expected to be between 0.5% and 1.5% as against the earlier expected range of 1.75-3.5%
Following the announcement, shares are down 2.8% in premarket trading on Jul 29.
VeriSign, Inc. Price, Consensus and EPS Surprise
VeriSign, Inc. price-consensus-eps-surprise-chart | VeriSign, Inc. Quote
VeriSign ended the reported quarter with 174.3 million .com and .net domain name registrations, up 2.2% year over year.
The company processed 10.1 million new domain name registrations for .com and .net compared with 11.7 million in the year-ago quarter. VeriSign saw a decrease in new units in the second quarter due to many factors, which include the pandemic-induced higher growth witnessed in the year-ago quarter along with uncertainty prevailing over global macroeconomic conditions and relative weakness in 2022 registrations from China.
The final .com and .net renewal rate for first-quarter 2022 stood at 75.9% against 76% in the year-ago quarter. Renewal rates are not fully measurable until 45 days after the end of the quarter.
Verisign will be hiking the annual registry-level wholesale fee for each new and renewal .net domain name registration to $9.92, from $9.02 with effect from Feb 1, 2023.
The company expects the renewal rate for second-quarter 2022 to be around 73.6% compared with 75.4% in the year-ago quarter.
VeriSign’s research and development (R&D) expenses increased 2.5% from the year-ago quarter’s level to $20.3 million.
Selling, general and administrative (SG&A) expenses declined 5.5% year over year to $46.1 million. As a percentage of revenues, SG&A expenses declined 170 basis points (bps) on a year-over-year basis to 13.1%.
Operating income was $236 million, up 10.8% year over year. The operating margin expanded 240 bps to 67.1%.
Balance Sheet & Cash Flow
As of Jun 30, 2022, the company’s cash and cash equivalents (including marketable securities) were $997 million compared with $1.2 billion compared with the quarter ended Mar 31, 2022.
Cash flow from operating activities was $145 million in the second quarter compared with $207 million in the previous-year quarter. Free cash flow was $139 million in the reported quarter compared with $200 million in the previous-year quarter.
In the second quarter, Verisign repurchased 2 million shares for $349 million. As of Jun 30, 2022, the company had shares worth $543 million available for future repurchases, with no expiration date.
GAAP operating margin is now expected in the 65.25-66.25% range compared with the earlier guidance of 64.5-65.5%. Ongoing focus on cost containment is likely to act as tailwind.
Capital expenditures are anticipated in the range of $30-$40 million compared with the previous expectation of $35-$45 million.
Zacks Rank & Stocks to Consider
VeriSign currently has a Zacks Rank #3 (Hold).
Some other top-ranked stocks from the broader technology sector worth consideration are Synopsys SNPS, Aspen Technology AZPN and Badger Meter BMI. BMI sports a Zacks Rank #1 (Strong Buy) while Synopsys and Aspen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days. Badger Meter’s earnings beat the Zacks Consensus Estimate in three of the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 7.2% of their value in the past year.
The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.
Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have increased 25.9% in the past year.
The Zacks Consensus Estimate for Aspen’s fiscal 2022 earnings is pegged at $5.49 per share, rising 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.
Aspen’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 4%. Shares of AZPN have grown 33.4% in the past year.
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