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VeriSign (VRSN) Q4 Earnings Top Estimates, Revenues Rise Y/Y

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·4 min read
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VeriSign VRSN reported fourth-quarter 2020 adjusted earnings of $1.38 per share, beating the Zacks Consensus Estimate by 7%. The reported figure also increased 9.5% year over year.

Revenues climbed 3.1% year over year to $320.3 million, in line with the Zacks Consensus Estimate.

Quarter Details

VeriSign ended the reported quarter with 165.2 million .com and .net domain name registrations, up 4% year on year. This uptick was driven by contributions from the North America and Europe, Middle East and Africa (EMEA)-based registrars. This was, nonetheless, moderately offset by reduced activity from the China-based registrars.

The company processed 10.5 million new domain name registrations for .com and .net compared with the year-earlier quarter’s 10.3 million.

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

Notably, renewal rates are not fully measurable until 45 days after the end of a quarter. The final .com and .net renewal rate for the third quarter of 2020 was 73.7%, flat year over year.

The company expects the renewal rate for fourth-quarter 2020 to be 73.5%. The renewal rate in the fourth quarter of 2019 was 73.8%.

VeriSign’s research and development (R&D) expenses flared up 28.5% from the prior-year quarter to $19.4 million. As a percentage of revenues, R&D expenses expanded 120 basis points (bps) year over year to 6.1%.

General and administrative (G&A) expenses shot up 2.6% to $37.5 million, year over year. As a percentage of revenues, G&A expenses contracted 10 bps year on year to 11.7%.

However, sales and marketing expenses (S&M) declined 6.9% year over year to $12.9 million. As a percentage of revenues, S&M expenses shrunk 40 bps to 4%, year on year.

Operating income totaled $204.5 million, up 3% from the year-ago period. Operating margin contracted 10 bps year over year to 63.9%.

Balance Sheet & Cash Flow

As of Dec 31, 2020, the company’s cash and cash equivalents (including marketable securities) were $1.17 billion compared with $1.15 billion as of Sep 30, 2020.

Cash flow from operating activities was $195.2 million in the October-December quarter compared with the previous quarter’s $139.6 million. Free cash flow was $188.8 million in the reported period compared with the July-September quarter’s $124.5 million.

During the fourth quarter, VeriSign repurchased 0.8 million shares for $170 million, which brings the total amount of shares repurchased in 2020 to 3.7 million shares for $735 million.

Also, as approved by the board of directors, the amount of shares authorized for share repurchase was increased by close to $747 million, effective Feb 11, 2021. This brings the total amount available for buybacks to $1 billion.

Key Announcements

VeriSign announced that from Sep 1, 2021, it will increase the annual registry-level wholesale price for new and renewal .com domain name registration by 54 cents from $7.85 to $8.39.

2021 Guidance

Domain name base is expected to lie between 2.5% and 4.5%.

Moreover, VeriSign projects full-year revenues between $1.3 billion and $1.32 billion.

GAAP operating margin is estimated in the 64-65% band.

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

Zacks Rank & Stocks to Consider

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

Baidu BIDU, Shopify SHOP and CEVA CEVA are a few better-ranked stocks from the broader computer and technology sector. Baidu and Shopify sport a Zacks Rank #1 (Strong Buy), while CEVA carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

While CEVA is set to release quarterly results on Feb 16, Shopify and Baidu will report on Feb 17.

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