VeriSign, Inc. (NASDAQ: VRSN), a global provider of domain name registry
services and internet infrastructure, today reported financial results
for the first quarter of 2019.
First Quarter GAAP Financial Results
VeriSign, Inc. and its subsidiaries (“Verisign”) reported revenue of
$306 million for the first quarter of 2019, up 2.4 percent from the same
quarter in 2018. Verisign reported net income of $163 million and
diluted earnings per share (diluted “EPS”) of $1.35 for the first
quarter of 2019, compared to net income of $134 million and diluted EPS
of $1.09 for the same quarter in 2018. The operating margin was 65.4
percent for the first quarter of 2019 compared to 62.0 percent for the
same quarter in 2018.
First Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $158 million and
diluted EPS of $1.31 for the first quarter of 2019, compared to net
income of $132 million and diluted EPS of $1.07 for the same quarter in
2018. The non-GAAP operating margin was 69.4 percent for the first
quarter of 2019 compared to 66.3 percent for the same quarter in 2018. A
table reconciling the GAAP to the non-GAAP results (which excludes the
items described under “Non-GAAP Financial Measures and Adjusted EBITDA”
below) is appended to this news release.
“We’re pleased to deliver another solid quarter,” said Jim Bidzos,
Executive Chairman, President and Chief Executive Officer.
Financial Highlights
-
Verisign ended the first quarter of 2019 with cash, cash equivalents
and marketable securities of $1.25 billion, a decrease of $17 million
from the end of 2018. -
During the first quarter of 2019, Verisign repatriated $249 million of
cash held by foreign subsidiaries, net of foreign withholding taxes. -
Cash flow from operating activities was $187 million for the first
quarter of 2019, compared with $90 million for the same quarter in
2018. -
Deferred revenues as of March 31, 2019 totaled $1.05 billion, an
increase of $29 million from the end of 2018. -
During the first quarter of 2019, Verisign repurchased 1.0 million
shares of its common stock for an aggregate cost of $175 million. As
of March 31, 2019, there was $891 million remaining for future share
repurchases under the share repurchase program which has no expiration
date.
Business Highlights
-
Verisign ended the first quarter of 2019 with 154.8 million .com and
.net domain name registrations in the domain name base, a 4.4
percent increase from the end of the first quarter of 2018, and a net
increase of 1.82 million during the first quarter of 2019. -
During the first quarter of 2019, Verisign processed 9.8 million new
domain name registrations for .com and .net, compared to 9.6 million
for the same quarter in 2018. -
The final .com and .net renewal rate for the fourth quarter of 2018
was 74.3 percent compared with 72.2 percent for the same quarter in
2017. Renewal rates are not fully measurable until 45 days after the
end of the quarter.
Non-GAAP Financial Measures and Adjusted EBITDA
Verisign provides quarterly and annual financial statements that are
prepared in accordance with generally accepted accounting principles
(GAAP). Along with this information, management typically discloses and
discusses certain non-GAAP financial measures in quarterly earnings news
releases, on investor conference calls and during investor conferences
and related events. These non-GAAP financial measures do not include the
following items that are included in the comparable GAAP financial
measures: stock-based compensation, non-cash interest expense through
June 30, 2018, and loss on debt extinguishment. Non-GAAP net income is
adjusted for an income tax rate of 22 percent which differs from the
GAAP income tax rate.
On a quarterly basis, Verisign also provides Adjusted EBITDA. Adjusted
EBITDA is a non-GAAP financial measure and is calculated in accordance
with the terms of the indentures governing Verisign’s senior notes.
Adjusted EBITDA refers to net income before interest, taxes,
depreciation and amortization, stock-based compensation, unrealized gain
/ loss on hedging agreements, gain on the sale of a business, and loss
on debt extinguishment.
Management believes that these non-GAAP financial measures supplement
the GAAP financial measures by providing investors with additional
information that allows them to have a clearer picture of Verisign’s
operations and financial performance and the comparability of Verisign’s
operating results from period to period. The presentation of these
non-GAAP financial measures is not meant to be considered in isolation
nor as a substitute for financial measures prepared in accordance with
GAAP.
The tables appended to this release include a reconciliation of the
non-GAAP financial measures to the comparable financial measures
reported in accordance with GAAP for the given periods.
Today’s Conference Call
Verisign will host a live conference call today at 4:30 p.m. (EDT) to
review the first quarter 2019 results. The call will be accessible by
direct dial at (888) 676-VRSN (U.S.) or (786) 789-4776 (international),
conference ID: Verisign. A listen-only live web cast of the conference
call and accompanying slide presentation will also be available at https://investor.Verisign.com.
An audio archive of the call will be available at https://investor.Verisign.com/events.cfm.
This news release and the financial information discussed on today’s
conference call are available at https://investor.Verisign.com.
About Verisign
Verisign, a global provider of domain name registry services and
internet infrastructure, enables internet navigation for many of the
world’s most recognized domain names. Verisign enables the security,
stability and resiliency of key internet infrastructure and services,
including providing root zone maintainer services, operating two of the
13 global internet root servers, and providing registration services and
authoritative resolution for the .com and .net top-level domains, which
support the majority of global e-commerce. To learn more about what it
means to be Powered by Verisign, please visit Verisign.com.
VRSNF
Statements in this announcement other than historical data and
information constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 as amended and Section 21E of
the Securities Exchange Act of 1934 as amended. These statements involve
risks and uncertainties that could cause our actual results to differ
materially from those stated or implied by such forward-looking
statements. The potential risks and uncertainties include, among others,
risks arising from the agreements governing our Registry Services
business; new or existing governmental laws and regulations in the U.S.
or other applicable foreign jurisdictions; system interruptions,
security breaches, attacks on the internet by hackers, viruses, or
intentional acts of vandalism; the uncertainty of the impact of changes
to the multi-stakeholder model of internet governance; risks arising
from our operation of two root zone servers and our performance of the
Root Zone Maintainer functions; changes in internet practices and
behavior and the adoption of substitute technologies; the success or
failure of the evolution of our markets; the highly competitive business
environment in which we operate; whether we can maintain strong
relationships with registrars and their resellers to maintain their
marketing focus on our products and services; the possibility of system
interruptions or failures; challenging global economic conditions;
economic, legal and political risk associated with our international
operations; our ability to protect and enforce our rights to our
intellectual property and ensure that we do not infringe on others’
intellectual property; the outcome of legal or other challenges
resulting from our activities or the activities of registrars or
registrants, or litigation generally; the impact of our new strategic
initiatives, including our IDN gTLDs; whether we can retain and motivate
our senior management and key employees; and the impact of unfavorable
tax rules and regulations. More information about potential factors that
could affect our business and financial results is included in our
filings with the SEC, including in our Annual Report on Form 10-K for
the year ended Dec. 31, 2018, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. Verisign undertakes no obligation to update any of
the forward-looking statements after the date of this announcement.
©2019 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN logo,
and other trademarks, service marks, and designs are registered or
unregistered trademarks of VeriSign, Inc. and its subsidiaries in the
United States and in foreign countries. All other trademarks are
property of their respective owners.
| VERISIGN, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands, except par value) | ||||||||
| (Unaudited) | ||||||||
|
March 31, |
December 31, |
|||||||
|
ASSETS |
||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 779,625 | $ | 357,415 | ||||
| Marketable securities | 473,365 | 912,254 | ||||||
| Other current assets | 62,277 | 47,365 | ||||||
| Total current assets | 1,315,267 | 1,317,034 | ||||||
| Property and equipment, net | 252,237 | 253,905 | ||||||
| Goodwill | 52,527 | 52,527 | ||||||
| Deferred tax assets | 120,192 | 104,992 | ||||||
| Deposits to acquire intangible assets | 145,000 | 145,000 | ||||||
| Other long-term assets | 34,453 | 41,046 | ||||||
| Total long-term assets | 604,409 | 597,470 | ||||||
| Total assets | $ | 1,919,676 | $ | 1,914,504 | ||||
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 183,996 | $ | 215,208 | ||||
| Deferred revenues | 757,284 | 732,382 | ||||||
| Total current liabilities | 941,280 | 947,590 | ||||||
| Long-term deferred revenues | 289,730 | 285,720 | ||||||
| Senior notes | 1,785,676 | 1,785,047 | ||||||
| Long-term tax and other liabilities | 309,119 | 281,621 | ||||||
| Total long-term liabilities | 2,384,525 | 2,352,388 | ||||||
| Total liabilities | 3,325,805 | 3,299,978 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
|
Preferred stock—par value $.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none |
— | — | ||||||
|
Common stock—par value $.001 per share; Authorized shares: 1,000,000; Issued shares: 352,872 at March 31, 2019 and 352,325 at December 31, 2018; Outstanding shares: 119,391 at March 31, 2019 and 120,037 at December 31, 2018 |
353 | 352 | ||||||
| Additional paid-in capital | 15,523,542 | 15,706,774 | ||||||
| Accumulated deficit | (16,927,262 | ) | (17,089,789 | ) | ||||
| Accumulated other comprehensive loss | (2,762 | ) | (2,811 | ) | ||||
| Total stockholders’ deficit | (1,406,129 | ) | (1,385,474 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 1,919,676 | $ | 1,914,504 | ||||
| VERISIGN, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
| (In thousands, except per share data) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Revenues | $ | 306,408 | $ | 299,288 | ||||
| Costs and expenses: | ||||||||
| Cost of revenues | 45,504 | 48,152 | ||||||
| Sales and marketing | 10,519 | 17,275 | ||||||
| Research and development | 16,132 | 15,375 | ||||||
| General and administrative | 34,001 | 33,067 | ||||||
| Total costs and expenses | 106,156 | 113,869 | ||||||
| Operating income | 200,252 | 185,419 | ||||||
| Interest expense | (22,631 | ) | (40,788 | ) | ||||
| Non-operating income, net | 12,203 | 7,804 | ||||||
| Income before income taxes | 189,824 | 152,435 | ||||||
| Income tax expense | (27,297 | ) | (18,172 | ) | ||||
| Net income | 162,527 | 134,263 | ||||||
| Other comprehensive income | 49 | 243 | ||||||
| Comprehensive income | $ | 162,576 | $ | 134,506 | ||||
| Earnings per share: | ||||||||
| Basic | $ | 1.36 | $ | 1.38 | ||||
| Diluted | $ | 1.35 | $ | 1.09 | ||||
| Shares used to compute earnings per share | ||||||||
| Basic | 119,757 | 97,250 | ||||||
| Diluted | 120,317 | 123,506 | ||||||
| VERISIGN, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 162,527 | $ | 134,263 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation of property and equipment | 11,593 | 12,117 | ||||||
| Stock-based compensation | 12,462 | 12,978 | ||||||
| Amortization of discount on investments in debt securities | (3,854 | ) | (4,128 | ) | ||||
| Other, net | (147 | ) | 4,005 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Other assets | (226 | ) | (987 | ) | ||||
| Accounts payable and accrued liabilities | (31,609 | ) | (36,271 | ) | ||||
| Deferred revenues | 29,219 | 27,120 | ||||||
| Net deferred income taxes and other long-term tax liabilities | 7,365 | (59,108 | ) | |||||
| Net cash provided by operating activities | 187,330 | 89,989 | ||||||
| Cash flows from investing activities: | ||||||||
| Proceeds from maturities and sales of marketable securities | 939,561 | 1,931,930 | ||||||
| Purchases of marketable securities | (496,779 | ) | (631,456 | ) | ||||
| Purchases of property and equipment | (9,133 | ) | (7,662 | ) | ||||
| Other investing activities | (2,958 | ) | (160 | ) | ||||
| Net cash provided by investing activities | 430,691 | 1,292,652 | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from employee stock purchase plan | 8,253 | 7,811 | ||||||
| Repurchases of common stock | (204,302 | ) | (152,741 | ) | ||||
| Net cash used in financing activities | (196,049 | ) | (144,930 | ) | ||||
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
255 | 167 | ||||||
| Net increase in cash, cash equivalents, and restricted cash | 422,227 | 1,237,878 | ||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 366,753 | 475,139 | ||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 788,980 | $ | 1,713,017 | ||||
| Supplemental cash flow disclosures: | ||||||||
| Cash paid for interest | $ | 13,063 | $ | 43,326 | ||||
| Cash paid for income taxes, net of refunds received | $ | 14,185 | $ | 72,959 | ||||
| VERISIGN, INC. | ||||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND ADJUSTED EBITDA | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
|
Operating |
Net Income |
Operating |
Net Income | |||||||||||||
| GAAP as reported | $ | 200,252 | $ | 162,527 | $ | 185,419 | $ | 134,263 | ||||||||
| Adjustments: | ||||||||||||||||
| Stock-based compensation | 12,462 | 12,462 | 12,978 | 12,978 | ||||||||||||
| Non-cash interest expense | — | 3,918 | ||||||||||||||
| Tax adjustment | (17,206 | ) | (19,081 | ) | ||||||||||||
| Non-GAAP | $ | 212,714 | $ | 157,783 | $ | 198,397 | $ | 132,078 | ||||||||
| Revenues | $ | 306,408 | $ | 299,288 | ||||||||||||
| Non-GAAP operating margin | 69.4 | % | 66.3 | % | ||||||||||||
| Diluted shares | 120,317 | 123,506 | ||||||||||||||
| Diluted EPS, non-GAAP | $ | 1.31 | $ | 1.07 | ||||||||||||
The following table presents the classification of stock-based
compensation:
|
Three Months Ended |
|||||||
| 2019 | 2018 | ||||||
| Cost of revenues | $ | 1,598 | $ | 1,609 | |||
| Sales and marketing | 983 | 1,448 | |||||
| Research and development | 1,589 | 1,721 | |||||
| General and administrative | 8,292 | 8,200 | |||||
| Total stock-based compensation expense | $ | 12,462 | $ | 12,978 | |||
The following table reconciles GAAP net income to non-GAAP Adjusted
EBITDA:
|
Year Ended |
||||
| Net Income | $ | 610,753 | ||
| Interest expense | 96,689 | |||
| Income tax expense | 156,152 | |||
| Depreciation and amortization | 47,844 | |||
| Stock-based compensation | 51,988 | |||
| Unrealized loss on hedging agreements | 119 | |||
| Gain on sale of business | (55,550 | ) | ||
| Loss on debt extinguishment | 6,554 | |||
| Non-GAAP Adjusted EBITDA | $ | 914,549 | ||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190425005729/en/