Verisign Reports Second Quarter 2019 Results

RESTON, Va.--()--VeriSign, Inc. (NASDAQ: VRSN), a global provider of domain name registry services and internet infrastructure, today reported financial results for the second quarter of 2019.

Second Quarter GAAP Financial Results

VeriSign, Inc. and its subsidiaries (“Verisign”) reported revenue of $306 million for the second quarter of 2019, up 1.3 percent from the same quarter in 2018. Verisign reported net income of $148 million and diluted earnings per share (diluted “EPS”) of $1.24 for the second quarter of 2019, compared to net income of $128 million and diluted EPS of $1.04 for the same quarter in 2018. The operating margin was 65.9 percent for the second quarter of 2019 compared to 63.8 percent for the same quarter in 2018.

Second Quarter Non-GAAP Financial Results

Verisign reported, on a non-GAAP basis, net income of $159 million and diluted EPS of $1.33 for the second quarter of 2019, compared to net income of $145 million and diluted EPS of $1.18 for the same quarter in 2018. The non-GAAP operating margin was 70.1 percent for the second quarter of 2019 compared to 68.2 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.

Our results demonstrate another solid quarter of focused execution,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.

Financial Highlights

  • Verisign ended the second quarter of 2019 with cash, cash equivalents and marketable securities of $1.22 billion, a decrease of $45 million from the end of 2018.
  • Cash flow from operating activities was $165 million for the second quarter of 2019, compared to $202 million for the same quarter in 2018.
  • Deferred revenues as of June 30, 2019 totaled $1.05 billion, an increase of $32 million from the end of 2018.
  • During the second quarter of 2019, Verisign repurchased 0.9 million shares of its common stock for an aggregate cost of $175 million. As of June 30, 2019, there was $716 million remaining for future share repurchases under the share repurchase program which has no expiration date.

Business Highlights

  • Verisign ended the second quarter of 2019 with 156.1 million .com and .net domain name registrations in the domain name base, a 4.3 percent increase from the end of the second quarter of 2018, and a net increase of 1.34 million during the second quarter of 2019.
  • During the second quarter of 2019, Verisign processed 10.3 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 first quarter of 2019 was 75.0 percent compared with 75.3 percent for the same quarter in 2018. 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, and gain on the sale of a business.

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 second 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)

 

June 30,
2019

December 31,
2018

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

$

751,580

 

$

357,415

 

Marketable securities

 

473,362

 

 

912,254

 

Other current assets

 

70,440

 

 

47,365

 

Total current assets

 

1,295,382

 

 

1,317,034

 

Property and equipment, net

 

250,820

 

 

253,905

 

Goodwill

 

52,527

 

 

52,527

 

Deferred tax assets

 

109,917

 

 

104,992

 

Deposits to acquire intangible assets

 

145,000

 

 

145,000

 

Other long-term assets

 

36,252

 

 

41,046

 

Total long-term assets

 

594,516

 

 

597,470

 

Total assets

$

1,889,898

 

$

1,914,504

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

Current liabilities:

 

 

Accounts payable and accrued liabilities

$

171,215

 

$

215,208

 

Deferred revenues

 

763,466

 

 

732,382

 

Total current liabilities

 

934,681

 

 

947,590

 

Long-term deferred revenues

 

286,143

 

 

285,720

 

Senior notes

 

1,786,306

 

 

1,785,047

 

Long-term tax and other liabilities

 

307,935

 

 

281,621

 

Total long-term liabilities

 

2,380,384

 

 

2,352,388

 

Total liabilities

 

3,315,065

 

 

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: 352,952 at June 30, 2019 and 352,325 at December 31, 2018; Outstanding shares: 118,548 at June 30, 2019 and 120,037 at December 31, 2018

 

353

 

 

352

 

Additional paid-in capital

 

15,356,935

 

 

15,706,774

 

Accumulated deficit

 

(16,779,728

)

 

(17,089,789

)

Accumulated other comprehensive loss

 

(2,727

)

 

(2,811

)

Total stockholders’ deficit

 

(1,425,167

)

 

(1,385,474

)

Total liabilities and stockholders’ deficit

$

1,889,898

 

$

1,914,504

 

 

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Revenues

$

306,289

 

$

302,452

 

$

612,697

 

$

601,740

 

Costs and expenses:

 

 

 

 

Cost of revenues

 

44,066

 

 

47,365

 

 

89,570

 

 

95,517

 

Sales and marketing

 

12,399

 

 

16,569

 

 

22,918

 

 

33,844

 

Research and development

 

14,953

 

 

13,755

 

 

31,085

 

 

29,130

 

General and administrative

 

33,178

 

 

31,753

 

 

67,179

 

 

64,820

 

Total costs and expenses

 

104,596

 

 

109,442

 

 

210,752

 

 

223,311

 

Operating income

 

201,693

 

 

193,010

 

 

401,945

 

 

378,429

 

Interest expense

 

(22,635

)

 

(28,792

)

 

(45,266

)

 

(69,580

)

Non-operating income, net

 

11,436

 

 

660

 

 

23,639

 

 

8,464

 

Income before income taxes

 

190,494

 

 

164,878

 

 

380,318

 

 

317,313

 

Income tax expense

 

(42,960

)

 

(36,527

)

 

(70,257

)

 

(54,699

)

Net income

 

147,534

 

 

128,351

 

 

310,061

 

 

262,614

 

Other comprehensive income

 

35

 

 

17

 

 

84

 

 

260

 

Comprehensive income

$

147,569

 

$

128,368

 

$

310,145

 

$

262,874

 

 

 

 

 

 

Earnings per share:

 

 

 

 

Basic

$

1.24

 

$

1.13

 

$

2.60

 

$

2.49

 

Diluted

$

1.24

 

$

1.04

 

$

2.59

 

$

2.13

 

Shares used to compute earnings per share

 

 

 

 

Basic

 

118,965

 

 

113,936

 

 

119,359

 

 

105,639

 

Diluted

 

119,361

 

 

123,200

 

 

119,837

 

 

123,399

 

 

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Six Months Ended June 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

Net income

$

310,061

 

$

262,614

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation of property and equipment

 

22,884

 

 

24,195

 

Stock-based compensation

 

25,617

 

 

26,276

 

Amortization of discount on investments in debt securities

 

(5,679

)

 

(7,686

)

Other, net

 

894

 

 

13,452

 

Changes in operating assets and liabilities:

 

 

Other assets

 

(10,254

)

 

(7,605

)

Accounts payable and accrued liabilities

 

(39,351

)

 

(20,892

)

Deferred revenues

 

31,857

 

 

27,296

 

Net deferred income taxes and other long-term tax liabilities

 

16,146

 

 

(25,844

)

Net cash provided by operating activities

 

352,175

 

 

291,806

 

Cash flows from investing activities:

 

 

Proceeds from maturities and sales of marketable securities

 

1,466,303

 

 

2,634,376

 

Purchases of marketable securities

 

(1,021,741

)

 

(1,592,403

)

Purchases of property and equipment

 

(20,189

)

 

(18,669

)

Other investing activities

 

(6,311

)

 

(160

)

Net cash provided by investing activities

 

418,062

 

 

1,023,144

 

Cash flows from financing activities:

 

 

Repayment of principal on subordinated convertible debentures

 

(1,250,009

)

Proceeds from employee stock purchase plan

 

8,253

 

 

7,811

 

Repurchases of common stock

 

(384,532

)

 

(281,597

)

Net cash used in financing activities

 

(376,279

)

 

(1,523,795

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

243

 

 

(590

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

394,201

 

 

(209,435

)

Cash, cash equivalents, and restricted cash at beginning of period

 

366,753

 

 

475,139

 

Cash, cash equivalents, and restricted cash at end of period

$

760,954

 

$

265,704

 

Supplemental cash flow disclosures:

 

 

Cash paid for interest

$

43,708

 

$

73,971

 

Cash paid for income taxes, net of refunds received

$

62,214

 

$

85,597

 

 
 

VERISIGN, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND ADJUSTED EBITDA

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended June 30,

 

2019

 

2018

 

Operating

Income

 

Net Income

 

Operating

Income

 

Net Income

GAAP as reported

$

201,693

 

$

147,534

 

$

193,010

 

$

128,351

 

Adjustments:

 

 

 

 

Stock-based compensation

 

13,155

 

 

13,155

 

 

13,298

 

 

13,298

 

Non-cash interest expense

 

 

 

1,801

 

Loss on debt extinguishment

 

 

 

6,554

 

Tax adjustment

 

 

(1,843

)

 

 

(4,510

)

Non-GAAP

$

214,848

 

$

158,846

 

$

206,308

 

$

145,494

 

 

 

 

 

 

Revenues

$

306,289

 

 

$

302,452

 

 

Non-GAAP operating margin

 

70.1

%

 

 

68.2

%

 

Diluted shares

 

 

119,361

 

 

 

123,200

 

Diluted EPS, non-GAAP

 

$

1.33

 

 

$

1.18

 

 
 

The following table presents the classification of stock-based compensation:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Cost of revenues

$

1,741

$

1,818

$

3,339

$

3,428

Sales and marketing

 

1,019

 

1,494

 

2,002

 

2,942

Research and development

 

1,642

 

1,688

 

3,231

 

3,409

General and administrative

 

8,753

 

8,298

 

17,045

 

16,497

Total stock-based compensation expense

$

13,155

$

13,298

$

25,617

$

26,276

 
 

The following table reconciles GAAP net income to non-GAAP Adjusted EBITDA:

 

 

Four Quarters Ended
June 30, 2019

Net Income

$

629,936

 

Interest expense

 

90,532

 

Income tax expense

 

162,585

 

Depreciation and amortization

 

47,057

 

Stock-based compensation

 

51,845

 

Unrealized loss on hedging agreements

 

307

 

Gain on sale of business

 

(55,593

)

Non-GAAP Adjusted EBITDA

$

926,669

 

 

 

Contacts

Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643
Media Relations: Deana Alvy, dalvy@verisign.com, 703-948-3800

Contacts

Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643
Media Relations: Deana Alvy, dalvy@verisign.com, 703-948-3800