VeriSign, Inc. (NASDAQ: VRSN), a leader in domain names and
internet infrastructure, today reported financial results for the
fourth quarter and full year 2018.
Fourth Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries (“Verisign”) reported revenue of
$307 million for the fourth quarter of 2018, up 4.0 percent from
the same quarter in 2017. Verisign reported net income of $182
million and diluted earnings per share (diluted “EPS”) of $1.50 for
the fourth quarter of 2018, compared to net income of $103 million
and diluted EPS of $0.83 for the same quarter in 2017. The
operating margin was 63.1 percent for the fourth quarter of 2018
compared to 59.7 percent for the same quarter in 2017.
Fourth Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $191
million and diluted EPS of $1.58 for the fourth quarter of 2018,
compared to net income of $119 million and diluted EPS of $0.96 for
the same quarter in 2017. The non-GAAP operating margin was 66.7
percent for the fourth quarter of 2018 compared to 64.1 percent for
the same quarter in 2017. A table reconciling the GAAP to the
non-GAAP results (which excludes items described below) is appended
to this release.
2018 GAAP Financial Results
For the year ended Dec. 31, 2018, Verisign reported revenue of
$1.21 billion, up 4.3 percent from $1.17 billion in 2017. Verisign
reported net income of $582 million and diluted EPS of $4.75 in
2018, compared to net income of $457 million and diluted EPS of
$3.68 in 2017. The operating margin for 2018 was 63.2 percent
compared to 60.7 percent in 2017.
2018 Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $620
million and diluted EPS of $5.05 for 2018, compared to net income
of $492 million and diluted EPS of $3.96 for 2017. The non-GAAP
operating margin for 2018 was 67.5 percent compared to 65.3 percent
for 2017.
On Dec. 5, 2018, Verisign completed the previously announced
sale of the rights, economic benefits, and obligations, in all
customer contracts related to its Security Services business to
NeuStar, Inc. The sale resulted in a pre-tax, non-operating gain of
$54.8 million, which for fourth quarter and full year 2018,
increased GAAP net income, and non-GAAP net income by $52.0 million
and $42.8 million, respectively. The gain increased GAAP diluted
EPS and non-GAAP diluted EPS by $0.43 and $0.36 in the fourth
quarter and by $0.43 and $0.35 for full year 2018. These increases
are included in the results above.
“2018 was a strong year for Verisign. The domain name base and
revenues grew; we divested non-core assets; and we repurchased 4.4
million of our shares. Significantly, in October, we executed an
amendment to the Cooperative Agreement with the Department of
Commerce, which gives Verisign the approval to engage with ICANN to
amend the .com Registry Agreement to allow Verisign to increase
.com domain name registration and renewal fees. The amendment also
provides regulatory reduction that allows for a standard renewal of
the .com Registry Agreement, which occurs every six years, to
proceed without review and approval by the Department of Commerce,”
said Jim Bidzos, Executive Chairman, President and Chief Executive
Officer.
Financial Highlights
- Verisign ended 2018 with cash, cash
equivalents, and marketable securities of $1.27 billion, a decrease
of $1.15 billion from year-end 2017.
- Cash flow from operations was $219
million for the fourth quarter of 2018 and $698 million for the
full year 2018 compared with $199 million for the same quarter in
2017 and $703 million for the full year 2017.
- Deferred revenues on Dec. 31, 2018,
totaled $1.02 billion, an increase of $19 million from year-end
2017.
- During the fourth quarter, Verisign
repurchased 1.2 million shares of its common stock for $175
million. During the full year 2018, Verisign repurchased 4.4
million shares of its common stock for $600 million.
- Effective Feb. 7, 2019 the Board of
Directors approved an additional authorization for share
repurchases of approximately $603 million of common stock, which
brings the total amount to $1.0 billion authorized and available
under Verisign’s share repurchase program, which has no
expiration.
Business Highlights
- On Oct. 26, 2018, Verisign and the U.S.
Department of Commerce (“DOC”) entered into Amendment 35 to the
Cooperative Agreement, which, among other items, permits Verisign,
without further approval of the DOC, to agree with the Internet
Corporation for Assigned Names and Numbers (“ICANN”) to change the
.com Registry Agreement to increase wholesale prices for .com
domain names up to 7 percent in each of the last four years of each
six-year period of the .com Registry Agreement.
- Verisign ended the fourth quarter with
153.0 million .com and .net domain name registrations in the domain
name base, a 4.5 percent increase from the end of the fourth
quarter of 2017, and a net increase of 1.29 million registrations
during the fourth quarter of 2018.
- In the fourth quarter, Verisign
processed 9.5 million new domain name registrations for .com and
.net, as compared to 9.0 million for the same quarter in 2017.
- The final .com and .net renewal rate
for the third quarter of 2018 was 74.8 percent compared with 74.4
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
information in quarterly earnings news releases, on investor
conference calls and during investor conferences and related
events. This non-GAAP financial information does not include the
following types of financial measures that are included in GAAP:
stock-based compensation, unrealized gain/loss on the contingent
interest derivative on the subordinated convertible debentures,
non-cash interest expense through June 30, 2018, and loss on debt
extinguishment. Non-GAAP net income is decreased by amounts accrued
for contingent interest payable through Aug. 15, 2017, related to
the subordinated convertible debentures, and is adjusted for an
income tax rate of 22 percent starting from the first quarter of
2018, 25 percent for the second through the fourth quarters of
2017, and 26 percent for the first quarter of 2017, all of which
differ 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 this non-GAAP financial data
supplements the GAAP financial data 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 this additional information is not
meant to be considered in isolation nor as a substitute for results
prepared in accordance with GAAP.
The tables appended to this release include a reconciliation of
the non-GAAP financial information to the comparable financial
information 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.
(EST) to review the fourth quarter and full year 2018 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 leader in domain names 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, whether an amended .com
Registry Agreement will include any or all of the changes permitted
in Amendment 35; the failure to renew key agreements on similar
terms, or at all; 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, 2017, 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. CONSOLIDATED BALANCE SHEETS
(In thousands, except par value) (Unaudited)
December 31, 2018
December 31, 2017
ASSETS
Current assets: Cash and cash equivalents $ 357,415 $ 465,851
Marketable securities 912,254 1,948,900 Other current assets 47,365
31,402
Total current assets
1,317,034 2,446,153 Property and equipment, net
253,905 263,513 Goodwill 52,527 52,527 Deferred tax assets 104,992
15,392 Deposits to acquire intangible assets 145,000 145,000 Other
long-term assets 41,046 18,603 Total long-term assets
597,470 495,035 Total assets $ 1,914,504 $
2,941,188
LIABILITIES AND
STOCKHOLDERS’ DEFICIT
Current liabilities: Accounts payable and accrued liabilities $
215,208 $ 219,603 Deferred revenues 732,382 713,309 Subordinated
convertible debentures, including contingent interest derivative —
627,616 Total current liabilities 947,590
1,560,528 Long-term deferred revenues 285,720 286,097 Senior
notes 1,785,047 1,782,529 Deferred tax liabilities 134 444,108
Other long-term tax liabilities 281,487 128,197 Total
long-term liabilities 2,352,388 2,640,931 Total
liabilities 3,299,978 4,201,459 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: 352,325 at December
31, 2018 and 325,218 at December 31, 2017; Outstanding shares:
120,037 at December 31, 2018 and 97,591 at December 31, 2017
352 325 Additional paid-in capital 15,706,774 16,437,135
Accumulated deficit (17,089,789 ) (17,694,790 ) Accumulated other
comprehensive loss (2,811 ) (2,941 ) Total stockholders’ deficit
(1,385,474 ) (1,260,271 ) Total liabilities and stockholders’
deficit $ 1,914,504 $ 2,941,188
VERISIGN, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (In thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
Year Ended December 31, 2018 2017
2018 2017 Revenues $ 307,452 $ 295,501
$ 1,214,969 $ 1,165,095 Costs and expenses:
Cost of revenues 48,368 47,680 192,134 193,326 Sales and marketing
17,179 25,488 64,891 81,951 Research and development 15,042 12,773
57,884 52,342 General and administrative 32,897 33,128
132,668 129,754 Total costs and expenses
113,486 119,069 447,577 457,373
Operating income 193,966 176,432 767,392 707,722 Interest expense
(22,634 ) (40,467 ) (114,845 ) (136,336 ) Non-operating income, net
62,570 6,082 76,969 27,626 Income
before income taxes 233,902 142,047 729,516 599,012 Income tax
expense (51,707 ) (39,210 ) (147,027 ) (141,764 ) Net income
182,195 102,837 582,489 457,248 Other comprehensive income 192
213 130 512 Comprehensive income $
182,387 $ 103,050 $ 582,619 $ 457,760
Earnings per share: Basic $ 1.51 $ 1.05 $ 5.13
$ 4.56 Diluted $ 1.50 $ 0.83 $ 4.75
$ 3.68 Shares used to compute earnings per share
Basic 120,591 98,215 113,452 100,325
Diluted 121,329 124,257 122,661 124,180
VERISIGN, INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
Year Ended December 31, 2018 2017 Cash
flows from operating activities: Net income $ 582,489 $ 457,248
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation of property and equipment 48,367
49,878 Stock-based compensation 52,504 52,907 Gain on sale of
business (54,840 ) (10,421 ) Loss on debt extinguishment 6,554 —
Payment of contingent interest — (15,232 ) Amortization of debt
discount and issuance costs 7,137 14,678 Amortization of discount
on investments in debt securities (18,259 ) (14,860 ) Other, net
955 826 Changes in operating assets and liabilities Prepaid
expenses and other assets 1,041 13,775 Accounts payable and accrued
liabilities (2,130 ) 15,483 Deferred revenues 19,825 25,348 Net
deferred income taxes and other long-term tax liabilities 54,124
113,131 Net cash provided by operating activities
697,767 702,761 Cash flows from investing activities:
Proceeds from maturities and sales of marketable securities
4,031,809 4,562,161 Purchases of marketable securities (2,976,752 )
(4,929,834 ) Proceeds from sale of business 52,240 11,748 Purchases
of property and equipment (37,007 ) (49,499 ) Other investing
activities (160 ) — Net cash provided by (used in) investing
activities 1,070,130 (405,424 ) Cash flows from financing
activities: Repayment of principal on subordinated convertible
debentures (1,250,009 ) — Proceeds from employee stock purchase
plan 12,836 12,915 Repurchases of common stock (638,152 ) (621,173
) Proceeds from senior notes, net of issuance costs —
543,185 Net cash used in financing activities (1,875,325 )
(65,073 ) Effect of exchange rate changes on cash, cash equivalents
and restricted cash (958 ) 1,294 Net (decrease) increase in
cash, cash equivalents and restricted cash (108,386 ) 233,558 Cash,
cash equivalents, and restricted cash at beginning of period
475,139 241,581 Cash, cash equivalents, and
restricted cash at end of period $ 366,753 $ 475,139
Supplemental cash flow disclosures: Cash paid for interest $
117,956 $ 117,234 Cash paid for income taxes, net of
refunds received $ 84,906 $ 28,294
VERISIGN, INC. RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES (In thousands, except per share data)
(Unaudited) Three Months Ended December 31,
2018 2017
OperatingIncome
Net Income
OperatingIncome
Net Income GAAP as reported $ 193,966 $
182,195 $ 176,432 $ 102,837 Adjustments: Stock-based compensation
11,098 11,098 12,864 12,864 Non-cash interest expense — 3,851 Tax
adjustment (2,193 ) (480 )
Non-GAAP $ 205,064 $ 191,100 $ 189,296
$ 119,072
Revenues $ 307,452 $ 295,501
Non-GAAP operating margin 66.7 % 64.1 %
Diluted shares 121,329 124,257
Diluted EPS, non-GAAP
$ 1.58 $ 0.96
Year Ended December
31, 2018 2017
OperatingIncome
Net Income
OperatingIncome
Net Income GAAP as reported $ 767,392 $ 582,489 $
707,722 $ 457,248 Adjustments: Stock-based compensation 52,504
52,504 52,907 52,907 Unrealized loss on contingent interest
derivative on the subordinated convertible debentures — 893
Non-cash interest expense 5,719 14,678 Contingent interest payable
on subordinated convertible debentures — (9,445 ) Loss on debt
extinguishment 6,554 — Tax adjustment (27,717 )
(24,352 )
Non-GAAP $ 819,896 $ 619,549
$ 760,629 $ 491,929
Revenues $
1,214,969 $ 1,165,095
Non-GAAP operating margin 67.5
% 65.3 %
Diluted shares 122,661 124,180
Diluted
EPS, non-GAAP $ 5.05 $ 3.96
VERISIGN, INC. RECONCILIATION OF NON-GAAP ADJUSTED
EBITDA (In thousands) (Unaudited)
The following table reconciles GAAP net
income to non-GAAP Adjusted EBITDA for the periods shown below:
Three Months EndedDecember
31,
Year EndedDecember 31,
2018 2017 2018 Net Income
$ 182,195 $ 102,837 $ 582,489 Interest expense 22,634 40,467
114,845 Income tax expense 51,707 39,210 147,027 Depreciation and
amortization 11,917 12,213 48,367 Stock-based compensation 11,098
12,864 52,504 Unrealized (gain) loss on hedging agreements (30 ) 43
(100 ) Gain on sale of business (54,840 ) — (54,840 ) Loss on debt
extinguishment — — 6,554
Non-GAAP Adjusted
EBITDA $ 224,681 $ 207,634 $ 896,846
VERISIGN, INC. STOCK-BASED COMPENSATION
CLASSIFICATION (In thousands) (Unaudited)
The following table presents the
classification of stock-based compensation:
Three Months EndedDecember
31,
Year EndedDecember 31,
2018 2017 2018 2017 Cost
of revenues $ 1,652 $ 1,719 $ 6,835 $ 7,030 Sales and
marketing 579 1,433 4,972 5,688 Research and development 1,696
1,560 6,728 6,113 General and administrative 7,171 8,152
33,969 34,076 Total stock-based compensation expense
$ 11,098 $ 12,864 $ 52,504 $ 52,907
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190207005717/en/
Investor Relations: David Atchley, datchley@verisign.com,
703-948-4643Media Relations: Deana Alvy, dalvy@verisign.com,
703-948-3800
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