Verisign (NASDAQ:VRSN) is scheduled to announce its fiscal year 2012 Q3 earnings on October 25. The company had a good first half of the year with its contract with ICANN for .com and .net registries being successfully renewed and revenues growing 13% to $420 million. Verisign is primarily a domain name registrar which has the exclusive registry rights for .com and .net domains from ICANN. It competes with other domain name registry providers like NeuStar, Employ Media, and Afilias to win new and maintain existing registry rights. Its .com and .net domain registration business accounts for nearly 90% of its $49 Trefis price estimate.
Growth in Domain Registrations
Since almost all its revenues are generated via domain registrations, the growth in .com and .net domain registrations is what we will be looking at closely in this earnings release. Verisign had nearly 119 million active domains by the end of the last quarter with 9 million domains being added during the quarter. We expect it to reach almost 120 million in total active domain names (.com and .net) by the end of the year.
The number of total domains has been increasing rapidly, but .com and .net domains as a percentage of all domains have been trending lower, so Verisign’s revenue growth depends largely on whether it is able to attract customers to use its services for its other gTLDs .tv, .name and .cc. We would be looking for more details on revenues from sources other than the .com and .net domain registries and plans to acquire registry for other gTLDs in the post-earnings call.
The company’s agreement with ICANN to manage the .com and .net domains runs for another 6 years, with the right to hike fees by 7% in any 4 years of the contract duration. This secures its bread-and-butter revenue stream for the next 6 years.
We have a $49 estimate for VeriSign which is at par with the market price.