VeriSign Q4 Earnings: Company Manages To Beat Consensus Estimates

by Trefis Team
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VeriSign (NASDAQ:VRSN) recently released Q4 results, posting higher revenues and earnings year over year. Revenues came in at $286.3 million, up 5% from the same quarter in 2015. Non-GAAP adjusted EBITDA was reported at $199.1 million, an increase of 7.2% year over year. The company ended the quarter with cash, cash equivalents, and marketable securities of $1.8 billion, in comparison to $1.9 billion from year-end 2015.

Key Highlights:

  • In the quarter, domain name registrations for .com and .net together grew 1.7% year over year to 142.2 million. VeriSign processed 8.8 million new domain name registrations for .com and .net, a decrease from 12.2 million processed in the year-ago quarter.
  • The renewal rate for Q2 2016 stood at about 73%, up by about 110 basis points. The news only comes now as renewal rates are not completely measurable until after 45 days from the end of the quarter. Domain growth is primarily driven by internet adoption rate, economic activity globally, e-commerce activity, and registrar go-to-market strategies.
  • For the reported quarter, the exact renewal rate figures will be available after 45 days from Dec 31, 2016. The company estimates it to be 67.5% compared with 73.3% in the year-ago quarter as the volume of domain name registrations up for renewal in the quarter will have a larger proportion of first time renewing registration as a result of strong demand during Q3 and Q4 2015.

  • The fourth quarter ended with 142.2 million .com and .net domain name registrations in the domain name base. That is a 1.7% increase year over year.
  • In Q3, it was announced that VeriSign was given permission to provide registrations for .com and .net domain names in the People’s Republic of China. The .com and .net domain registries will be the first non-Chinese registry to be allowed in China. This marks a huge opportunity for VeriSign. The company now has the potential to increase sales from the region at a dramatic pace given the popularity of the TLDs in question globally. To put things into perspective, revenues in the region grew at a rate of 53% this quarter.

Additionally, this quarter marks 20 straight quarters in which the company maintained a 100% .com and .net availability. As more and more companies begin to rely on digitally growing their business, maintaining availability is going to be of utmost priority. Given the track record so far, it could be many quarters before we see this number slip.

All said and done, the company holds a prime position in the highly regulated .com and .net domain industry. We expect the renewal of the .com contract and price hikes at .com and .net domain names will continue to push the top line going forward. Additionally, VeriSign has the potential to greatly benefit from the significant growth opportunities in the Distributed Denial of Service (DDoS) security market.

For 2017, the company expects to record revenues in the $1.138 billion to $1.158 billion range, while non-GAAP operating margin is expected of between 64% to 65%.

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