Key Takeaways From Verisign Q1 Earnings

by Trefis Team
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VeriSign (NASDAQ:VRSN) recently reported Q1 revenue of $289 million, implying growth of 2.4% over the same period last year. Net income saw an 8% increase to around $116 million. The company ended the quarter with cash, cash equivalents and marketable securities of $1.8 billion.

Key Highlights:

  • In the quarter, domain name registrations for .com and .net together grew 1% year over year to 143.6 million. VeriSign processed 9.5 million new domain name registrations for .com and .net, a decrease from 0.5 million processed in the year-ago quarter.
  • The renewal rate for Q4 2016 stood at about 67.6%, down by about 6 percentage 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 March 31, 2017. The company estimates that it will be around 72.2% compared with 74.4% in the year-ago quarter.

  • In terms of geographical revenues, the U.S. and Europe, the Middle East and Africa (EMEA) regions continued their growth. However, the revenues from China, which grew at a phenomenal rate over the past year owing to new registrations, slowed down in the quarter. This is possibly due to a lower renewal rate and unfavorable macro conditions.

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Additionally, this quarter marks 21 straight quarters in which the company maintained 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 the utmost priority. Given the track record so far, it could be a while before we see this number slip.

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 $1.145 billion to $1.160 billion range, while non-GAAP operating margin is expected to be between 64.5% and 65.25%.

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