Key Takeaways From Verisign’s Q4

by Trefis Team
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VeriSign
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After a positive performance in the first three quarters of the year, Verisign (NASDAQ:VRSN) performed decently in the fourth quarter with revenue of $296 million, growth of 3% over the same period last year. The company’s net income was around $103 million, slightly below Q4 2016. With a contractual right to increase the fees by up to 10% each year during the term of its agreement with ICANN, through June 30, 2023, we expect Verisign to sustain its growth momentum going forward.

Our price estimate for Verisign is slightly above the current market price. We have also created an interactive dashboard where you can change the company’s expected revenue, margins, and other key drivers to gauge how they would impact expected earnings for the year.

Key Highlights:

In the quarter, domain name registrations for .com and .net together grew 2.9% year over year to 146.4 million. VeriSign processed 9 million new domain name registrations for .com and .net, an increase from 8.8 million processed in the year-ago quarter. The renewal rate for Q3 2017 stood at about 74.4%, up from 73% in the prior year period. This figure lags a quarter (which is why Q3 data is coming out now) as renewal rates are not completely measurable until 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 in the coming weeks. The company estimates that it will be around 72.2% compared with 67.6% in the year-ago quarter. Verisign 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 2018, the company expects to record revenues in the $1.195 billion to $1.215 billion range, while its non-GAAP operating margin is expected to be between 65.5% and 66.5%.

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