Domain Name Registration & Improved Renewal Rates Boost VeriSign’s 2Q’18 Earnings

by Trefis Team
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As expected, VeriSign (NASDAQ:VRSN) reported a strong financial performance for the second quarter backed by the growth in domain name registrations for .com and .net, coupled with improved renewal rates compared to the previous year. We expect the company’s leading position in the highly regulated domain industry, and expected price hikes, to drive its value in the coming quarters. Additionally, VeriSign has the potential to greatly benefit from the significant growth opportunities in the Distributed Denial of Service (DDoS) security market.

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Key Highlights of 2Q’18 Results

  • During the second quarter, VeriSign processed 9.6 million new registrations and the domain name base increased by 1.4 million names. This caused the company’s 2Q’18 revenue to rise by almost 5% to $302 million.
  • Although the renewal rate is not fully measurable until 45 days after the quarter, the company expects its second quarter renewal rate to be around 74.9%, up from 74% in the same quarter of last year. This implies that the company was able to attract better pricing for its domain names, which drove its quarterly revenue.
  • VeriSign’s operating income improved from $175 million in the second quarter of 2017 to $193 million in the latest quarter, increasing its operating margin to 63.8% compared to 60.6% in the same quarter a year ago.
  • Further, the company repurchased 1 million of its shares for $125 million to return higher value to its shareholders.

Going Forward

  • For the full year 2018, VeriSign increased the guidance for domain name base growth from 2.5%-3.25% to 3.5%- 4.25%. The company expects its domain name base to grow between 1.3 and 1.8 million net registrations during the third quarter.
  • Accordingly, the company now anticipates its full year revenue to be in the range of $1.205-$1.215 billion, narrowed from its previous guidance of $1.200-$1.215 billion.
  • Also, VeriSign updated its operating margin (Non-GAAP) expectation to 66%-67%, up from the earlier guidance of 65.5%-66.5%. The company’s capital expenditure is still expected to be between $45 and $55 million.

 

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