VeriSign, Inc. (NASDAQ: VRSN), a leader in domain names and internet infrastructure, today reported financial results for the fourth quarter and full year 2018.
Fourth Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries (“Verisign”) reported revenue of $307 million for the fourth quarter of 2018, up 4.0 percent from the same quarter in 2017. VeriSign reported net income of $182 million and diluted earnings per share (diluted “EPS”) of $1.50 for the fourth quarter of 2018, compared to net income of $103 million and diluted EPS of $0.83 for the same quarter in 2017. The operating margin was 63.1 percent for the fourth quarter of 2018 compared to 59.7 percent for the same quarter in 2017.
Fourth Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $191 million and diluted EPS of $1.58 for the fourth quarter of 2018, compared to net income of $119 million and diluted EPS of $0.96 for the same quarter in 2017. The non-GAAP operating margin was 66.7 percent for the fourth quarter of 2018 compared to 64.1 percent for the same quarter in 2017. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.
2018 GAAP Financial Results
For the year ended Dec. 31, 2018, Verisign reported revenue of $1.21 billion, up 4.3 percent from $1.17 billion in 2017. Verisign reported net income of $582 million and diluted EPS of $4.75 in 2018, compared to net income of $457 million and diluted EPS of $3.68 in 2017. The operating margin for 2018 was 63.2 percent compared to 60.7 percent in 2017.
2018 Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $620 million and diluted EPS of $5.05 for 2018, compared to net income of $492 million and diluted EPS of $3.96 for 2017. The non-GAAP operating margin for 2018 was 67.5 percent compared to 65.3 percent for 2017.
On Dec. 5, 2018, Verisign completed the previously announced sale of the rights, economic benefits, and obligations, in all customer contracts related to its Security Services business to NeuStar, Inc. The sale resulted in a pre-tax, non-operating gain of $54.8 million, which for fourth quarter and full year 2018, increased GAAP net income, and non-GAAP net income by $52.0 million and $42.8 million, respectively. The gain increased GAAP diluted EPS and non-GAAP diluted EPS by $0.43 and $0.36 in the fourth quarter and by $0.43 and $0.35 for full year 2018. These increases are included in the results above.
“2018 was a strong year for Verisign. The domain name base and revenues grew; we divested non-core assets; and we repurchased 4.4 million of our shares. Significantly, in October, we executed an amendment to the Cooperative Agreement with the Department of Commerce, which gives Verisign the approval to engage with ICANN to amend the .com Registry Agreement to allow Verisign to increase .com domain name registration and renewal fees. The amendment also provides regulatory reduction that allows for a standard renewal of the .com Registry Agreement, which occurs every six years, to proceed without review and approval by the Department of Commerce,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
- Verisign ended 2018 with cash, cash equivalents, and marketable securities of $1.27 billion, a decrease of $1.15 billion from year-end 2017.
- Cash flow from operations was $219 million for the fourth quarter of 2018 and $698 million for the full year 2018 compared with $199 million for the same quarter in 2017 and $703 million for the full year 2017.
- Deferred revenues on Dec. 31, 2018, totaled $1.02 billion, an increase of $19 million from year-end 2017.
- During the fourth quarter, Verisign repurchased 1.2 million shares of its common stock for $175 million. During the full year 2018, Verisign repurchased 4.4 million shares of its common stock for $600 million.
- Effective Feb. 7, 2019 the Board of Directors approved an additional authorization for share repurchases of approximately $603 million of common stock, which brings the total amount to $1.0 billion authorized and available under Verisign’s share repurchase program, which has no expiration.
- On Oct. 26, 2018, Verisign and the U.S. Department of Commerce (“DOC”) entered into Amendment 35 to the Cooperative Agreement, which, among other items, permits Verisign, without further approval of the DOC, to agree with the Internet Corporation for Assigned Names and Numbers (“ICANN”) to change the .com Registry Agreement to increase wholesale prices for .com domain names up to 7 percent in each of the last four years of each six-year period of the .com Registry Agreement.
- Verisign ended the fourth quarter with 153.0 million .com and .netdomain name registrations in the domain name base, a 4.5 percent increase from the end of the fourth quarter of 2017, and a net increase of 1.29 million registrations during the fourth quarter of 2018.
- In the fourth quarter, Verisign processed 9.5 million new domain name registrations for .com and .net, as compared to 9.0 million for the same quarter in 2017.
- The final .com and .net renewal rate for the third quarter of 2018 was 74.8 percent compared with 74.4 percent for the same quarter in 2017. Renewal rates are not fully measurable until 45 days after the end of the quarter.