01—Abstract
Summary
Summary of the 10-K filed February 19, 2016. Cited figures are marked; the original filing is the authoritative source.
VeriSign, Inc. (NASDAQ: VRSN) reported 2015 revenues of $1,059.4 milliona, up 5% from $1,010.1 million in 2014, and operating income of $605.9 million, up from $564.4 million.
Net income was $375.2 millionb, compared with $355.3 million in 2014. Registry Services, which operates the .com and .net domain registries, make up substantially all of revenue. The domain name base for .com and .net grew to 139.8 million at December 31, 2015, from 131.5 million a year earlier, and the filing attributes revenue growth mainly to that increase and to .net fee increases.
The company expects revenues to keep increasing in 2016. Cash flow from operations was $651.5 millionc in 2015, and the company repurchased 9.3 million shares for $621.9 million. Cash, cash equivalents and marketable securities totaled $1.9 billion at year-end, against $1.25 billion of principal on Subordinated Convertible Debentures and $1.235 billion of senior notes.
Stockholders' deficit was $1.07 billiond. In February 2016 the Board authorized a new repurchase of about $611.2 million, bringing the total authorization to up to $1.0 billion. The filing highlights significant regulatory and contractual dependence.
The .com Registry Agreement runs through November 30, 2018, and any renewal requires Department of Commerce approval. The .com price is fixed at $7.85 under Amendment 32, subject to limited increases.
One customer accounted for approximately 31% of 2015 revenues. The filing also notes a pending Root Zone Maintainer agreement with ICANN tied to the IANA transition, and risks from new gTLD delegations.
02—Key points
Key Highlights
- Revenues of $1,059.4 million in 2015, up 5% from $1,010.1 million in 2014.
- Operating income of $605.9 million in 2015, compared with $564.4 million in 2014; net income of $375.2 million versus $355.3 million.
- The domain name base for .com and .net reached 139.8 million at December 31, 2015, up 6% from 131.5 million at year-end 2014.
- Cash flow from operating activities was $651.5 million in 2015, and the company repurchased 9.3 million shares for $621.9 million.
- Cash, cash equivalents and marketable securities totaled $1.9 billion at December 31, 2015, while senior notes were $1.235 billion and Subordinated Convertible Debentures carried $1.25 billion principal.
- The .com Registry Agreement runs through November 30, 2018, and renewal requires prior DOC approval; the .com price is fixed at $7.85 subject to limited increases.
- One customer accounted for approximately 31% of revenues in 2015 and 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Verisign kept $0.35.
- Revenue$1.06B100.0%
- Cost of revenue−$192.8M18.2%
- Gross profit$866.6M81.8%
- Operating costs−$260.6M24.6%
- Operating income$605.9M57.2%
- Interest, other & tax−$230.7M21.8%
- Net income$375.2M35.4%
Where FY2015 revenue went
$1.06B- Net income: $375.2M, 35% of revenue
- Interest, other & tax: $230.7M, 22% of revenue
- Other operating costs: $196.9M, 19% of revenue
- Cost of revenue: $192.8M, 18% of revenue
- R&D: $63.7M, 6.0% of revenue
Kept 35% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 19, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.06B$1.01B | +4.9% |
| Cost of Revenue | $192.79M$188.43M | +2.3% |
| Gross Profit | $866.58M$821.69M | +5.5% |
| R&D Expenses | $63.72M$67.78M | −6.0% |
| Operating Expenses | $453.42M$445.69M | +1.7% |
| Operating Income | $605.95M$564.43M | +7.4% |
| Interest Expense | $107.63M$85.99M | +25.2% |
| Net Income | $375.24M$355.26M | +5.6% |
| EPS (Basic) | $3.29$2.80 | +17.5% |
| EPS (Diluted) | $2.82$2.52 | +11.9% |
| Shares Outstanding (Basic) | 114.16M126.71M | −9.9% |
| Shares Outstanding (Diluted) | 133.03M140.90M | −5.6% |
05—Questions
Frequently Asked Questions
What drove revenue growth in 2015?
The filing attributes the $49.2 million revenue increase primarily to a 6% increase in .com and .net domain names and to increases in the .net registration fee in February 2014 and February 2015.
How is the company returning capital to shareholders?
In 2015 the company repurchased 9.3 million shares for $621.9 million. Effective February 11, 2016, the Board authorized repurchases of approximately $611.2 million, which together with $388.8 million remaining from the prior program gives a total authorization of up to $1.0 billion. The company has not declared or paid cash dividends in the last four years.
What are the main regulatory risks to the .com business?
The .com Registry Agreement with ICANN expires November 30, 2018, and any renewal or extension requires prior written approval from the Department of Commerce. If the DOC does not approve, the current agreement remains unchanged. The filing states that the DOC's approval of a renewal would be a material matter for the business.
What do the Subordinated Convertible Debentures mean for the company?
The $1.25 billion principal of 3.25% Subordinated Convertible Debentures due 2037 became convertible at holders' option through March 31, 2016, because the stock price exceeded the trigger in the fourth quarter of 2015. The company states it intends and has the ability to settle principal in cash, and the conversion spread could require up to 22.1 million additional shares.
06—Continue