01—Abstract
Summary
Summary of the 10-K filed February 16, 2018. Cited figures are marked; the original filing is the authoritative source.
VeriSign, Inc. (Nasdaq: VRSN) reported 2017 revenues of $1,165.1 milliona, up 2% from $1,142.2 million in 2016, and operating income of $707.7 million, up 3%.
Net income was $457.2 millionb, compared with $440.6 million in 2016. The company is the exclusive registry for the .com and .net domains, with the .com and .net domain name base reaching 146.4 million registrations at December 31, 2017. Operating cash flow was $702.8 million.
The company repurchased 6.3 million shares for $592.7 millionc during 2017 and, on February 8, 2018, its Board authorized a new repurchase program of approximately $585.8 million, bringing total available authorization to up to $1.0 billion. The filing highlights regulatory and contractual dependence. The Cooperative Agreement with the U.S. Department of Commerce expires November 30, 2018 unless the DOC extends it, and the .com Registry Agreement's pricing is capped at $7.85 per registration.
The company reported a provisional $162.4 milliond U.S. tax on accumulated foreign earnings and a $186.8 million benefit from remeasuring deferred taxes under the Tax Cuts and Jobs Act. Total stockholders' deficit was $1.26 billion, and senior notes stood at $1.78 billion net of issuance costs. In February 2018, the company called its $1.25 billion 3.25% Subordinated Convertible Debentures for redemption on May 1, 2018, and intends to settle principal in cash.
Key risks in the filing include the expiration of the Cooperative Agreement, ICANN-driven contract amendments due by October 20, 2018, the impact of GDPR beginning May 2018, and DDoS and security threats. China revenue declined 16% in 2017 to $106.5 million after a 53% increase in 2016, which the company attributed to non-renewal of registrations from a surge in the second half of 2015 and early 2016.
02—Key points
Key Highlights
- Revenues were $1,165.1 million in 2017, up 2% from $1,142.2 million in 2016; operating income rose 3% to $707.7 million.
- Net income was $457.2 million in 2017 ($3.68 diluted EPS), compared with $440.6 million ($3.42 diluted EPS) in 2016.
- The .com and .net domain name base reached 146.4 million at December 31, 2017, up 3% year over year; the Q3 2017 final renewal rate was 74.4%.
- Cooperative Agreement with the DOC expires November 30, 2018 unless extended; the .com price cap is $7.85 through November 30, 2024.
- Tax Act impact: $162.4 million provisional U.S. tax on accumulated foreign earnings and $186.8 million deferred tax remeasurement benefit in 2017; the company plans to repatriate about $1.1 billion by early Q2 2018.
- Board authorized a new share repurchase of approximately $585.8 million on February 8, 2018, for total availability of up to $1.0 billion; $477.4 million remained at year-end 2017.
- China revenue fell 16% to $106.5 million in 2017 after rising 53% in 2016, reflecting non-renewal of earlier registration volume.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Verisign kept $0.39.
- Revenue$1.17B100.0%
- Cost of revenue−$193.3M16.6%
- Gross profit$971.8M83.4%
- Operating costs−$264.0M22.7%
- Operating income$707.7M60.7%
- Interest, other & tax−$250.5M21.5%
- Net income$457.2M39.2%
Where FY2017 revenue went
$1.17B- Net income: $457.2M, 39% of revenue
- Interest, other & tax: $250.5M, 21% of revenue
- Other operating costs: $211.7M, 18% of revenue
- Cost of revenue: $193.3M, 17% of revenue
- R&D: $52.3M, 4.5% of revenue
Kept 39% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 16, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $1.17B$1.14B | +2.0% |
| Cost of Revenue | $193.33M$198.24M | −2.5% |
| Gross Profit | $971.77M$943.92M | +2.9% |
| R&D Expenses | $52.34M$59.10M | −11.4% |
| Operating Expenses | $457.37M$455.60M | +0.4% |
| Operating Income | $707.72M$686.57M | +3.1% |
| Interest Expense | $136.34M$115.56M | +18.0% |
| Net Income | $457.25M$440.64M | +3.8% |
| EPS (Basic) | $4.56$4.12 | +10.7% |
| EPS (Diluted) | $3.68$3.42 | +7.6% |
| Shares Outstanding (Basic) | 100.33M107.00M | −6.2% |
| Shares Outstanding (Diluted) | 124.18M128.83M | −3.6% |
05—Questions
Frequently Asked Questions
What drove the revenue increase in 2017?
The filing attributes the $22.9 million increase primarily to a 4% increase in the .com domain name base and the .net registration fee increases in February 2016 and February 2017, partially offset by a 5% decline in the .net domain name base.
What is the status of the Cooperative Agreement with the Department of Commerce?
The Cooperative Agreement expires November 30, 2018, unless the DOC extends the term in its sole discretion. The DOC may conduct a public interest review to decide whether to extend, and the company agreed to cooperate and negotiate in good faith to resolve issues identified in that review.
How is the convertible debt being handled?
In February 2018 the company called all $1.25 billion of its 3.25% Subordinated Convertible Debentures for redemption on May 1, 2018, and may be converted until April 30, 2018. If holders convert, the company intends to settle principal in cash and the excess value in shares of common stock.
How much cash and debt does the company have?
At December 31, 2017, cash, cash equivalents and marketable securities totaled $2.41 billion. Senior notes were $1.78 billion net of issuance costs, including the $550.0 million 4.75% notes issued in July 2017. The company also had a $200.0 million undrawn revolving credit facility.
What were the main changes in operating expenses?
Cost of revenues fell 2% to $193.3 million, research and development fell 11% to $52.3 million, and general and administrative expenses rose 10% to $129.8 million. Sales and marketing was roughly flat at $82.0 million.
06—Continue