01—Abstract
Summary
Summary of the 10-K filed February 14, 2020. Cited figures are marked; the original filing is the authoritative source.
VeriSign, Inc. reported 2019 revenues of $1,231.7 milliona, up 1% from $1,215.0 million in 2018, and operating income of $806.1 million, up 5% from $767.4 million.
Net income was $612.3 millionb, or $5.15 per diluted share, compared with $582.5 million, or $4.75 per diluted share, in 2018, which included a $52.0 million after-tax gain on the sale of customer contracts of its security services business. The .com and .net domain name base reached 158.8 million registrations at December 31, 2019, up from 153.0 million, and the company processed 40.3 million new .com and .net registrations in 2019 versus 38.2 million in 2018. The final .com and .net renewal rate for the third quarter of 2019 was 73.7%, compared with 74.8% a year earlier.
Cash flow and capital return remained central to the story. Net cash provided by operating activities was $753.9 millionc in 2019, and the company repurchased 3.9 million shares for $738.5 million. On February 6, 2020, the Board authorized a repurchase of $743.0 million, which together with $257.0 million remaining brings total authorization to up to $1.0 billion.
Cash, cash equivalents and marketable securities totaled $1.22 billiond at year-end, against $1.79 billion of senior notes, and total stockholders' deficit was $1.49 billion. The filing highlights regulatory and contractual dependence. The .com Registry Agreement runs through November 30, 2024 and the .net agreement through June 30, 2023.
A Proposed .com Amendment would allow price increases of up to 7% in certain years, and a Proposed LOI calls for $20 million in payments to ICANN over five years beginning January 1, 2021; both were open for public comment until February 14, 2020. The company also disclosed a pending Independent Review Process brought by Afilias concerning the .web gTLD, for which a $145.0 million deposit has been paid.
02—Key points
Key Highlights
- Revenues of $1,231.7 million in 2019, up 1% from $1,215.0 million in 2018.
- Operating income of $806.1 million, up 5% from $767.4 million; operating margin reflected in the 65.5% of revenues reported for 2019 versus 63.2% in 2018.
- Diluted EPS of $5.15 in 2019 versus $4.75 in 2018; 2018 net income included a $52.0 million after-tax gain on sale of security services customer contracts.
- The .com and .net domain name base grew to 158.8 million registrations, up from 153.0 million, while the Q3 2019 final renewal rate was 73.7% versus 74.8% a year earlier.
- Net cash from operations of $753.9 million in 2019; $738.5 million spent repurchasing 3.9 million shares, with a new authorization of $743.0 million approved February 6, 2020.
- Pending .com Registry Agreement amendment and Letter of Intent would permit price increases of up to 7% in certain years and require $20 million in payments to ICANN over five years starting January 1, 2021.
- Afilias' Independent Review Process challenging the .web gTLD award to Verisign and NDC remains pending; Verisign has a $145.0 million deposit recorded for the .web rights.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Verisign kept $0.50.
- Revenue$1.23B100.0%
- Cost of revenue−$180.5M14.7%
- Gross profit$1.05B85.3%
- Operating costs−$245.1M19.9%
- Operating income$806.1M65.5%
- Interest, other & tax−$193.8M15.7%
- Net income$612.3M49.7%
Where FY2019 revenue went
$1.23B- Net income: $612.3M, 50% of revenue
- Interest, other & tax: $193.8M, 16% of revenue
- Other operating costs: $184.3M, 15% of revenue
- Cost of revenue: $180.5M, 15% of revenue
- R&D: $60.8M, 4.9% of revenue
Kept 50% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 14, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.23B$1.21B | +1.4% |
| Cost of Revenue | $180.47M$192.13M | −6.1% |
| Gross Profit | $1.05B$1.02B | +2.8% |
| R&D Expenses | $60.80M$57.88M | +5.0% |
| Operating Expenses | $425.53M$447.58M | −4.9% |
| Operating Income | $806.13M$767.39M | +5.0% |
| Interest Expense | $90.61M$114.84M | −21.1% |
| Net Income | $612.30M$582.49M | +5.1% |
| EPS (Basic) | $5.17$5.13 | +0.8% |
| EPS (Diluted) | $5.15$4.75 | +8.4% |
| Shares Outstanding (Basic) | 118.51M113.45M | +4.5% |
| Shares Outstanding (Diluted) | 118.97M122.66M | −3.0% |
05—Questions
Frequently Asked Questions
How much did VeriSign's revenue and profit grow in 2019?
Revenues were $1,231.7 million in 2019, up 1% from $1,215.0 million in 2018. Operating income rose 5% to $806.1 million, and net income was $612.3 million, compared with $582.5 million in 2018. The 2018 net income included a $52.0 million after-tax gain from the sale of security services customer contracts.
How is VeriSign returning capital to shareholders?
In 2019 the company repurchased 3.9 million shares for $738.5 million. Effective February 6, 2020, the Board authorized an additional $743.0 million of repurchases, which together with $257.0 million remaining brings the total program authorization to up to $1.0 billion. The program has no expiration date.
What regulatory or contractual events could affect .com pricing and renewals?
The Proposed .com Amendment and Proposed LOI, announced January 3, 2020, would allow price increases of up to 7% in each of the final four years of each six-year period beginning October 26, 2018, and would require $20 million in payments to ICANN over five years beginning January 1, 2021. ICANN's public comment period ran until February 14, 2020, and the filing notes that ICANN and Verisign will determine whether to enter into these agreements afterward.
What is the status of the .web gTLD dispute?
Afilias, a losing bidder in the .web auction, filed an Independent Review Process against ICANN on November 14, 2018, alleging that the Verisign and Nu Dotco agreement violated ICANN rules. On February 12, 2020, the IRP Panel permitted Verisign and NDC to participate in aspects of the proceeding. The company believes the claims are without merit and intends to vigorously oppose them. The $145.0 million deposit for the .web rights remains recorded as an asset.
What is VeriSign's balance sheet position?
At December 31, 2019, cash, cash equivalents and marketable securities totaled $1.22 billion, senior notes were $1.79 billion net of issuance costs, and total stockholders' deficit was $1.49 billion. The company entered a $200.0 million unsecured revolving credit facility in December 2019, with no borrowings outstanding at year-end.
06—Continue