01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
VeriSign, Inc. (Nasdaq: VRSN) describes itself as a global provider of domain name registry services and internet infrastructure, operating the registries for .com and .net, which it says support the majority of global e-commerce, and operating two of the 13 global internet root servers.
Revenues rose to $1,265.1 milliona in 2020 from $1,231.7 million in 2019, and operating income reached $824.2 million. Net income was $814.9 million, or $7.07 per diluted share, which includes a $204.2 million income tax benefit from remeasuring previously unrecognized tax benefits. Net cash provided by operating activities was $730.2 million.
The company had 165.2 million .com and .net registrations in the domain name base at year-end, up 4%. The filing highlights that substantially all revenue comes from the .com and .net registry agreements, which carry renewal dates of November 30, 2024 and June 30, 2023, respectively. The .com price is fixed at $7.85b per registration, and the company announced it will increase this wholesale fee to $8.39 effective September 1, 2021.
The company repurchased 3.7 million shares for $734.9 millionc in 2020 and, as of February 11, 2021, the board authorized a total repurchase capacity of up to $1.0 billion. Cash and marketable securities totaled $1.17 billion at year-end, against $1.79 billion of senior notes outstanding and a stockholders' deficit of $1.39 billion.
The main legal item is an Independent Review Process arbitration brought by Afilias plc against ICANN over the award of the .web gTLD to a Verisign affiliate, where the company expects a panel decision in the first quarter of 2021 and says Afilias' claims are without merit. The filing also cites COVID-19 uncertainty, with most employees working remotely, though it states that financial condition and results had not been adversely affected as of the filing date.
02—Key points
Key Highlights
- Revenues of $1,265.1 million in 2020, up 3% from $1,231.7 million in 2019; operating income of $824.2 million, up 2%.
- Net income of $814.9 million (diluted EPS $7.07) includes a $204.2 million income tax benefit from remeasured unrecognized tax benefits.
- Domain name base reached 165.2 million .com and .net registrations at December 31, 2020, a 4% increase; 42.4 million new .com and .net registrations were processed in 2020.
- The .com annual fee has been fixed at $7.85 since 2012; a fee increase to $8.39 takes effect September 1, 2021.
- Share repurchases totaled $734.9 million in 2020; the board authorized up to $1.0 billion in total repurchase capacity effective February 11, 2021.
- Cash and marketable securities of $1.17 billion versus $1.79 billion of senior notes; operating cash flow was $730.2 million.
- Pending .web gTLD arbitration (IRP) against ICANN brought by Afilias, with a decision expected in Q1 2021; the company believes the claims are without merit.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Verisign kept $0.64.
- Revenue$1.27B100.0%
- Cost of revenue−$180.2M14.2%
- Gross profit$1.08B85.8%
- Operating costs−$260.7M20.6%
- Operating income$824.2M65.1%
- Interest, other & tax−$9.3M0.7%
- Net income$814.9M64.4%
Where FY2020 revenue went
$1.27B- Net income: $814.9M, 64% of revenue
- SG&A: $186.0M, 15% of revenue
- Cost of revenue: $180.2M, 14% of revenue
- R&D: $74.7M, 5.9% of revenue
- Interest, other & tax: $9.3M, 0.7% of revenue
Kept 64% as net incomeInterest, other & tax $9.3M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $1.27B$1.23B | +2.7% |
| Cost of Revenue | $180.20M$180.47M | −0.1% |
| Gross Profit | $1.08B$1.05B | +3.2% |
| R&D Expenses | $74.70M$60.80M | +22.9% |
| SG&A Expenses | $186.00M— | — |
| Operating Expenses | $440.90M$425.53M | +3.6% |
| Operating Income | $824.20M$806.13M | +2.2% |
| Interest Expense | $90.20M$90.61M | −0.5% |
| Net Income | $814.90M$612.30M | +33.1% |
| EPS (Basic) | $7.08$5.17 | +36.9% |
| EPS (Diluted) | $7.07$5.15 | +37.3% |
| Shares Outstanding (Basic) | 115.10M118.51M | −2.9% |
| Shares Outstanding (Diluted) | 115.30M118.97M | −3.1% |
05—Questions
Frequently Asked Questions
How dependent is VeriSign on the .com and .net registries?
The filing states that substantially all revenues are derived from operating the .com gTLD under the Cooperative Agreement with the DOC and the .com Registry Agreement, as well as the .net gTLD under its .net Registry Agreement. The .com and .net agreements carry presumptive renewal rights, with current terms expiring November 30, 2024 and June 30, 2023, respectively.
What pricing changes did the company announce?
The company announced on February 11, 2021 that it will increase the annual registry-level wholesale fee for each new and renewal .com domain name registration from $7.85 to $8.39, effective September 1, 2021. Registry prices for all TLDs had been frozen through March 31, 2021. The .net fee may be raised by up to 10% each year under its agreement with ICANN.
What is the status of the .web litigation?
Afilias, a losing bidder in the .web auction, brought an Independent Review Process proceeding against ICANN alleging that the Verisign and NDC agreement violated ICANN's guidebook. A hearing on the merits was held in early August 2020, and the company expects the panel to issue its decision in the first quarter of 2021. The company says Afilias' claims regarding its conduct are without merit and intends to oppose them vigorously. The company has paid a $145.0 million deposit for the .web rights.
Why did net income rise so sharply in 2020?
Net income was $814.9 million in 2020 versus $612.3 million in 2019. The increase reflects a $204.2 million income tax benefit from remeasuring previously unrecognized tax benefits, largely tied to a 2013 worthless stock deduction and the lapse of statutes of limitations. Operating income rose more modestly, to $824.2 million from $806.1 million.
How is the company returning capital to shareholders and managing its debt?
In 2020 the company repurchased 3.7 million shares for $734.9 million, with $335.6 million remaining under the program at year-end. In February 2021 the board added $747.0 million to the remaining $253.0 million, for a total of up to $1.0 billion. Senior notes outstanding were $1.79 billion at year-end, and the company had no borrowings under its $200.0 million revolving credit facility.
06—Continue