VRSN - Earnings call transcript Q4 2018

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Operator

Good day everyone. Welcome to VeriSign's Fourth Quarter and Full Year 2018 Earnings Call. Today's conference is being recorded and unauthorized recording of this call is not permitted. At this time, I would like to turn the conference over to Mr. David Atchley, Vice President of Investor Relations and Corporate Treasurer. sir. ahead go Please

David Atchley

your the release Strubbe, full of be fourth Kilguss, available and CFO. and XXXX And Executive full the will everyone. XX-Q, be quarter through a With discussing year recent not to and could Executive non-GAAP identify matters The on and forward-looking reports most performance financial remarks year There the today unless CEO; earnings disclosure. guidance is during materially retains under longstanding presentation policy XX-K in About SEC, VeriSign with its and and that on actual the Forms public This Relations on Investor GAAP or the also done the results quarter include on call, and comment be call in factors Jim the results financial specifically operator, will in and we and today's we contained earnings President from the to subject that results within fourth those risk will which cause you release. webcast me from presentation differ filed in to forward-looking of statements. to At statements quarter call are it few hours, some Bidzos, to VeriSign George to Todd Investor found and will provide being information President Jim. I With can our the and replay and earnings end XXXX will Vice and we open applicable, in find presentation measures remarks, Chairman, and are website, each the Vice include good call of over uncertainties George of Jim you, In the risks President Welcome like used turn that website. slide moment, the reconciliation be a the COO; detail a afterwards afternoon, site. questions. VeriSign's this are and is for that, to appended Executive discuss call prepared our our Thank VeriSign. call Relations our available and release by earnings to GAAP posted. are our which as will our our would which is unaudited documents verisign.com. that our call. Financial in section non-GAAP

Jim Bidzos

strong we XXXX and million financial of million domain for XXXX afternoon, everyone. report good and a objectives with another and generated of full Fourth am the value in VeriSign. our .net line $X,XXX XX.X%. performance by our customers, in year and margin XXXX David, shareholders. revenues free during, to generating to offering registrations and was for of was Thanks, year profitable the .com and million, year growth the XXX names. our providing solid strong stability which million pleased base results I name cash quarter while XX.X as operating and marked processed year long-term non-GAAP year with $XXX flow were company full security XXXX to finished

.com more DNS marked uninterrupted than we XX year, of of the VeriSign the and During for years availability .net.

only ICANN-accredited the not other XX six-year to change things to on engage to approval for increase Agreement announced XX The ICANN to the the the Amendment .com wholesale Cooperative we entered Commerce further Registry As registrations into among X% amendment own X, period. that the DOC each VeriSign as Amendment offered and by to and on the VeriSign. also years integration Department .com prices of renewals .com last the to in year of name ability of Registry November other Agreement. four VeriSign domain by apply and with permits of to registrar up Agreement to restrictions the each services vertical an in clarifies .com last TLD VeriSign's without

XX can provisions any that certain approval Registry without future Amendment of renewal changes further unless certain DOC unnecessary the such Agreement also as pricing. .com to so seek Additionally, occur key to changes to by term. mutual regulations, made Cooperative to burdensome VeriSign and the removes were expiration Agreement agreement except the Cooperative Agreement notice terminate at days' time DOC and can of only can of the change XXX any Any with the be DOC VeriSign the that the to prior

XXXX. another These the to DDoS DNS the Verisign customers. related customer primarily on December update, of completed the Security sale our and contracts company As Managed Services contracts are X,

us last core our resiliency quarter, infrastructure. discussed solely the supporting to ensuring of security, mission As sale on the stability customer enable core focus will and our contracts non-core these of

Of for sale our but drag the to base million is slight domain XX from the XXX X.X%. customer .net growth XXXX, on year-over-year this of revenue name rate will contracts these for a continued .net in decrease. of XXX business totaled course, consisting names end expected core the be revenue .com offset our of At organic and December, names .com and domain name with in growth million million of a

and million base the processed new fourth we quarter, increased the by name During X.XX domain registrations X.X million names.

XXXX renewal fully preliminary to end compares XX.X% fourth the days after be XX rates until not of are the achieved renewal XX.X%. that for quarter, XXXX. This fourth of quarter believe the the in Although, measurable rate will the rate quarter of we the

be expect year we rate growth X.XX% XXXX, between the for domain XXXX. to to name X.XX% base and forward full Looking

common by the During for repurchase million program million. quarter, of X.X share we stock $XXX shares fourth repurchasing our continued

for under common approximately the $XXX XXXX, authorized repurchase share X of year $XXX available and has million. stock million a the expiration. billion During full no for which authorized the Effective program, shares of to total Board of by million repurchased X.X repurchase the amount today, increased share we VeriSign Directors

including I'd billion turn equivalents potential cash to end our of investing Our call And George. to financial of consider continually with needs and best uses the overall repurchases. the in over the the share marketable evaluate now, cash position remains $X.XX at strong securities the quarter. and cash the business for We cash, and like

George Kilguss

Jim, everyone. good afternoon Thanks, and

year $XXX from GAAP $XXX sequentially. of XXXX. million, million, December billion, revenue XXXX fourth the million the the X.X% in XXXX, X.X% year-over-year ended For company income from up X% of totaled and $X.XXX up by Revenue quarter and XXXX operating up X.X% of XX, generated up for delivered $XXX

year the which same gain quarter quarter, GAAP $X.XX XX.X% the last dilutive the recorded $XXX to Verisign per million quarter totaled in gain fourth results, $X.XX. income of earnings relates Services In $XXX a XXXX. by the $X.XX net year. fourth Net million to it fourth The $XXX same compared XX.X% the share the year to GAAP came in As million income to million $XXX and quarter of totaled customer compared quarter we pre-tax quarter earnings in produced to income year earlier, million in operating compared This increased operating by with margin a the $XX to this of $XX.X GAAP a per contracts. ago. million Security sale compared for share related quarter

assets XX, of $X.X company $X.X liabilities maintained of total and total XXXX, As billion of December the billion.

year flow cash some $XXX $X.X non-GAAP free included metrics, with operating Assets provide held include remainder financial billion and I were now of equivalents will our margin I'll cash guidance. abroad. the marketable flow. which non-GAAP share, then cash fourth and review quarter additional million of earnings per XXXX operating domestically full held cash, securities

last excludes to XX.X% $XXX relates quarter million $XX As same to expense, year million operating XX.X% non-GAAP compared compared for quarter $XXX million compensation, XX.X% in million and fourth last was quarter fourth fourth it to XXXX. which Non-GAAP operating stock-based in quarter of of totaled margin $XX the the a metrics, quarter ago. the quarter and

This sales cash our non-GAAP Non-GAAP and income diluted million, resulting as The on $XXX quarter $X.XX the XXXX. earnings in contracts fourth our XXX.X was fourth of year. based for marketing weighted share cash $X.XX non-GAAP earnings quarter, fourth respectively to compares and $X.XX to million quarter additional in and spend sale quarter by the was million the $XXX quarter related million quarter and $XXX diluted compared fourth flow with $XX.X quarter. Operating net increased increased during income last flow sequentially of on per and net million share gain in we $X.XX million of the count average Services last $XXX a fourth Security had by the free During was non-GAAP share fourth the the expense per programs million for market. of the for shares. $XXX customer

is $X.XXX Now like range Revenue I'd to $X.XXX provide full XXXX expected year guidance. the to in billion. billion to our be of

our our will on and of the X.XX% Our partially costs for XXXX full of providing our name Non-GAAP contracts. for customers. to the is our non-material to sale expectation Security expected operating of continue between based year base certain growth XX.X% XX.X% services loss with offset margin by XXXX being and of customer for domain associated be X.XX%, associated is range revenue to continued the between operating Security transition with Service include Service revenue

Our expense, part interest Agreement. XXXX by the $XX and Services expected expected million. to in $XX partially during continued be in collected taxes and fourth net the to offset million of the of are cash net and and income interest between performance $XX summary, $XXX million are year. for Transition million. of demonstrate In expense to between XXXX $XX to expected million be non-operating finally, expense consist an and is solid Capital And primarily payments between the as financial $XX be quarter and aforementioned company full million expenditures

Now I'll for the turn closing remarks. call Jim to his back

Jim Bidzos

com and we're and solid ICANN questions. customers protect, There increase Amendment registrations was of the name with and success and from price concluded base to for XX Services now increasing further in amend generated name We of business first core our you, unique this to business. to COM ready our The take entered the the allowing engage domain of We was for efficiently manage sale Cooperative and employees We Agreement, question. the your Commerce. for approval customer into to and our year another Security George. our shareholders. the revenues. efforts Department returned value XXXX VeriSign focus Agreement domain benefits renewals VeriSign. Operator, the the expansion Thank without contracts, We'll to further further shareholders. grow to

Operator

[Operator from you, with And Instructions] hear sir. Thank first Sterling JPMorgan. we'll Auty

Sterling Auty

Hi thanks. guys. Yes,

different? is moving just the given can all So, simply for beneficial But ICANN guys. certainly you is parts, XX explain what you

Jim Bidzos

Sure Sterling.

mentioned just allowed the we're I I in that increase Amendment points main think are .com. to that are most prices XX for aware

flexibility have there on services VeriSign both that burden services not for government. regulatory the is for and vertical reduced We are .com and more integration

think will for what I VeriSign. us question in your is practice be different

Agreement Amendment So, a .com process But years, I'll me with before -- Registry which let we Every for and and .com what changed ICANN in of change. a presumptive XXXX. with renewal the will me will let not Right occur Agreement contrast on ICANN next start of is Registry six there's XX. of not renewal after with a November That just Renewal. the engage

of parts in the through agreement Some process changed may that be negotiation.

DOC. review on renewal deferring to that to services prices DOC the historically of in That of called Prior and that it the interest ICANN pick reasonable standard "providing applied pricing I'd review performance process the followed up was to with would tests that negotiated this COM were XX, that present standard .com terms has note However, that there, with stability prior ICANN a And two-pronged ICANN required. security one, based not Agreement consent Registry then on on process the for and was would renewals. Agreement process unchanged. DOC us, is us conditions." -- we pricing registry negotiated test public whether and prior renewal review two, VeriSign the then Registry to was by Amendment ICANN we these to DOC's our as following on a a and -- and

what's review integration they now to noted Registry X% Agreement done Registry us to one renewal services. in vertical the the that restriction the what to the specs first registration we that in and -- COM or have process to raise three, that and two, changes WHOIS streamlined to also renewal COM So, changed the the noted that review with allow minute period; that we've changed was termination to interest and not we not longer performance that Amendment NTIA COM is have founded Agreement; changed of SLAs five, .com; that the four such have Also of ago. XX and I the the only intended consent Registry apply changed to review that provided pricing not from .com the Agreement any there's is or terms years that has to on required we ICANN. no the been prices public the perform six-year specifically, any on now restriction allowed, X% in following; and no vertical had each consent to DOC back a the been have COM not for integration

of if these the DOC or from all consent renewal required terms is not then to of Given changed. not COM Registry the NTIA those the Agreement are

in automatically for such a any the renew, as again, consent and another mutually six-year agreed reviewing Agreement will term. Cooperative and further So, is DOC absent VeriSign case changes, without

the So, one Cooperative again is reviewing another X-year term. could see will consent renew Agreement automatically as without for

without terminate the So right Cooperative NTIA the Agreement Cooperative end of stay further the one evergreen has see review, terms given to now the days' could term. the on the before notice same. a Agreement as also XXX

we've in quote, manner, course agrees VeriSign registry So other done. there a continue the is to content-neutral one that operate of is .com always which which change to

Amendment of course or had us to XX that different of make Cooperative deleted that's Long essentially amendments that's and changed. but... to including will So what the were it. earlier although answer basically also for about But be sorry Amendment parts Agreement XX be that modified work

Sterling Auty

follow -- two typically calls know opportunity to the going are so a But up I'm these couple of I to ask short take to it. okay. on relatively That's questions

of Item first is The and you news. have any Registry facto same so Item the de in now kind has you Cooperative changed, of pricing that to incorporate seen there but the back Agreement Or XX? the happened with XX? what I already is, go Do actually to that's change did Agreement because or parameters refresh .com haven't one

Jim Bidzos

faith government to Well historically mentioned moving agreement I .com pricing. com to to into But case is the may Cooperative for there process negotiate in an the and the Cooperative with a be ICANN as the and to well and as in this relating registry consistency a historically DOC and Agreement U.S. Agreement. Agreement. a there's cooperate to matters ICANN deferred that. cooperate Registry written from negotiate to to There's as process com the good for -- VeriSign agreement the have -- operate for necessary amend changes changes on has

take work through ICANN months we'll including few amend it process. number the can of have changes process times. It to we begun think to that I you So further And with We've to comment as I a agreement pricing. make update don't these through may but a appropriate. been to it,

Sterling Auty

it's history where then registrar appears for And All on integration, and VeriSign right, up long Network a read vertical to we this and interested entering This way you as open are upon Is indicating Solutions in .web? the a look that that ability for to time I were the registry if be the to great. today that would back becoming of you you registrar. as both a not again, for the perhaps registrar be once through to the you .com.

Jim Bidzos

clarification I mentioned -- it all applies was only earlier that, as this to restriction .com. first of that Well is a

couldn't off integrated. I XXXX the think XXXX. when to time we services we the that be flexibility. early synonymous, no how are we -- in how business, have it agreement VeriSign .com or And to to at that use with at restriction I so think and applied. applies entirely the registrar. read flexibility How early it clarification stands applied, said, Solutions applies might I offer too any in is it's today? were that vertically it, if early and our did only and the XXXX was acquired of covered vertical right, this then and apply So think be to only or But June And sold that think if both how technically language other is that say restriction you're longer integration clarifies I it we And modification. would we this how that say made now applies .com. as that time we'll .web or I Network .com, VeriSign that too But to it's that use would

Sterling Auty

All right, great.

in you. it will turn Thank I over. back me hop queue. And Let

Jim Bidzos

I sorry. am

Sterling Auty

you saying, I was turn next I thank the over question. call to will

Operator

will Oliver like last come looks Rob Baird. question it And with from our

Matt Lemenager

any you Thanks. steps tonight. are .web process. there? of the there pricing talked the type Guys, remaining It's us I help secondly can charge is we I Matt there look a and that kind unrestricted might Lemenager of in Rob what .web, there? Because update premium kind what about what be the know evaluate and that's like? for remaining potential you've using on are would you of I on Could And then understand steps to past. unlimited it understand, can pricing think you like factors or be guess on what

you're there to of So evaluate look pricing examples any are what premium like? might using what that

Jim Bidzos

the questions. for Thanks

offer all, our that that .web towards .web delay the the the filed continue spoke Afilias against process to of a competitors bidders we who has on first is I So, company the is last process. since update can losing one trying named arbitration an the of to auction in one delegation of ICANN of

.com We pricing parties is, a might in to complete Number do the pricing new same are join that X-month parts to your form for the are what new agreements price is they participate that be up the like do any arbitration about to provide regulated .net notice we so-called under but which limit answer. to agreement. IDNs, is TLD flexibility. one those of our It's require yes it. not Registry pricing And not gTLD and that similar actively to yet, not New would change, only two a form operating They Agreement. signed also but or we .web seeking and About question, even TLD are like is.

ICANN question, do, Amendment et we complete. that how to do to other XX anything. with occurs how of to to pricing, .web, changes of completing he that I'd price et at to vertical exists we premature use just would about be it, about, subject Sterling's we about I you your I this process more about into these what based about say how would .com tell we that this about premium second way back or it's cetera, at That integration, would price asked .web thinking also agreement, would like but assumptions is the actually operate As it's we'd have ICANN flexibility clarification too changes to to Registry vertical to to we're we're But restriction restricted on It would me really apologize would the process would how flexibility it it And how point. whichever think just just or under integration stage to And are what thinking correct. cetera earlier. the .web, we so I chose. applies and be we this very the incorporating all pricing described what talk premiums all the would not offer Agreement that premature that do

Matt Lemenager

then tell geographies That's markets the more on looking a anything, numbers for -- And which XXXX you they that? name growth parts international? just high kind X.XX%, Anything base look for of or might like Okay. the you be be directionally, of us domain so what headwind? about America but what no numbers, expecting Or color. North strength could what but of might of specific are kind kind Not there? what level. X.XX% driving helpful the to pockets or the But are next one's of for specific

George Kilguss

in all is about the registrars Well as market. located registrars the tell good both Matt seen U.S. in China we've you in from what year, can registrars, in we've over both talking I that been growth XXXX

have for in least at good those been markets us growth. So for XXXX

business. As talked a as base X.XX%. we name about global range. to to we XXXX, X.XX% the of you on talk expect as about you our obviously We still into things domain lot up a we're grow between factor -- going But

year see just So there but good in the there's we're we giving been we're I looking a where our in that that guidance. growth guidance exactly and not we that mean for growth range do specific is, outlined this growth a

Matt Lemenager

Okay.

Thanks good. Sterling over turn Sounds guys. I’ll to it back

Operator

taking looks Sterling from it final like a follow-up our JPMorgan. questions we be And will with

Sterling Auty

back this Thanks. forth. and We forum an go open could do just as and

on rate. ask, Just couple a get to I cash taxes a of cash tax and the I more. wanted actually the number questions

going So the just taxes do -- cash look should it and driving that? think XXXX, rate? some to tax Or if the you, structural simplistic should Is this maintain it both I'll level? factors how I to the here and cash this should the forward? would think we just how at and other about rate about XXXX for in maybe And we to actually it what leave can be elevate

George Kilguss

Sterling. Yeah, thanks for that

taxes in taxes you XXXX, the about $XXX math into translated to that's were an cash you tax that know and our if million, effective in million as about rate low-XX% about do range. XX% about effective to that So cash of that compared tax translates $XX rate of GAAP and which

you long-term rate do we closer our as NOLs. effective our million to And fully over expect that's as be state you some to while those attributes. provide XXXX few using guided we $XX the years math don't we our rate effective GAAP still be And cash a accrete cash we've to foreign utilize cash if that and million. because And up that do $XXX below we're the next GAAP would rate, credits still up tax for tax between to rate. result effective tax tax So taxes know remaining

Sterling Auty

then me. And Excellent. one for the last

the what And increased at the -- missed much the to end the was I repurchase. what said. billion? and more quarter in you maybe people even would on front? a share the you Because you lot if to of to of before the was left get You of $X for lever went again now repurchase How terms wonder thought expand? repurchase the timing of aggressive up

George Kilguss

board program to billion. to we reauthorized the up under authorization, before had went million remaining we we just and before under $X for that were back it So, went $XXX

Sterling Auty

what then aggressive add thought last on And bit to part and an debt little this right. your potential buyback. capital optimal it. structure within just Maybe Great. around more year maybe update of the is a All that that be

George Kilguss

Yeah.

that you As the that's the we've sit as business specific best of framework try through review investment are a target Sterling needs business use make ahead optimal shareholders. we we is Jim each and to. grow to the to At return capital manage needs. we're decisions the We interest level the to about the have to of about don't I leverage what our make to talked we're sure pretty the we that and the times liquidity. a protect appropriate active look thinking manage of then present, process we and And down grow many and make maintaining constantly we we're and need our try know, looking in opportunities of company. We go what to at specific quarter. that

anything I time. this so, at report to don't really have And

that a then and marketplace business the needs the active and we'll to fashion. in at the of do are look to very what continue continue We

Jim Bidzos

into Yes just us factoring think our different it add we've XXXX fully But and it us it, flexibility and in areas, Amendment Sterling, thinking. XX certainly would Jim was significant enough. too that and about a talked event strategic additional and and for in that number does of here. I afford understanding a just I

just is to consider. need that think something we do I

And that's a so underway process that's too.

about to say specific this George point. really as nothing So, at there's just said

Sterling Auty

right. All

you, Sounds guys. Thank good.

Jim Bidzos

Thanks.

Operator

to David back ladies I'd final Atchley And to the no further over questions. for like call gentlemen, turn remarks. with and any

David Atchley

call good the your Thank Investor Relations follow-up you, Thank participation. call. from call. questions with evening. operator. department any our for This you Have Please concludes a this

Operator

gentlemen, you ladies our And again, today. joining call Thank us. for for and concludes once that

disconnect. You may now

VeriSign (VRSN) 7 Feb 192018 Q4 Earnings call transcript