VRSN - Earnings call transcript Q2 2019

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Operator

Good day, everyone. Welcome to Verisign's Second Quarter 2019 Earnings Call. Today's conference is being recorded. Unauthorized recording of this call is not permitted.

At this time, I'd like to turn the conference over to Mr. of and President Treasurer. Vice Atchley, Investor Corporate Relations David Please sir. go ahead,

David Atchley

earnings Executive everyone. and With VeriSign's Bidzos, and CEO; George operator, and you, Vice Welcome Strubbe, me President Executive Todd good There call second presentation which About under Jim is being Kilguss, call. Thank and you also COO; from earnings afternoon, our webcast release. verisign.com. find will President XXXX to Vice and President the and XXXX CFO. quarter second available are Verisign This Executive are Investor website, on Chairman, quarter Relations

identify are of the be and detail risks site. our will the forward-looking XX-Q most reports and include At this the are in on our on on few of forms specifically available replay statements. will posted. from the cause that Financial those end to remarks differ documents within contained hours, unaudited a materially the filed which factors discuss that that and call, the release we the statements presentation SEC, actual results results recent call risk be subject forward-looking uncertainties XX-K to in that could the in with , And earnings our

and guidance quarter, Relations matters our we In to and will not provide afterward, on retains slide long-standing can measures open today's remarks found the each some which we Jim is appended and disclosure. be in of George call by non-GAAP presentation release its your GAAP to call used website. to Investor as a Verisign the prepared non-GAAP policy information The for be our questions. unless done public applicable, moment, the today financial will during and and reconciliation earnings will performance through a on of section comment Verisign. is or the it financial include GAAP results discussing

that, to to Jim. I over turn like call With would the

Jim Bidzos

for quarter am pleased Verisign. everyone. solid to Thanks, report another good I afternoon, David, and

growth the long-term Second quarter end stability objectives to providing and our our of results line of generating shareholders. the customers, security with our for rate offering value XXX.X million, June, names a were in names and dot-net name profitable to consisting while year-over-year At dot-net million for and of X.X%. million and with dot-com dot-com XX.X growth in domain XXX.X of totaled base

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

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

X% domain from XXXX X.X% to rate year, X.XX For our to X.XX%. growth narrowed the be full we previous range between and base expect of name %

incorporate for with the dot-com agreement. to As noted during earnings our terms are a the calls, engaged in including we registry Agreement, pricing of the ICANN Amendment Cooperative XX process recent terms into

For the dot-com familiar the under me those dot-com remind agreement the extended amendment registry. registry XXXX you with term which not with the let ICANN, of to this, that

flow to ICANN that -- Agreement, ongoing. to to Cooperative any through negotiate would to share. security to ICANN details registry further this or with the the no dot-com And stability are These preserve the of there discussions and and enhance time, are Internet. addition at terms, in the pricing faith agreement the in we and made agreed good be and We also changes including

Of course you. appropriate, we update when will

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

for the and at best the repurchases. equivalents financial the billion potential in cash, business investing remained including strong, uses of evaluate the securities end consider cash marketable quarter, Our and the continually $X.XX cash, of share position we cash overall with our and needs

turn I'd And George. to to the over like call now,

George Kilguss

Thanks, everyone. and good Jim, afternoon,

quarter million up million compared million, $XXX in operating the million million a ago. of $XXX in million revenue same XXXX. last and produced in of year compared with The XX.X% the the to totaled totaled margin quarter results compared year quarter $XXX quarter GAAP to Operating came in income ago. second $XXX year-over-year. $XXX second a expense to the quarter Second XX.X% X.X% quarter $XXX Operating

Net income million to year same earlier, $XXX quarter year to earnings $XXX diluted million quarter totaled a for $X.XX second of per in the year. this which share of last compared compared produced the $X.XX

of company $X.X XXth, maintained $X.X As total and June total XXXX, assets the billion. of of billion liabilities

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

a spend relates a decrease result of to primarily quarter our expenses stock-based the is expense, it million of metrics, non-GAAP to of totaled as As in million and compared expenses as $XX excludes which of year non-GAAP as operating the slight The quarter Services a $XX ago. periodic to quarter million the operating second year-over-year infrastructure. changes compensation, and $XX result planned in $XX second million Security investments our related and of timing sale in well lower business to last

non-GAAP the resulting $XX.X% XX.X% of $XXX quarter second and for to XXXX. for the margin was million XX.X% a quarter the of Non-GAAP Non-GAAP second in net last income quarter in diluted of the was to in earnings per last $X.XX share compares weighted million, quarter $X.XX quarter XXXX. quarter $X.XX average operating shares. count This same second and compared XXX.X share of on diluted based

a and was quarter compared respectively for second $XXX year. million in was the last versus million quarter $XXX was the and occurring the free of last the this year. cash payments, made cash second The second in year year-over-year result quarter for of predominantly decline flow $XXX which million with flow $XXX QX were million timing cash Operating tax

the to billion be is $X.XXX to the in of billion, to provided range last expected billion like updates call. $X.XXX XXXX now on narrowed Now, to guidance. provide I'd our billion year full to range our $X.XXX from Revenue $X.XXX

XXXX full to on year the growth name continued Our XXXX base between our based X.XX%. for is range X% expectation and of of revenue domain for our

operating margin be XX.X% Security increased certain we'll non-GAAP is provided our operating include customers. to associated range call, with Service XX% Our continue to on to costs between from transition and for immaterial and XX.X% the last XX%, services providing expected

interest interest $XX the to million expense offset as of Our expected income partially aforementioned consists income between agreement. recognized of expense, primarily and million part is still an $XX non-operating net of be net services and by transition expense and

to are are million from between $XXX XXXX be between expected previously. Capital million million. now and million and narrowed be $XX $XX million provided range to expected expenditures to $XX $XX the million, in Cash still taxes $XXX

second In sound quarter XXXX. summary, the performance during of financial demonstrate company the continued to

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

Jim Bidzos

Thanks, George.

generated domain second of year-over-year We quarter another quarter Verisign. value base revenue efficiently The was to solid growth. the name further shareholders. was and returned for expansion and There

continuing dedication and on achievement to the XXX% work shareholders. and continued long-term This system. We our expertise to the our Last result our and marked value business company XX week, protect, our domain name grow of in is infrastructure. the availability team a the dot-net focus of manage specialized our dot-com providing of while and years

ready first your We'll for now question. Operator, we're questions. the take

Operator

Sterling We'll Instructions] today Auty from first with JPMorgan. hear [Operator

Sterling Auty

Hi, give the with you where on off. us things dot-web an thanks. stand and update Yeah, Maybe guys. can situation? two arbitration to Jim, kick

Jim Bidzos

spoke Since Thanks. and has we on to affiliates movement website. Sterling. filed which posted ICANN's complaint, Sure. has there the a response is in to Hi, you, a process. it's some last been response ICANN as public

but that movement, some any beyond is there So, don't we update. have

Afilias, of not arbitration, As to continue of we of this the a in to that arbitration our ICANN XXXX to but one are We're the process. continuing competitors, to party the to against filed auction, reminder, a seek the participate one proceedings. losing in in dot-web delay November bidders trying

Sterling Auty

XX% of All initial -- right, types kind that first being that mix down. -- same terms in you the rate renewals out didn't in that at the And trend? particular second more that's of rate names, of year noticed anything a versus or noted renewal either call names Anything the is multi of great. drove or time then, renew renewal

George Kilguss

This Sterling. Sure, George. is

So, down registrars. first XX%, proportion rate estimated you of by a for as I'd a one is say, rates renewal coming is know, our being rate, which far higher is contributors of time year-over-year. at as renewal lower up slightly X% as are, prime Chinese our which driven our about the names preliminary from renewal is renewal

markets As we've domain than have talked and other Europe. US name emerging the lower before, like rates, historically markets renewal mature say China more like

up And so, names being impacted is first the this Chinese accordingly, effective that is time for average renewal we're renewal. more by rate coming weighted seeing what

Sterling Auty

impacted being upper the million we And that names what did is also XX.X Was other towards see China impacting that you new influences typically also the of or what see. end processed by there?

George Kilguss

Yeah.

answer short yes. is the think I

operating As China in quarters, US, well of about the some both and China previous lot perform registrars for of but continues seeing the in we've to registrars but a talked in QX, well perform us. we're drivers big are

Sterling Auty

on back the to to Okay. suggest things half, of look the income and line question, margin and for we are would happen? results What compression of that would cause be year. the given And some first full-year to the down the operating last then, get just for operating to the guidance the going half of that sort operating investments that margins and in should some

George Kilguss

Sterling. Sure, Yeah.

the variance in variances down million that answer best one business the remaining two And prepared expenses associated timing year-over-year, investments is costs some But of $X.X then $X.X of really We with big give that I last telco year-over-year, just networking our the my year-over-year, that of is remarks. to $X of and in you end were there And talk related year. again maybe million of in the VSS. of and the then being $XX.X by the our So, about I as the million, some year. to million quarter. that mentioned color the down about way about rest network. of to can costs to is sold are

we in we -- of year, sold forward G&A. a as well, sales filed and and we some increases As for G&A afternoon, marketing and go goods our in the year, for marketing, of both for we'll invest which cyber cost the that's falls revenue spend we sales more will continue to and activities probably this percent invest network. in expect have to throughout we slight Q but say in as money continue in still as We'll our here, and that our next we

Sterling Auty

perfect. All you so Thank guys. right, much,

Jim Bidzos

you. Thank

Operator

from next Nick with hear Citi. We'll Jones

Nick Jones

kind I for may Hi, the ICANN of taking broader Do move question. ICANN's kind -- any for you ICANN of have color of that any Is could what thanks the in possible headlines or increases. implications rate dot-com future uncapped it is kind future uncapped dot-net? you mean you Does that? it get around for dot-org have there pricing commentary the have saw or comments any industry? guys some what or that

Jim Bidzos

the negotiated notices of Sure. changes Well, ICANN have provide program like they agreements advance that pricing. new the price have pricing in are these do caps, new uniform agreements TLD customary they generic no but that practice and longer to any to more

So Registry from ability XXXX to Cooperative features flexibility Agreement. for implementing simply term times pricing six-year prices X% to pricing XX of increase for the to of to formerly XXXX, the during the the Agreement unilaterally the domains Amendment restores to existed by the up X us com

the So, price the cap. late June they [Phonetic] by bids Oregon for agreements and their renewed were lifted ICANN completely registry way,

renewal you next is by Cooperative can't the speculate as similar dot-com Agreement. the will And for dot-net. So, be of we regulated of for know, the approach pricing used

a really animal process. in that that's different So

Nick Jones

maybe it. be there a or to have involves is kind seeing approach Got it it you're off of may sort less tilt for a more ICANN take more -- like a hands be trend, and Is seems one-off? of of kind to

Jim Bidzos

now Well, those I These you agreements as that I like do TLD and generic they for caps. roughly did, don't can mentioned. have are the but I more ICANN price and are X,XXX can't somewhat those, they of tell they speak agreements and have standardized

Nick Jones

questions. my Thank it. taking you for Got

Operator

Our from Rob be Baird. question with final Oliver will

Matt Lemenager

I question to on vertically for Great, Matt your -- on ability I integrate. Jim, Lemenager a wanted the now to thanks. tonight. ask about Rob had It's

at I that last the think said you think you about guys would put no update that internally on call time. something -- but

look see you or integrate wanted Is anything there? any Just chose like could vertically discussion you if if that look what there changed. to what to might like on

Jim Bidzos

point that nothing No, last specific Really certainly time let the update we Yeah. about nothing that. this We'll talked know. to at since changes. you

Matt Lemenager

only But the for again, TLDs? non-comp that's

Jim Bidzos

Dot-com of not of is part that, course.

that. you're think I of aware

Matt Lemenager

Yeah.

Jim Bidzos

Yeah. But nothing at to this update point.

Sorry.

Matt Lemenager

in -- quarter to those matter looking price price any $XX.X there then, late names do at Do of it next gross increases of and in a you mostly rush thing And is row, timeframe China the and I'm prices accelerated Do like Okay. that just registrars year I one of ahead it's is when substantial just and -- mean, expect, buy the and the any -- come there second accelerated. it but ahead new you million ahead it the on think of it to be you that drive sounds people October think business increases not are not enough going that? not maybe may or the may names people US, increasing.

Jim Bidzos

I the that penetration we're against people general increase. from internationally of and growth CCTLDs benefit sales in in online. those Internet, trying matter. see we the TLDs demand market, price I other in continuing. and for the in getting trends speculate the drive continued really that compete names on e-commerce think new we market couldn't And mean, We from to continued see of domain and GTLDs markets

just in flourishing So, where e-commerce demand continued is and we markets think of are part see a that. domains we

Matt Lemenager

it. you to the get from the with nothing stamp Is ICANN. Okay, that amendment? expect last something of RA my amendment or that you ICANN than about to then, of dot-com approval thought on process get And frame taking that it thought the maybe that the one, longer is just you kind outside pricing time of the that's this timeframe that got

Jim Bidzos

on comment of into we as And terms to pricing any going Amendment discussions. incorporate com don't we're So in with my I and I to like XX, engaged able we're said details approved through the in be comment actively prepared remarks, and terms agreement this a process, ICANN. including said, process the won't in the

agreed changes, of ICANN, including that to the as also, security the of then But XXXX pricing, preserve registry negotiate we the amendment made but flow agreement, addition in amendment, faith com Verisign ICANN the of in back and enhance Verisign the part those good Internet. to the a stability XXXX extend to and and and com through

no So updates beyond that.

Matt Lemenager

all Okay, Thanks, George. Thanks, Jim. right.

Jim Bidzos

Thank you.

Operator

time, at back closing turn things this to Atchley I'd And for remarks. like David to

David Atchley

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

Operator

does Again that today's conference. for us. conclude Thank all you joining

VeriSign (VRSN) 25 Jul 192019 Q2 Earnings call transcript