VRSN - Earnings call transcript Q4 2019

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Operator

Good day, everyone. Welcome to VeriSign's Fourth Quarter and Full Year 2019 Earnings Call. Today's conference is being recorded. Recording of this call is not permitted unless preauthorized.

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

are everyone. and XXXX VeriSign's me President Chairman, and operator, Executive Executive you, George President Todd Welcome and earnings Bidzos, CEO; President good With COO; year Thank Vice full and afternoon, to CFO. Strubbe, Executive and fourth call. Kilguss, and Jim Vice quarter

posted. will fourth About This and the replay site, hours, which Web and the Investor of VeriSign verisign.com. XXXX At call on Relations be earnings and our that presentation few presentation this the are being be also There year call full end site the you available available a on quarter call, webcast under find will from release. within is the of will

are which that forms reports we with in documents Financial our are the the earnings and SEC, that retains unless XX-Q, contained public statements. during performance quarter, that forward-looking statements guidance our recent results in done remarks discuss uncertainties actual is to not on the in forward-looking from cause our the VeriSign and specifically XX-K differ or could materially disclosure. long-standing comment filed subject to on and release unaudited those policy the to financial detail risk in risks include results through it most its identify factors

and we questions. Jim some to by earnings Web as GAAP for call we discussing our today be slide VeriSign. found presentation will of reconciliation and include will appended site. moment, in matters open in non-GAAP a The of the the results afterward, and be the remarks measures Investor our and applicable, and financial used call today's provide each information George release prepared GAAP will section which to non-GAAP is In can your Relations

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

James Bidzos

XXXX, decade expanded pleased caps solid in .net. off more but also the returned another XX for not to strong core afternoon, of Thanks, solid name a In year years we on marked base focused I’m and report our our shareholders. for for business, quarter and than a only .com David. Good availability which everyone. domain the VeriSign we’ve VeriSign DNS value to that uninterrupted

XXXX was .net and a we domain the XX.X strong base names. and year year million for million a also .com with processed name registrations concluded the record XXX.X as

characterized solid of by was X,XXX flow performance cash XXXX revenues free Finally, million with financial of XXX and million.

related and resiliency amend between in working VeriSign domain On a X, of ICANN for registry agreement the of .com agreement two the together January on proposed to the initiatives and framework security, form a name the binding Intent stability Letter to new the proposed system and the organizations. announced of

fulfill was The commitments the proposed .com XX under in changes. updates amended. pricing Commerce, to amendment the that the the agreement registry and XXXX amendment ICANN registry previously agreements agreement these when VeriSign U.S. Department Together, agreement including with reflect the .com of made to new changes cooperative certain

year over of the support the commitment VeriSign per this to We on for Internet. activities ICANN the years security, to provide preserve stability that the of activities Letter will and funded five and have will According the Intent, DNS believe the a to $X XXXX one-time terms commitment resiliency enhance benefit and Internet by community. entire the beginning to X, proposed January million of

of to the report The periods follow the its are will comment March will that period closes Directors. February XX. the closing for Web by and that a two comments comment of steps according prepare X, submit ICANN ICANN site to ICANN's public XXXX public these staff ICANN's documents report Board then

XX.X XXX.X end operational base totaled in million .com million name .com .net and consisting names highlights. quarter of of and for discuss a I’ll XXX.X X.X%. year-over-year December, growth of .net rate names domain Now At fourth the the with for million

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

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

compares rate of XXXX preliminary to achieved in This quarter XX.X% the in fourth fourth the XX.X% and quarter of XXXX.

to forward between rate domain XXXX, Looking and expect the growth we name X%. X% of base

million stock quarter, common fourth shares the During we XXX repurchased million. of for X

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

at financial continually the with our equivalents We cash the and remains end the business quarter. consider investing and of million strong cash, position including securities marketable the of evaluate cash, the needs overall X,XXX Our best share cash for in repurchases. uses and potential

NBC's and the Lastly, participate last as hearing in a mentioned held quarter, was process request regarding .web, we arbitration on year. to VeriSign last

issue our a expect on now told this have that We by request hopes XXXX, but ruling it month. in its to panel we the been ruling

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

George Kilguss

and Jim, everyone. Thanks, afternoon, good

XXX ended XXXX, the XXX million company ago. XXXX million, year up December XX, generated from X.X% year revenue delivered operating and million, GAAP up the a X% income of For X,XXX of from

contracts the divested was from security our a revenue most business partially the during to by year. reminder, customers’ offset as XXXX buyer lower transition As revenue services growth during

compared came quarter from XX% the fourth in For customers. customers million million ago. year with was expense quarter the year up coming operating total XXX U.S. revenue XXX XXXX, X% a foreign Fourth quarter XXX year-over-year. XX% GAAP XXX and full million, of last from to revenue million to totaled

security result The increased investment operating sales as of business, increased marketing and as our quarter-over-quarter infrastructure operational in capabilities. including expense well in primarily in increase is a and our programs investments

same XX.X% quarter a income XXX quarter operating compared XXX the quarter quarter the Fourth ago. XX.X% compared with XXXX. in totaled the The margin in operating to of same million million year in came to

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

on remember XXXX services included million by results of the increased results, quarter per gain the security the year-over-year XXXX and $X.XX. fourth XX our by that earnings competitive income business which share For net GAAP sale

XXXX discussed quarter expense, results, Related quarter XX which sequentially fourth non-GAAP million slightly excludes for compensation, and and to XXXX higher operating million I was non-GAAP of than $XXX lower the stock-based reasons totaled levels. fourth earlier

XX.X%. operating diluted million earnings the income was Non-GAAP the for of in share XXX quarter fourth non-GAAP margin resulting $X.XX. Non-GAAP net was for quarter per

margin year full operating XX.X%. XXXX was the non-GAAP Finally,

be metrics with the will discussing quarter of non-GAAP the beginning adjusted presenting nor a free with results, As reminder, longer first we flow exception and of cash XXXX no EBITDA.

X,XXX XX, As of million. the maintained assets total XXXX, December and total million company liabilities X,XXX of of

X,XXX of equivalents million Assets and cash, securities. marketable included cash

for Operating and the with for respectively, XXX quarter compared in million, a to was last XXX year-over-year cash million and fourth of cash fourth benefit. related year. XXX quarter million capital XXXX lower higher flow XXX primarily fourth The difference million the free quarter was and flow the taxes cash was working

revenue based in range name metrics. expected XXXX domain million any This on between year X,XXX was which rate below I X,XXX on and security GAAP range expected forecast $XX XXXX XXXX million. will as be revenue the longer no in the business, X% now discuss of the guidance, which revenue million. about X% growth base to solely of to slightly residual services Revenue a is is reflects rate reflects full growth now

our investment GAAP compensation, our in range guidance operating expectation margin, stock-based XXXX. and incremental reflects between includes which XX.X% of security to during and be operational expected is capabilities XX.X%. This infrastructure

be an will income first million Interest both XX and expense and and quarter to during the income expense expected cash the non-operating which of lower agreement is from services range million. expected lower transition cease interest This balances. income XX net on non-operating between reflects

is The be Capital tax million expenditures XX%. expected and effective million. and XX XX% are to expected between XX to GAAP be rate between

cash We expect for XXXX tax to the same also within be the range. rate

summary, sound execution we demonstrate strong forward in continuing and In during continued VeriSign XXXX to financial look XXXX. performance to

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

James Bidzos

year-over-year quarter capping growth returned to for solid generated VeriSign Thank you, fourth further year a was and shareholders. for another and expansion the efficiently quarter company the value base revenue George. The as name of domain we solid

and protect, while long-term We on shareholders. the manage value continue work business providing to continuing our our focus our grow to

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

Operator

today you. take question our Thank with from first Oliver Rob Instructions]. [Operator Baird. We’ll

Rob Oliver

in would understand Good we’re follow expecting you increases later to curious just what were quick George, there that’s afternoon, year that us and you, up. that be might for 'XX you if I and to of question but know price Great. the thank And gentlemen, meaningful, then taking roll I questions. – for closes, but less this know in starting just in in been I factored full terms tough my guess .web, in just whether help curious could if additionally the guide? when A guidance, a it had expecting year on it’s And obviously those included Thanks. just exactly in? on

George Kilguss

you the tell the Rob, guidance no we can there in don’t increases but guidance. in our increases I are guide price price

James Bidzos

And guidance this revenue point. from at you’ve the there’s given .web no that – none of been any includes

Rob Oliver

helpful. and I increasing in was remarks and – And just than coming and domain then very also wondering obviously expected. sales if know mentioned as growth a up, follow – just prepared in Okay, was your great; marketing strong you stronger

anything just increased else that’s I spend driving if going forward? channel incentive kind normal guys. Thanks, and there’s structural it. wondering going on in and or sales of if activity marketing Just potential increase terms of appreciate

George Kilguss

this similar would to types the Rob, I a ran so marketing last and we from programs were say general year perspective, year. of that programs in

quarter year, had percent increase quarter as change. well. not really filed and we expected marketing fourth again, recall that also the some if there’s we in So that we our up and to as sales go a XX-Q last we last we’re articulated in seasonal What that a sales of huge in doing that we

Rob Oliver

Thanks, again. Great.

Operator

Citi. Nick Next Jones we’ll from with hear

Nicolas Jones

Hi. Thanks taking questions. my for

on far region? of that is coronavirus that China given Is geographic impact First, as challenges as has I know registrations guess, in anything goes? had issue an kind noteworthy rates with any mix there. there the creating renewal I

George Kilguss

I’m second question. the catch the sorry, of part I didn’t

Nicolas Jones

Just registrations if kind of having on or issues an wondering is impact China healthcare renewals? in

George Kilguss

Okay.

When in States, the quarter look from came that to, million registrars 'XX. XX.X which new a very in alluded Pacific where we EMEA. million demand fourth at United we as and Asia from quarter X.X fourth So, region based strong yes, came additions Jim up was in of it from, the quarter fourth – the had

rates, something it’s on. an something it date to virus we’ll any seeing again, as any So as to by but over impact not renewal as But It’s geography. we’re eye eye they an in China, on. relates far vary keep we keep

Nicolas Jones

preservation? in more. then investment improvement one anything CapEx more color with Is there kind can mostly bigger little can ICANN, And ongoing a it is of what it. out? of kind provide that Got The or you you call around needs

James Bidzos

that Nick, the spend that was So question, infrastructure. about the the Was question? on

Nicolas Jones

million year X the over five years. Yes, per

George Kilguss

-- sorry. you I’m Can just

James Bidzos

about question of the years. million Letter the The over X Intent, five

Nicolas Jones

color needs to is what I’m be you more just any provide a exactly there be looking preserved, to of improved, on the can for there? going be additional going is to little and kind needs color money towards what what

James Bidzos

There’s mission It’s Internet. broad will where There’s stability core governance and the which such as security Internet. and that go. funding where on of every funding the ICANN’s for this everybody, is security things stability for impacts going. relying variety areas that’s party and and root both DNS is global a

community the ICANN example, from. VeriSign, global KSK areas have of broad that everybody, of may including for for You there’s funding year, additional executed rollover the the a called Internet, refreshing will system part entire on the that the of variety last need security something benefit Internet critical global followed

the in so in specifically in that resiliency security, ICANN funding broad core and LOI And area the mission. targeted is stability

Nicolas Jones

Thank taking Got for questions. it. you my

Operator

JPMorgan. our Sterling will question from take We with Auty last

Sterling Auty

of guys. Hi, questions. couple Thanks. a I got

the changes any can rates was renewal geographies? the First with of it revisit geographies any mix rate Is you color I the of the rates in mentioned renewal that or year-on-year, that consistent one But know in varies given rate, give? that those renewal year, by did you you geography. driven last renewal down in to where it more see just each any

George Kilguss

a seems be and mixture from quarter, Sterling, coming for you as think we that year of names articulated the last it really picture last know, slightly had [indiscernible] we I – of perspective Asia prior names as renewal rates proportion up more a but to Pacific period-to-period, it is in in sold sold becoming renewal. the a being the base. year region We large big the China

Again, while other seeing back company’s couple years, than impact of huge they and XX% are base XX% improving down around in would range. still been I increased But there. about the variances. year-over-year a as that, the look points, up XX into general And is has so if And the we’re you by it’s has having just recently not you basis slight rate over renewal the ages. last remind it

we would that I within the rate say folks had a stable remind So company. pretty renewal

Sterling Auty

Okay. of a been can And on U.S., million EMEA. basically up more? out you said peel little bit additions, the growth then that and gross we XX.X better is is But there following what XX.X back Asia Pacific So have than seeing. you

incremental you’ve done quite In what XX quarter? some have been area this over I geography you words, in think it’s contributed seeing? growth time. the more million first time which other generated Which than

George Kilguss

we’re growth. we’re our is what reporting Again, Well, where registrars as said, are FIN business. by domicile registrations those so to the they do I on the were contributors the to registry, a recall three largest

from the sometimes But markets, some users The not another tend So companies EMEA. be the is us. new our acquire some have where happens remain have transparent completely new what end pop have in continued from performed for registrar. in they market becoming thing up registrars the well in us Asia business may we and regions and U.S. as three consolidation fourth also comment sometimes strong only are. we just Pacific year-to-year may and is registrar the I’d those it one customers quarter. and in registrars But on to to to degree the quarter, necessarily did that The not where to information registrars

Sterling Auty

month to a decision you waiting party of the that’s whether or that clarify. .web, Okay, you you’re the got want decision panel what the can that final to And in this Jim, I as it. mentioned terms is on process for just to be on? decision

James Bidzos

they before could the the Yes, indication is panel. rule in issue they now before by They be that But this month. the hope Sterling, participation end is ruling the on process. they the that issue rule but them that’s that indicated The the of year, this VeriSign before to that happen. didn’t will active

Sterling Auty

which you areas? as back Can both where marketing well portion the were investments. kind bigger those of then And in – of some you sales parse the investment, that of mentioned making was you Okay. operationally as out and two investments infrastructure in that

James Bidzos

components are We’re of that talk about lot infrastructure to investments. not a security prepared the level to There detail. of different

very We As marketing requirements. than the rather different you Sterling, we’re other most stringent them requires Many which registries. of operate net know, are registries actually than performance registries. infrastructure operating common

know make we’re new dynamic products and to those investments. strengthen threats, are make So make, that we a cyber I environment and is lot as there most are far you think that hesitate do. If others new that ever There threat schedule investments new we of changing. our are if the but are security there investments infrastructure core our what mission, going technologies, beyond to not

quarter break of We don’t we now But sales haven’t in have that marketing. and detail. think any the along to prepared we’re all above and I in with out the

Sterling Auty

your question interest is outside one on to and right. got now your questions a I acquisitions company is All view of What’s and those get vertically level frequently what would being investors a in of .com? be opportunities? appetite ability pursuing you’ve the integrated the consolidator what be the your in market that especially Last from

James Bidzos

update we provide particular can for no I a don’t think there’s any certainly interest. There’s you. guidance

is We’ve As VSS you made in actually know, business. .com and our focus on divestments our .net.

additional growth deploy opportunity. we pursuing to .web that do are a the have in IDNs We We future. expect as

not you would just current talk for heard speculate There’s include stability that say from and any that the doesn’t about. else would anything what are I that earlier, revenue we’ve I and or as to. we’re growth talked that plans to guidance we’ve does in security guide any not given prepared George myself about comment provision our price XXXX for increases, about .web. think I include

tend this probably and can as to areas tell that’s we time. at those as conservative I much more in So you be

Sterling Auty

Understood. Thank you.

Operator

over David session. today’s for closing turn Mr. conclude remarks. now will any conference Atchley That will the to I question-and-answer additional

David Atchley

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

Operator

today's That participation. conference. your for Thank you conclude does

You may now disconnect.

VeriSign (VRSN) 6 Feb 202019 Q4 Earnings call transcript