Verisign ended 2016 with 142.2 million .com and .net domain names (Lost 1.9m domains in Q4)

VeriSign, Inc. (NASDAQ: VRSN), a global leader in domain names and internet security, today reported financial results for the fourth quarter and full year of 2016.

Verisign ended 2016 with 142.2 million .com and .net domain names. The company lost 1.9 million domains in the fourth quarter most probably because some of the domain names that the Chinese investors bought in late 2015 are expiring. More domains are set to be deleted in Q1 of 2017.

Fourth Quarter GAAP Financial Results

VeriSign, Inc. and subsidiaries (“Verisign”) reported revenue of $286 million for the fourth quarter of 2016, up 5.0 percent from the same quarter in 2015. Verisign reported net income of $106 million and diluted earnings per share (diluted “EPS”) of $0.84 for the fourth quarter of 2016, compared to net income of $102 million and diluted EPS of $0.76 for the same quarter in 2015. The operating margin was 59.0 percent for the fourth quarter of 2016 compared to 58.1 percent for the same quarter in 2015.

Fourth Quarter Non-GAAP Financial Results

Verisign reported, on a non-GAAP basis, net income of $115 million and diluted EPS of $0.92 for the fourth quarter of 2016, compared to net income of $105 million and diluted EPS of $0.79 for the same quarter in 2015. The non-GAAP operating margin was 63.9 percent for the fourth quarter of 2016 compared to 62.4 percent for the same quarter in 2015. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

2016 GAAP Financial Results

For the year ended Dec. 31, 2016, Verisign reported revenue of $1.14 billion, up 7.8 percent from $1.06 billion in 2015.

Verisign reported net income of $441 million and diluted EPS of $3.42 in 2016, compared to net income of $375 million and diluted EPS of $2.82 in 2015. The operating margin for 2016 was 60.1 percent compared to 57.2 percent in 2015.

2016 Non-GAAP Financial Results

Verisign reported, on a non-GAAP basis, net income of $465 million and diluted EPS of $3.61 for 2016, compared to net income of $405 million and diluted EPS of $3.05 for 2015. The non-GAAP operating margin for 2016 was 64.5 percent compared to 61.5 percent for 2015.

“2016 saw a number of significant achievements for Verisign, which included obtaining ICANN and Commerce Department approval for extending the .com agreement to 2024, the continuation of our unique role of publishing the global internet root zone through a new agreement with ICANN, and surpassing 19 years of uninterrupted availability of the Verisign DNS for .com and .net. Secure, reliable operation of these critical infrastructure services help support billions of internet users worldwide,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.

Financial Highlights

ŠVerisign ended 2016 with cash, cash equivalents and marketable securities of $1.8 billion, a decrease of $118 million from year-end 2015.

ŠCash flow from operations was $195 million for the fourth quarter of 2016 and $668 million for the full year 2016 compared with $189 million for the same quarter in 2015 and $651 million for the full year 2015.

ŠDeferred revenues on Dec. 31, 2016, totaled $976 million, an increase of $14 million from year-end 2015.

ŠDuring the fourth quarter, Verisign repurchased 2.0 million shares of its common stock for $160 million. During the full year 2016, Verisign repurchased 7.8 million shares of its common stock for $637 million.

ŠEffective Feb. 9, 2017, the Board of Directors approved an additional authorization for share repurchases of approximately $641 million of common stock, which brings the total amount to $1 billion authorized and available under Verisign’s share repurchase program, which has no expiration.

ŠFor purposes of calculating diluted EPS, the fourth quarter diluted share count included 20.6 million shares related to subordinated convertible debentures, compared with 21.4 million shares for the same quarter in 2015. These represent diluted shares and not shares that have been issued.

Business Highlights

ŠVerisign ended the fourth quarter with 142.2 million .com and .net domain name registrations in the domain name base, a 1.7 percent increase from the end of the fourth quarter of 2015, and a net decrease of 1.9 million during the fourth quarter of 2016.

ŠIn the fourth quarter, Verisign processed 8.8 million new domain name registrations for .com and .net, as compared to 12.2 million for the same quarter in 2015.

ŠThe final .com and .net renewal rate for the third quarter of 2016 was 73.0 percent compared with 71.9 percent for the same quarter in 2015. Renewal rates are not fully measurable until 45 days after the end of the quarter.