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MARKETS LIVE BLOG:

STOCK FUTURES DIG OUT OF ISRAEL STRIKE-FUELLED TUMBLE

Shares of Netflix, the first of the megacap techs to report, slide in pre-market trading

VeriSign (VRSN) Q1 Earnings Top Estimates, Revenues Up Y/Y

Zacks Equity Research
·4 min read

VeriSign VRSN reported first-quarter 2023 adjusted earnings of $1.70 per share, which beat the Zacks Consensus Estimate by 3.7%. The company had reported earnings of $1.43 in the prior-year quarter.

Revenues jumped 5.1% year over year to $364 million but missed the Zacks Consensus Estimate by 1.8%.

VeriSign marginally raised the lower end of its revenue guidance. Management now expects 2023 revenues to be between $1.49 billion and $1.505 billion compared with earlier guided range of $1.485-$1.505 billion. VRSN’s domain name base’s growth is now expected to be between 0.5% and 2.25% due to modest improvement in the registration trend. Earlier, domain name base’s growth was projected to remain flat to up 2.5%.

Quarter in Details

VRSN ended the reported quarter with 174.8 million .com and .net domain name registrations, up 0.1% year over year.

The company processed 10.3 million new domain name registrations for .com and .net compared with 10.2 million in the year-ago quarter. VeriSign noted that renewal rates were stable in the reported quarter.

The final .com and .net renewal rate for fourth-quarter 2022 was 73.3% compared with 74.8% in the year-ago quarter. Renewal rates are not fully measurable until 45 days after the end of the quarter.

Management expects renewal rate for first-quarter 2023 to be around 75.6% compared with 75.9% in the year-ago quarter.

VeriSign’s research and development expenses increased 5.7% from the year-ago quarter’s level to $24.2 million.

Selling, general and administrative (SG&A) expenses increased 1% year over year to $49 million. As a percentage of revenues, SG&A expenses expanded 40 basis points (bps) on a year-over-year basis to 13.4%.

Operating income was $241.3 million, up 7.3% year over year. Operating margin expanded 140 bps to 66.2%.

Balance Sheet & Cash Flow

As of Mar 31, VRSN’s cash and cash equivalents (including marketable securities) were $1.02 billion compared with $980 million as of Dec 31, 2022.

Cash flow from operating activities was $259 million in the first quarter compared with $207 million in the previous-year quarter. Free cash flow was $253 million in the reported quarter.

In the first quarter, Verisign repurchased 1.1 million shares for $220 million. As of Mar 31, the company had shares worth $639 million remaining under buyback authorization.

2023 Guidance

GAAP operating income is now expected to be between $0.99 billion and $1.005 billion (earlier view: $0.985 billion and $1.005 billion).  Capital expenditures are anticipated in the range of $35-$45 million.

Zacks Rank & Stocks to Consider

VeriSign currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology space are Arista Networks ANET, Asure Software ASUR and Salesforce CRM. Asure Software and Salesforce currently sport a Zacks Rank #1 (Strong Buy) whereas Arista Networks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Arista Networks’ 2023 earnings stands at $5.78 per share. The long-term earnings growth rate is anticipated to be 14.2%.

Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 14.2%. Shares of ANET have increased 35.6% in the past year.

The Zacks Consensus Estimate for Asure Software’s 2023 earnings has increased 25% in the past 60 days to 35 cents per share. The long-term earnings growth rate is projected to be 25%.

Asure Software’s earnings beat the Zacks Consensus Estimate in all the last four quarters, the average being 445.8%. Shares of ASUR have surged 117.8% in the past year.

The Zacks Consensus Estimate for Salesforce’s 2023 earnings has risen 22% in the past 60 days to $7.11 per share. The long-term earnings growth rate is expected to be 16.8%.

Salesforce’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 15.6%. Shares of CRM have gained 11.4% in the past year.

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