Yahoo Finance VeriSign's (NASDAQ:VRSN) Q2 Earnings Results: Revenue In Line With Expectations
Domain name registry operator Verisign (NASDAQ:VRSN) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 4.1% year on year to $387.1 million. It made a GAAP profit of $2.01 per share, improving from its profit of $1.79 per share in the same quarter last year.
Is now the time to buy VeriSign? Find out in our full research report.
VeriSign (VRSN) Q2 CY2024 Highlights:
Revenue: $387.1 million vs analyst estimates of $385.8 million (small beat)
EPS: $2.01 vs analyst estimates of $1.94 (3.6% beat)
Gross Margin (GAAP): 87.8%, up from 86.5% in the same quarter last year
Free Cash Flow of $404.7 million, up 59.6% from the previous quarter
Billings: $429.7 million at quarter end, up 15.6% year on year
Market Capitalization: $17.43 billion
“We delivered another solid quarter, both operationally and financially, by focusing on our mission. Last week we marked 27 years of providing 100% availability in the .com/.net domain name resolution system,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
While the company is not a domain registrar and does not directly sell domain names to end users, Verisign (NASDAQ:VRSN) operates and maintains the infrastructure to support domain names such as .com and .net.
E-commerce Software
While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.
Sales Growth
As you can see below, VeriSign's revenue growth has been weak over the last three years, growing from $329.4 million in Q2 2021 to $387.1 million this quarter.
VeriSign's quarterly revenue was only up 4.1% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $2.8 million in Q2 compared to $3.9 million in Q1 CY2024. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.
Looking ahead, analysts covering the company were expecting sales to grow 5% over the next 12 months before the earnings results announcement.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
VeriSign has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cash cushion. The company's free cash flow margin was among the best in the software sector, averaging an eye-popping 70.3% over the last year.
VeriSign's free cash flow clocked in at $404.7 million in Q2, equivalent to a 105% margin. This quarter's result was good as its margin was 67.2 percentage points higher than in the same quarter last year, but we wouldn't read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Key Takeaways from VeriSign's Q2 Results
It was good to see VeriSign beat analysts' EPS expectations this quarter. Zooming out, we think this was a decent quarter, showing the company is staying on target. The stock traded up 1.9% to $180 immediately following the results.
So should you invest in VeriSign right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
