VeriSign, Inc. reports 27.6 pp ROIC growth from 54.3% to 81.9% in 2018 in 2018 and 7.7% EBITDA growth
02/07/2019 • About VeriSign, Inc. (
$VRSN) • By InTwits
VeriSign, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- VeriSign, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.5%. At the same time it's in pair with industry average of 7.4%
- CAPEX is quite volatile: $112m in FY2018, $163m in FY2017, $73m in FY2016, $34m in FY2015, $36m in FY2014
- In the last 5 years the company invested considerably less than D&A: $193m vs. $282m. In 2018 this situation was still the same: CAPEX was 37 while D&A was 48
- The company has highly profitable business model: ROIC is 81.9%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
VeriSign, Inc.'s Revenue increased on 4.3%. Revenue growth showed small slowdown in 18Q4 - it was 4.0% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.1 pp from 65.0% to 67.1% in 2018. EBITDA Margin followed a growing trend at 1.2 pp per annum in 2014-2018.
Gross Margin increased slightly on 0.78 pp from 83.4% to 84.2% in 2018. Gross Margin stuck to a growing trend at 0.73 pp per annum in 2014-2018. SG&A as a % of Revenue decreased slightly on 1.9 pp from 18.2% to 16.3% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During 2014-2018 SBC as a % of Revenue topped in 2017 at 4.5%.
Net Income margin increased on 8.7 pp from 39.2% to 47.9% in 2018. Net Income margin grew at 2.9 pp per annum in the last 5 years. The efficient tax rate was 20.2% in 2018 while the average for the last five years was 23.3%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 3.0% in 2018. CAPEX/Revenue decreased slightly on 0.79 pp from 3.8% in 2015 to 3.0% in 2018. It's average CAPEX/Revenue for the last three years was 3.2%.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.8x and Debt / EBITDA is 2.2x. Net Debt / EBITDA dropped on 0.8x from 2.6x to 1.8x in 2018. Debt dropped on 25.9% while cash dropped on 23.3%.
VeriSign, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 6.7x. The company has no short term refinancing risk: short term debt is zero.
Average interest expence charged on company's debt was 6.4% in 2018.
Valuation and dividends
VeriSign, Inc.'s trades at EV/EBITDA 27.5x and P/E 36.1x.
Management team
D James Bidzos is a the company's CEO. D James Bidzos is a founder and has spent 10 years with the company. CEO total compensation was
$9,162,786 in 2018 which included
$913,461 salary. George E Kilguss III is a VeriSign, Inc.'s CFO. George E Kilguss III has spent 3 years at the company.
Insider ownership is 1.3%. Insider ownership didn't change in 2018.
The company has 900 employees. The number of employees decreased on 5.5%. Average revenue per employee in 2018 was
$1,349,966 and it surged on 10.3%.
Financial and operational results
FY ended 12/31/2018
VeriSign, Inc. ($VRSN) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,010 | 1,059 | 1,142 | 1,165 | 1,215 | 4.3% |
| Gross Profit | 822 | 867 | 944 | 972 | 1,023 | 5.3% |
| SG&A | 189 | 197 | 198 | 212 | 198 | -6.7% |
| EBITDA | 628 | 667 | 745 | 758 | 816 | 7.7% |
| EBIT | 564 | 606 | 687 | 708 | 767 | 8.4% |
| Interest expence | 86 | 108 | 116 | 136 | 115 | -15.8% |
| Tax | 128 | 112 | 141 | 142 | 147 | 3.7% |
| Net Income | 355 | 375 | 441 | 457 | 582 | 27.4% |
| Stock Based Compensation | 38 | 46 | 50 | 53 | 53 | -0.8% |
Balance Sheet
|
|---|
| Cash | 192 | 229 | 232 | 466 | 357 | -23.3% |
| Accounts Receivable | 13 | 13 | 13 | | | |
| Short Term Debt | 621 | 634 | 630 | 628 | 0 | -100.0% |
| Long Term Debt | 740 | 1,235 | 1,237 | 1,783 | 1,785 | 0.1% |
Cash flow
|
|---|
| Capex | 39 | 41 | 27 | 49 | 37 | -25.2% |
Ratios
|
|---|
| Revenue growth | 4.7% | 4.9% | 7.8% | 2.0% | 4.3% | |
| EBITDA growth | 6.7% | 6.3% | 11.6% | 1.7% | 7.7% | |
|
|---|
| Gross Margin | 81.3% | 81.8% | 82.6% | 83.4% | 84.2% | 0.8% |
| EBITDA Margin | 62.2% | 63.0% | 65.2% | 65.0% | 67.1% | 2.1% |
| EBIT Margin | 55.9% | 57.2% | 60.1% | 60.7% | 63.2% | 2.4% |
| SG&A, % of revenue | 18.8% | 18.6% | 17.4% | 18.2% | 16.3% | -1.9% |
| SBC, % of revenue | 3.8% | 4.3% | 4.4% | 4.5% | 4.3% | -0.2% |
| Net Income Margin | 35.2% | 35.4% | 38.6% | 39.2% | 47.9% | 8.7% |
| CAPEX, % of revenue | 3.9% | 3.8% | 2.3% | 4.2% | 3.0% | -1.2% |
|
|---|
| ROIC | 60.6% | 68.7% | 65.2% | 54.3% | 81.9% | 27.6% |
| Net Debt/EBITDA | 1.9x | 2.5x | 2.2x | 2.6x | 1.8x | -0.8x |
| Interest coverage ratio (ICR) | 6.6x | 5.6x | 5.9x | 5.2x | 6.7x | 1.5x |
| Interest expence / Average debt | 6.3% | 6.7% | 6.2% | 6.4% | 6.4% | 0.1% |
People
|
|---|
| Insider ownership | 1.3% | 1.3% | 1.3% | 1.3% | 1.3% | 0.0% |
| Employees | 1,061 | 1,019 | 990 | 952 | 900 | -5.5% |
| Revenue/Employee, th. $ | 952 | 1,040 | 1,154 | 1,224 | 1,350 | 10.3% |
VeriSign, Inc. ($VRSN) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 299 | 302 | 306 | 307 | | 3.7% | 4.8% | 4.6% | 4.0% |
| EBITDA | 198 | 205 | 207 | 206 | | 4.9% | 9.7% | 7.1% | 9.1% |
| Net Income | 134 | 128 | 138 | 182 | | 15.3% | 4.3% | 19.8% | 77.2% |
Balance Sheet
|
|---|
| Cash | 1,704 | 256 | 232 | 357 | | 274.8% | 5.8% | -19.3% | -23.3% |
| Short Term Debt | 631 | 0 | 0 | 0 | | 0.8% | -100.0% | -100.0% | -100.0% |
| Long Term Debt | 1,783 | 1,784 | 1,784 | 1,785 | | 44.1% | 44.1% | 0.1% | 0.1% |
Ratios
|
|---|
| Gross Margin | 83.9% | 84.3% | 84.2% | 84.3% | | 1.5% | 0.9% | 0.4% | 0.4% |
| EBITDA Margin | 66.0% | 67.8% | 67.8% | 67.0% | | 0.7% | 3.0% | 1.6% | 3.1% |
| Net Income Margin | 44.9% | 42.4% | 45.0% | 59.3% | | 4.5% | -0.2% | 5.7% | 24.5% |
Peers in Internet Services & Infrastruc
Below we provide VeriSign, Inc. benchmarking against other companies in Internet Services & Infrastruc industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | | 20.4% | 108.0% |
| GTT Communications, Inc. ($GTT) | | 78.1% | 41.3% | 58.7% | 80.1% |
| MongoDB, Inc. ($MDB) | | | | 55.3% | 63.8% |
| Twilio Inc. ($TWLO) | | 87.9% | 66.1% | 43.9% | 62.9% |
| Okta, Inc. ($OKTA) | | | 109.5% | 86.6% | 60.0% |
| |
|---|
| Median (15 companies) | 25.5% | 13.9% | 15.8% | 13.7% | 19.2% |
|---|
| VeriSign, Inc. ($VRSN) | | 4.9% | 7.8% | 2.0% | 4.3% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | 68.1% | 77.5% | 84.9% |
| Wix.com Ltd. ($WIX) | 81.6% | 82.8% | 84.4% | 83.7% | 79.0% |
| MongoDB, Inc. ($MDB) | | | 68.0% | 70.5% | 74.2% |
| Carbonite, Inc. ($CARB) | 68.5% | 71.6% | 70.6% | 70.7% | 71.2% |
| Okta, Inc. ($OKTA) | | 54.3% | 58.1% | 65.1% | 68.5% |
| |
|---|
| Median (15 companies) | 48.4% | 54.3% | 59.2% | 61.7% | 64.9% |
|---|
| VeriSign, Inc. ($VRSN) | 81.3% | 81.8% | 82.6% | 83.4% | 84.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | 32.0% | -29.9% | 32.2% |
| Internap Corporation ($INAP) | 20.0% | 21.0% | -5.4% | 28.4% | 30.5% |
| Akamai Technologies, Inc. ($AKAM) | 37.5% | 34.8% | 33.9% | 27.6% | 29.4% |
| Endurance International Group Holdings, Inc. ($EIGI) | 23.2% | 24.0% | 14.8% | 20.0% | 26.0% |
| 21Vianet Group, Inc. ($VNET) | 10.9% | 8.3% | -4.8% | -20.7% | 25.6% |
| |
|---|
| Median (15 companies) | 4.5% | 1.3% | -5.1% | -7.1% | 14.4% |
|---|
| VeriSign, Inc. ($VRSN) | 62.2% | 63.0% | 65.2% | 65.0% | 67.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Akamai Technologies, Inc. ($AKAM) | 16.2% | 20.2% | 13.5% | 16.7% | 14.9% |
| 21Vianet Group, Inc. ($VNET) | 32.6% | 29.0% | 15.8% | 11.7% | 12.8% |
| Internap Corporation ($INAP) | 24.0% | 17.5% | 14.9% | 12.7% | 12.1% |
| Limelight Networks, Inc. ($LLNW) | 11.5% | 14.5% | 5.7% | 11.2% | 8.2% |
| GTT Communications, Inc. ($GTT) | 2.8% | 3.8% | 4.6% | 5.1% | 5.2% |
| |
|---|
| Median (15 companies) | 4.4% | 3.8% | 4.0% | 3.8% | 3.3% |
|---|
| VeriSign, Inc. ($VRSN) | 3.9% | 3.8% | 2.3% | 4.2% | 3.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | | -13.2% | 12.1% |
| Akamai Technologies, Inc. ($AKAM) | 15.5% | 12.5% | 11.9% | 7.9% | 8.2% |
| Endurance International Group Holdings, Inc. ($EIGI) | 1.0% | 4.2% | -2.3% | 2.0% | 7.5% |
| GoDaddy Inc. ($GDDY) | -3.3% | -1.7% | 2.9% | 2.7% | 4.6% |
| 21Vianet Group, Inc. ($VNET) | -1.5% | -3.6% | -8.9% | -14.6% | 2.8% |
| |
|---|
| Median (16 companies) | -3.0% | -6.9% | -18.5% | -14.6% | 1.0% |
|---|
| VeriSign, Inc. ($VRSN) | 60.6% | 68.7% | 65.2% | 54.3% | 81.9% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GTT Communications, Inc. ($GTT) | 3.1x | 7.4x | 6.8x | 7.2x | 12.7x |
| Internap Corporation ($INAP) | 5.1x | 5.3x | | 6.5x | 6.9x |
| Endurance International Group Holdings, Inc. ($EIGI) | 7.3x | 6.0x | 11.8x | 7.8x | 5.8x |
| GoDaddy Inc. ($GDDY) | 14.0x | 5.4x | 2.3x | 6.8x | 3.9x |
| 21Vianet Group, Inc. ($VNET) | 10.7x | 5.6x | | | 1.0x |
| |
|---|
| Median (9 companies) | 4.1x | 5.3x | 1.3x | 6.5x | 1.0x |
|---|
| VeriSign, Inc. ($VRSN) | 1.9x | 2.5x | 2.2x | 2.6x | 1.8x |
