Domain name registry operator Verisign (NASDAQ:VRSN) reported results in line with analysts’ expectations in Q4 FY2023, with revenue up 3% year on year to $380.4 million. It made a GAAP profit of $2.60 per share, improving from its profit of $1.69 per share in the same quarter last year.
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VeriSign (VRSN) Q4 FY2023 Highlights:
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Revenue: $380.4 million vs analyst estimates of $377.9 million (small beat)
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EPS: $2.60 vs analyst estimates of $1.86 (39.6% beat)
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Free Cash Flow of $199.2 million, similar to the previous quarter
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Gross Margin (GAAP): 87.3%, up from 86.3% in the same quarter last year
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Market Capitalization: $20.45 billion
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 unimpressive over the last two years, growing from $340.3 million in Q4 FY2021 to $380.4 million this quarter.
VeriSign’s quarterly revenue was only up 3% year on year, which might disappoint some shareholders. We can see that revenue increased by $4.1 million in Q4, which was roughly the same as in Q3 2023.
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Cash Is King
If you’ve followed StockStory for a while, you know that 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’s free cash flow came in at $199.2 million in Q4, roughly the same as last year.
VeriSign has generated $808 million in free cash flow over the last 12 months, an eye-popping 54.2% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.
Key Takeaways from VeriSign’s Q4 Results
Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is flat after reporting and currently trades at $202 per share.
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.
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