Core Insights - Warren Buffett has a history of achieving significant returns for investors, with a compound annual return of over 20% for shareholders over the last 60 years [2] - Buffett's investment strategy often involves going against Wall Street sentiment, as evidenced by his recent investment in VeriSign, which is not favored by many analysts [3][14] Company Overview - VeriSign holds exclusive rights to register .com and .net domains, allowing it to consistently raise prices within regulated limits set by ICANN [7] - The company reported a gross margin of 87.7% and an operating margin of 67.9% last year, indicating strong profitability [8] Recent Developments - Buffett increased his stake in VeriSign, purchasing $94 million worth of shares, bringing Berkshire Hathaway's ownership to 14% [5] - The shares were acquired at prices between $191 and $206, which are below the price targets set by analysts ranging from $260 to $275 [6] Market Position - Despite a decline in the total number of registered domains, VeriSign is experiencing strong new name registration rates and expects fewer expiring domains in 2025 [9][10] - Management is optimistic about future growth, focusing on customer acquisition and reducing the impact of high-churn Chinese-registered domains [10] Investment Considerations - VeriSign's stock has performed well since Buffett's purchase, trading around $255 per share, but carries a forward P/E ratio of approximately 29.6, indicating potential risk [11][12] - The company offers slow and steady growth with predictable free cash flow, which may appeal to investors in a volatile market [13]

VeriSign (VRSN 2.75%) has defied the recent stock market sell-off, with shares rising 19% year to date.The company continues to benefit as the sole registry operator for .com and .net domains, playing a pivotal role in internet services. However, a dynamic tech landscape, marked by the rise of alternative domain names like .ai and .io, has introduced uncertainty about VeriSign's long-term industry dominance.With the stock nearing its all-time high of $256 set in 2021, can the rally keep going? Or is it time ...

Core Viewpoint - Warren Buffett's recent stock selling does not preclude Berkshire Hathaway from making strategic purchases, particularly in VeriSign, which has not been added to since 2014 [1][2][3] Group 1: Berkshire Hathaway's Investment in VeriSign - Berkshire Hathaway increased its stake in VeriSign by approximately 474,000 shares, marking a 3.7% increase [2] - The last transaction involving VeriSign was a reduction of 1.1% in March 2020, making the recent purchase noteworthy [3] - The recent buy occurred at a similar price point to previous sales in 2020, but with a 20% lower share count due to share repurchases, indicating a lower market cap [4] Group 2: VeriSign's Business Operations - VeriSign operates the authoritative registry for .com and .net domain names and manages two of the 13 global root servers for the internet [5] - The company renewed contracts with ICANN and NTIA for six more years, allowing for a 7% price increase in the last four years of the contract [6][7] - This pricing strategy suggests a potential total price increase of around 30% over the next six years, which may outpace inflation [8] Group 3: Domain Registration Trends - In 2024, VeriSign experienced 4.3% revenue growth, entirely driven by price increases, while overall domain registrations fell by 2.1% [9] - Management indicated that declines in domain registrations in China may moderate, and new stimulus measures could lead to growth in that market [11] - The U.S. market, which also saw declines, may reverse in 2025 as VeriSign collaborates with registrars to enhance customer acquisition [12][13] Group 4: Future Growth Potential - Although net growth in domain names has not yet occurred, positive trends in gross additions suggest potential for recovery [14] - The post-pandemic slowdown in domain registrations is expected to eventually stabilize, leading to growth resuming around 2027 when price increases can be implemented again [15] - VeriSign's regulated monopoly supports a high-margin, cash-generative business model, which is likely to enhance earnings per share through share buybacks [16] Group 5: Stock Performance Outlook - Despite a 20% increase in stock price since Berkshire's recent purchase, VeriSign is still considered a viable long-term investment [17]

Company Overview - VeriSign is a specialist in internet domain registration and has seen a positive stock performance recently, particularly after Berkshire Hathaway increased its stake in the company [1] - The company has a strong economic moat, which is a key factor in its business model and performance [1] Historical Performance - Investors who bought shares of VeriSign after its IPO in 1998 would have significantly increased their holdings due to two stock splits in 1999, resulting in four times the original shares for each purchased before 1999 [2][3] - VeriSign has maintained its exclusivity in holding registration rights for .com and .net domains, renewing its rights annually as long as it meets ICANN's criteria [4] Financial Performance - The company's revenue is projected to grow modestly by 4% in full-year 2024, reaching $1.56 billion [5] - Net income has shown more volatility, with a 21% increase in 2023 to $818 million, followed by a 4% decrease in 2024 to $786 million [5] - VeriSign combines modest growth with high profitability, which may not appeal to all investors despite its unique market position [6]

Financial Performance - The company recorded revenues of $1,557.4 million in 2024, representing a 4% increase compared to 2023[151] - Operating income for 2024 was $1,058.2 million, reflecting a 6% increase from the previous year[151] - Revenues from the U.S. market were $1,035.5 million, a 4% increase from 2023[162] - Total revenues for the year ended December 31, 2024, were $1,557.4 million, an increase of 4.3% compared to $1,493.1 million in 2023[218] - Net income for 2024 was $785.7 million, a decrease of 3.9% from $817.6 million in 2023[218] - Income before income taxes for 2024 was $1,021.9 million, compared to $976.5 million in 2023, reflecting a year-over-year increase of approximately 4.5%[293] Cash Flow and Liquidity - Cash flows from operating activities increased by 6% to $902.6 million in 2024[151] - Net cash provided by operating activities increased to $902.6 million in 2024 from $853.8 million in 2023[178] - Cash and cash equivalents decreased to $206.7 million in 2024 from $240.1 million in 2023, while marketable securities fell to $393.2 million from $686.3 million[174] - The company believes existing cash and marketable securities will be sufficient to meet working capital and capital expenditure requirements for the next 12 months[177] Share Repurchase and Stockholder Equity - The company repurchased 6.6 million shares for a total cost of $1.21 billion in 2024, with $1.02 billion remaining for future repurchases[151] - The company repurchased common stock totaling $1,225.6 million in 2024, compared to $901.4 million in 2023, reflecting a 36% increase[223] - Total stockholders' deficit at the end of 2024 was $(1,957.9) million, an increase from $(1,581.0) million in 2023[221] Expenses - Research and development expenses increased by 6% in 2024 to $96.7 million, compared to $91.0 million in 2023[164] - Selling, general and administrative expenses rose by 3% in 2024 to $211.1 million, up from $204.2 million in 2023[167] - The total income tax expense for 2024 was $236.2 million, up from $158.9 million in 2023, largely due to increased foreign current expenses[296] Registrations and Domain Performance - The total number of .com and .net registrations decreased by 2.1% to 169.0 million as of December 31, 2024[151] - The company processed 37.4 million new domain name registrations in 2024, down from 39.4 million in 2023[151] - The renewal rate for .com and .net domains was 72.2% in Q3 2024, compared to 73.5% in Q3 2023[151] Assets and Liabilities - Total assets decreased to $1,406.5 million in 2024 from $1,749.0 million in 2023, representing a decline of 19.6%[215] - Total liabilities increased to $3,364.4 million in 2024 from $3,330.0 million in 2023, an increase of 1.0%[215] - The company had $750.0 million in senior unsecured notes due 2031 and $500.0 million due April 2025, with plans to refinance the latter[176] Tax and Deferred Tax - The company recognized $281.3 million of deferred tax assets as of December 31, 2024, down from $301.0 million in 2023[201] - The Company had total deferred tax assets of $344.0 million as of December 31, 2024, down from $375.5 million in 2023[297] - The ending balance of gross unrecognized tax benefits as of December 31, 2024, was $6.5 million, a decrease from $9.6 million in 2023[300] Commitments and Obligations - Verisign's total minimum payment obligations amount to $2,114.5 million, which includes $2,023.1 million in Senior Notes and $67.1 million in purchase obligations for 2025[12] - The company has purchase obligations with telecommunication carriers and service providers, which are significant for its operations[304] - The company entered into a $200.0 million committed unsecured revolving credit facility in December 2023, with no borrowings outstanding as of December 31, 2024[272] Miscellaneous - The company maintained effective internal control over financial reporting as of December 31, 2024, according to the audit opinion[208] - The company adopted ASU No. 2023-07, which did not have a material impact on the consolidated financial statements[252] - The company recognized net remeasurement gains of $14.7 million in 2023, with no significant gains or losses in 2024[238]

Financial Data and Key Metrics Changes - In 2024, the company achieved a revenue growth of 4.3% year-over-year, with total revenue reaching $1.557 billion [9][17] - Operating income increased by 5.7% to $1.058 billion for the year [17] - The diluted earnings per share for Q4 2024 was $2, down from $2.60 in Q4 2023, primarily due to a prior year tax benefit [18] - The company reported a decrease in shares outstanding by 6.2% from the end of 2023 [9] Business Line Data and Key Metrics Changes - The domain name base in .com and .net totaled 169 million, a decrease of 2.1% year-over-year [11] - New registrations in Q4 2024 were 9.5 million, an increase from 9 million in Q4 2023 [12] - The renewal rate for Q4 2024 is expected to be approximately 73.9%, showing improvement [12] Market Data and Key Metrics Changes - The domain name base decreased from both US and China-based registrars, while EMEA saw an increase [13] - The decline in the China registrar segment is expected to slow, now representing only 5% of the domain name base [14] Company Strategy and Development Direction - The company aims to reengage registrars on new customer acquisition through new marketing programs for .com and .net [15] - For 2025, the company expects a slight decline in the domain name base but anticipates improved trends compared to 2024 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the adoption of new marketing programs and a potential return to growth in the domain name base [33][34] - The company is focused on maintaining strong relationships with regulatory bodies like ICANN and NTIA, emphasizing security and stability [46][47] Other Important Information - The company returned $1.2 billion to shareholders through share repurchases in 2024 [11] - Operating cash flow for Q4 2024 was $232 million, with free cash flow at $222 million [19] Q&A Session Summary Question: Insights on domain base and macro factors - Management indicated that while the domain name base is expected to continue decreasing in 2025, there are signs of improvement due to easing trends from China and the adoption of new marketing programs [31][34] Question: Details on marketing programs and regional traction - Management noted that it is early to assess the full impact of marketing programs, but positive feedback has been received from registrars [40][41] Question: Impact of leadership changes in DC - Management believes that the long-standing policies regarding security and stability will remain unaffected by new leadership in DC [45][46] Question: Update on .web and interest in new TLDs - The company remains interested in being the registry operator for .web and is considering applications for new TLDs, although no specific plans have been finalized [78][80]

VeriSign (VRSN) Q4 2024 Earnings Call February 06, 2025 04:30 PM ET Company Participants David Atchley - Vice President, Investor Relations & Corporate TreasurerJames Bidzos - CEO & Executive Chairman of the BoardGeorge Kilguss - Executive VP & CFO Conference Call Participants Rob Oliver - Senior Research AnalystYgal Arounian - Analyst Operator Good day, everyone. Welcome to VeriSign's Fourth Quarter and Full Year twenty twenty four Earnings Call. Today's conference is being recorded. Recording of this call ...

Financial Performance - VeriSign reported Q4 2024 revenue of $395 million, a 3.9% increase from Q4 2023[3] - Operating income for Q4 2024 was $264 million, compared to $256 million in Q4 2023[3] - Net income for Q4 2024 was $191 million, with diluted EPS of $2.00, down from $265 million and $2.60 in Q4 2023[3] - Full year 2024 revenue reached $1.56 billion, up 4.3% from 2023[4] - Full year 2024 net income was $786 million, with diluted EPS of $8.00, compared to $818 million and $7.90 in 2023[4] Cash Flow and Investments - Cash flow from operations for Q4 2024 was $232 million, compared to $204 million in Q4 2023[6] - Net cash provided by operating activities increased to $902.6 million, up 5.7% from $853.8 million in the previous year[18] - Net cash provided by investing activities was $286.3 million, a significant improvement compared to a net cash used of $(97.4) million in 2023[18] - Total cash, cash equivalents, and restricted cash at the end of the period was $212.1 million, down from $245.5 million at the beginning of the period[18] - Proceeds from maturities and sales of marketable securities were $1,195.1 million, down from $1,278.9 million in 2023[18] - Cash paid for interest remained stable at $72.8 million for both years[18] Shareholder Returns - VeriSign repurchased 1.4 million shares for $260 million in Q4 2024, totaling 6.6 million shares for $1.21 billion for the full year[6] - Repurchases of common stock amounted to $1,225.6 million, an increase of 36% compared to $901.4 million in 2023[18] Deferred Revenues and Registrations - Deferred revenues as of December 31, 2024, totaled $1.30 billion, an increase of $58 million from year-end 2023[6] - VeriSign ended Q4 2024 with 169.0 million .com and .net domain name registrations, a 2.1% decrease from Q4 2023[10] - In Q4 2024, VeriSign processed 9.5 million new domain name registrations for .com and .net, up from 9.0 million in Q4 2023[10] Expenses - Cash paid for income taxes was $230.5 million, slightly down from $239.7 million in the previous year[18] - Depreciation of property and equipment decreased to $36.9 million from $44.1 million in 2023[18] - Stock-based compensation expense increased to $61.1 million, up from $59.7 million in the previous year[18]

Core Viewpoint - Verisign has become an attractive investment opportunity due to its strong market position and steady growth in revenue and earnings, despite regulatory concerns and a stagnant stock price over the past five years [9][10]. Company Overview - Verisign holds exclusive rights to register .com and .net domain names, creating a monopoly in the domain registration market [4]. - The company can increase prices by 7% for .com and 10% for .net domains annually, which is built into its contracts with ICANN [4]. Financial Performance - Over the last decade, Verisign's revenues have increased by more than 50%, while net earnings have grown by 146%, showcasing significant operating leverage [6]. - The total number of .com and .net domains increased by 7.8% over the five-year period ending in September, indicating sustained demand [7]. Shareholder Returns - Verisign has been returning capital to shareholders through share repurchases, leading to a substantial increase in earnings per share compared to net income [8]. - The stock trades at approximately 24 times analysts' 2025 earnings expectations, which is considered a fair valuation for a company with strong growth prospects [10]. Investment Considerations - Despite steady business growth, Verisign's stock price has remained relatively flat, potentially due to regulatory concerns [9]. - Berkshire Hathaway currently owns 13.8% of Verisign, and its market capitalization of $20.3 billion limits the ability to invest significantly more [11].

Group 1: Company Overview - VeriSign is recognized as a key player in the digital economy, providing domain registration and security services essential for online businesses [3][6][12] - The company has a current stock price of $211.67, with a 52-week range between $167.04 and $213.68, and a P/E ratio of 24.61 [2][10] - VeriSign's management has announced a stock buyback of $1.1 billion, indicating confidence in the stock's undervaluation [13] Group 2: Market Position and Analyst Sentiment - Warren Buffett's investment in VeriSign highlights its potential as a value stock in the context of the digital economy [3][7] - Wall Street analysts have recently upgraded VeriSign's rating from neutral to outperform, with a 12-month price forecast of $244.00, representing a 15.27% upside [9][10] - The stock is currently trading at a discount compared to the average valuation of the computer sector, which is significantly higher [12] Group 3: Financial Performance - VeriSign reported a free cash flow of $852 million for the year, a strong indicator of its financial health and future growth potential [14] - The stock's valuation has been adjusted upward, with analysts previously valuing it at $200, now targeting closer to $250 per share [10]