Good day, everyone. Welcome to VeriSign's Q4 and Full Year 2019 Earnings Call. Today's conference is being recorded. Recording of this call is not permitted unless pre-authorized. At this time, I could turn the conference over to Mr. David Atchley, Vice President of Investor Relations and Corporate Treasurer. Please go ahead, sir.
Thank you, operator, and good afternoon, everyone. Welcome to VeriSign's Q4 and Full Year 2019 Earnings Call. With me are Jim Bidzos, Executive Chairman, President, and CEO; Todd Strubbe, Executive Vice President and COO; and George Kilguss, Executive Vice President and CFO. This call and presentation are being webcast from the investor relations website, which is available under About VeriSign on verisign.com. There you will also find our Q4 and full year 2019 earnings release. At the end of this call, the presentation will be available on that site, and within a few hours, the replay of the call will be posted.
Financial results in our earnings release are unaudited, and our remarks include forward-looking statements that are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically in the most recent reports on Form 10-K and 10-Q, which identify risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. VeriSign retains its longstanding policy not to comment on financial performance or guidance during the quarter unless it is done through public disclosure.
The financial results in today's call and the matters we will be discussing today include GAAP and non-GAAP measures used by VeriSign. GAAP to non-GAAP reconciliation information is appended to our earnings release and slide presentation as applicable, each of which can be found in the investor relations section of our website. In a moment, Jim and George will provide some prepared remarks, afterward, we will open the call for your questions. With that, I would like to turn the call over to Jim.
Thanks, David. Good afternoon, everyone. I'm pleased to report another solid quarter for VeriSign that caps off not only a solid year, but also a strong decade in which we focused on our core business, expanded the domain name base, and returned value to our shareholders. In 2019, we marked more than 22 years of uninterrupted availability for the VeriSign DNS for .com and .net. 2019 was also a strong year for the .com and .net domain name base as we processed a record 40.3 million registrations and concluded the year with 158.8 million names. Finally, 2019 was characterized by solid financial performance, with revenues of $1.232 billion and free cash flow of $714 million.
On January 3rd, VeriSign and ICANN announced a proposed agreement to amend the .com registry agreement and a new proposed framework for working together on initiatives related to the security, stability, and resiliency of the domain name system in the form of a binding letter of intent between the two organizations. Together, these agreements fulfill commitments that ICANN and VeriSign made in 2016 when the .com registry agreement was previously amended. The new proposed amendment updates the .com registry agreement to reflect certain changes under Amendment 35 to the cooperative agreement with the U.S. Department of Commerce, including the pricing changes.
According to the terms of the proposed letter of intent, VeriSign will have a one-time commitment to provide $4 million per year over five years, beginning on January 1, 2021, for ICANN to support activities to preserve and enhance the security, stability, and resiliency of the DNS and the internet. We believe that the activities funded by this commitment will benefit the entire internet community. ICANN's public comment period for these two documents closes February 14. The steps that follow the comment period's closing, according to ICANN's website, are that ICANN staff will prepare a report of the public comments by March 6, 2020, and then ICANN will submit the report to its board of directors. Now I'll discuss Q4 operational highlights.
At the end of December, the domain name base in .com and .net totaled 158.8 million, consisting of 145.4 million names for .com and 13.4 million names for .net, with a year-over-year growth rate of 3.9%. During the Q4, we processed 10.3 million new registrations, and the domain name base increased by 1.46 million names. Although renewal rates are not fully measurable until 45 days after the end of the quarter, we believe that the renewal rate for the Q4 of 2019 will be approximately 73.7%. This preliminary rate compares to 74.3% achieved in the Q4 of 2018, and 72.2% in the Q4 of 2017.
Looking forward to 2020, we expect a domain name base growth rate of between 2% and 4%. During the Q4, we repurchased 1 million shares of common stock for $195 million. During the full year 2019, we repurchased 3.9 million shares for $738 million. Effective today, the board of directors increased the amount of VeriSign common stock authorized for share repurchase by approximately $743 million to a total of $1 billion authorized and available under the share repurchase program, which has no expiration. Our financial position remains strong, with $1.218 billion in cash equivalents, and marketable securities at the end of the quarter.
We continually evaluate the overall cash and investing needs of the business and consider the best uses for our cash, including potential share repurchases. Lastly, regarding .web, as we mentioned last quarter, a hearing on VeriSign and NDC's request to participate in the arbitration process was held last year. We expected a ruling on our request in 2019, but we have been told by the panel that it now hopes to issue its ruling this month. Now I'd like to turn the call over to George.
Thanks, Jim, and good afternoon, everyone. For the year ended December 31st, 2019, the company generated revenue of $1.232 billion, up 1.4% from 2018, and delivered GAAP operating income of $806 million, up 5% from $767 million a year ago. As a reminder, revenue growth during 2019 was partially offset by lower revenue from our divested security services business, as most customers' contracts transitioned to the buyer during the year. For the full year of 2019, revenue from U.S. customers was 63% of total, with 37% coming from foreign customers. Fourth quarter revenue came to $311 million, up 1% year-over-year.
GAAP operating expense totaled $112 million compared to $103 million last quarter and $113 million in the Q4 a year ago. The quarter-over-quarter increase in operating expense is primarily a result of increased investment in our business, including increased sales and marketing programs, as well as investments in our operational infrastructure and security capabilities. Fourth quarter operating income totaled $199 million compared with $194 million in the same quarter of 2018. The operating margin in the quarter came to 63.9% compared to 63.1% in the same quarter a year ago.
Net income totaled $148 million compared to $182 million a year earlier, which produced diluted earnings per share of $1.26 in the Q4 this year, compared to $1.50 for the same quarter last year. For the year-over-year comparative results, remember that 2018 results included the gain on the sale of our Verisign Security Services business, which increased Q4 2018 GAAP net income by $52 million and earnings per share by $0.43. Related to non-GAAP results, Q4 2019 non-GAAP operating expense, which excludes $12 million of stock-based compensation, totaled $100 million and was higher sequentially for the reasons I discussed earlier, and slightly lower than Q4 2018 levels.
Non-GAAP operating margin for the 4th quarter was 67.9%. Non-GAAP net income for the quarter was $154 million, resulting in non-GAAP diluted earnings per share of $1.31. Finally, the full year 2019 non-GAAP operating margin was 69.6%. As a reminder, beginning with the 1st quarter of 2020 results, we will no longer be presenting nor discussing non-GAAP metrics, with the exception of free cash flow and adjusted EBITDA. As of December 31st, 2019, the company maintained total assets of $1,854 million and total liabilities of $3,344 million. Assets included $1,218 million of cash equivalents, and marketable securities.
Operating cash flow for the Q4 was $194 million, and free cash flow was $185 million, compared with $219 million and $211 million respectively for the Q4 of last year. The year-over-year difference was primarily related to higher cash taxes in the Q4 of 2019 and a lower working capital benefit. I will now discuss full year 2020 guidance, which is now based solely on GAAP metrics. Revenue is expected to be in the range of $1.25 billion-$1.265 billion.
This revenue range forecast reflects a growth rate slightly below the expected domain name base growth rate of between 2% and 4%, as 2020 revenue no longer reflects any residual revenue from the Verisign Security Services, which in 2019 was about $10 million. GAAP operating margin, which includes stock-based compensation, is expected to be between 64.5% and 65.5%. This guidance range reflects our expectation of incremental investment in our operational infrastructure and security capabilities during 2020. Interest expense and non-operating income net is expected to be an expense of between $68 million and $75 million.
This range reflects both lower non-operating income from the transition services agreement, which will cease during the Q1, and lower expected interest income on cash balances. Capital expenditures are expected to be between $45 million and $55 million. The GAAP effective tax rate is expected to be between 18% and 21%. We expect the cash tax rate for 2020 to also be within the same range. In summary, VeriSign continued to demonstrate sound financial performance during 2019, and we look forward to continuing strong execution in 2020. Now I'll turn the call back to Jim for his closing remarks.
Thank you, George. The Q4 was another solid quarter for VeriSign, capping a solid year for the company. There was further expansion of the domain name base and year-over-year revenue growth. We generated and efficiently returned value to shareholders. We continued our work to protect, grow, and manage the business while continuing our focus on providing long-term value to our shareholders. We'll now take your questions. Operator, we're ready for the first question.
We'll take our first question today from Rob Oliver with Baird.
Hey, great. Good afternoon, gentlemen, and thank you for taking my question. Question for you, George. Just on the, on the full year guidance, just curious if you could help us understand what might be in there in terms of, we're expecting price increases to roll in starting later this year, and if that's been factored in. Additionally on .web, I know it's tough to know exactly when that closes, but expecting that it would in 2020, obviously less meaningful, but just curious whether those were included in the guide. Then just had a quick follow-up. Thanks.
Yeah, Rob. We don't guide the price increases, but I can tell you in our guidance there are no price increases in the guidance.
None of the guidance that you've been given includes any revenue from .web at this point.
Okay, great. Very helpful. Then just as a follow-up, I know you also mentioned in your prepared remarks, increase in sales and marketing, and just was wondering if, and domain growth obviously was strong coming in stronger than expected. Just wondering if that's just kind of normal channel incentive activity or if there's anything else, structural going on in terms of driving increased sales and marketing and potential increased spend going forward. Thanks, guys. I appreciate it.
Yeah, Rob, from a marketing perspective, I would say in general, the programs and types of programs that we ran this year were similar to last year. There's really not a huge change. What we're doing, again, if we recall last year, we also had some seasonal increase in sales and marketing in the Q4, and we articulated that in our, Form 10-Q that we filed last quarter that we expected that to go up as a % of sales as well.
Great. Thanks again.
Next, we'll hear from Nick Jones with Citi.
Hi, thanks for taking my questions. First, like, is there anything noteworthy as far as geographic mix goes? I know China's had an impact on renewal rates, and given kind of the coronavirus issue there, is that creating any challenges with registrations in that region?
I'm sorry, I didn't catch the second part of the question.
Just wondering if the kinda healthcare issues in China is having an impact on registrations or renewals?
Okay. In the Q4, we had a very strong Q4, as Jim alluded to, $10.3 million new additions, which was up from $9.5 million in the Q4 of 2018. When we look at where that demand came from, it came from registrars based in the United States, Asia Pacific region, and EMEA. As far as renewal rates, again, they vary by geography. It's something we keep an eye on, but as it relates to any virus over in China, we're not seeing any impact to date, but it's something we'll keep an eye on.
Got it. One more. The investment with ICANN, can you provide a little more color around kinda what needs improvement and preservation? Is it mostly ongoing CapEx, or is there anything kinda bigger that you can call out?
The question, Nick, that was about spend on the infrastructure, was that the question?
The $4 million per year over five years.
Okay. The letter of intent.
Yeah. I'm sorry. Can you just?
The question about the letter of intent, the $4 million over five years.
I'm just looking for a little more color on what exactly the money is gonna be going towards and what needs to be improved, what needs to be preserved. Is there any kind of additional color you can provide there?
It's security and stability for both the DNS and for the Internet. There's a broad variety of areas where that funding will go. There's things such as route governance, which impacts everybody, every relying party on the global Internet. ICANN's core mission is security and stability, and that's where this funding is going that you may have followed last year, for example, ICANN executed on something called the KSK rollover, refreshing a critical part of the global security system for the Internet. There's a broad variety of areas that need additional funding that everybody, including VeriSign, but the entire global Internet community will benefit from. The funding in the LOI is specifically targeted in that broad security, stability, and resiliency area in ICANN's core mission.
Got it. Thank you for taking my questions.
We will take our last question from Sterling Auty with JP Morgan.
Yeah, thanks. Hi, guys. Got a couple of questions. First one, to revisit the renewal rate. I know you mentioned that renewal rate varies by geography, but given that it was down year-over-year, any more color that you can give? Is it just mix driven? Were the renewal rates in each of the geographies consistent with last year, or did you see any changes in any of the renewal rates in those geographies?
Sterling, as renewal rates vacillate, period to period. From a big picture perspective, as we articulated last quarter, it seems to be a mixture of the names that we sold in the prior year coming up for renewal. We had more names being sold last year in the Asia Pacific and China region. They're becoming a slightly larger proportion of the base. They are having a slight impact there. Other than that, we're not seeing huge variances. Again, I would just remind you, if you look back over the last couple of years, the company's renewal rate has been around 72% and has recently increased up into the 74% range. While it is down, year-over-year, by about 60 basis points, it's still, in general, improving as the base ages. I would just remind folks that we have a pretty stable renewal rate within the company.
Okay. Following up on the 10.3 million gross additions, you basically said there's growth out of U.S., Asia Pacific and EMEA. Can you peel that back a little bit more? 10.3 is better than what we have been seeing. It's the first time you've done over 10 million in quite some time. Which area contributed more than what you had been seeing? In other words, which geography generated incremental growth this quarter?
As I said, those three were the largest contributors to the growth. Again, recall we're a thin registry, what we're reporting on is the registrations by our registrars where they are domiciled to do business. To some degree, it may not be completely transparent as to where the end users are. The registrars have that information, not necessarily us. Our customers, the registrars, in the Q4, the U.S. continued to remain strong, as did Asia Pacific and EMEA. The other thing I'll just comment on is also what happens sometimes from year to year is you have new companies becoming registrars, they tend to pop up in new markets. We have sometimes consolidation in the market, where one registrar may acquire some business from another registrar. But those three regions performed well for us in the quarter.
Okay, got it. I wanna clarify, Jim, you mentioned in terms of the panel decision on .web, that's just the final decision as to whether you can be a party to the process, or what is that decision that you're waiting for this month on?
Yes, Sterling, that's the issue before the panel. They indicated that they could rule before the end of the year, but that didn't happen. The indication now is that they hope to rule this month. The issue before them that they will be ruling on is the active participation by VeriSign in this process.
Okay. Back operationally, you mentioned the investments that you were making both in sales marketing as well as some infrastructure investments. Can you kind of parse out where was the bigger portion of that investment, in which of those two areas?
I don't know if we're prepared to talk about that level of detail. There are a lot of different components to the security infrastructure investments. As Sterling, we're very different than most other registries. Many of them are actually marketing registries rather than operating registries. We operate the .com and .net infrastructure, which has stringent performance requirements. We make investments that are, I think, far beyond what most others do. There are a lot of scheduled investments that we make, as the cybersecurity threat environment is dynamic and ever-changing. If there are new threats, if there are new technologies, new products that strengthen our infrastructure and our core mission, we're not gonna hesitate to make those investments. We had all of the above in the quarter, along with sales and marketing. We haven't, and I don't think we're prepared now to break that out in any detail.
All right. Last question is, one of the questions I get frequently from investors is what your appetite and what your view would be on acquisitions and being a consolidator in the market, especially now that you've got the ability to be a vertically integrated company outside of .com. What's your interest level in pursuing those opportunities?
I don't think there's any update we can provide you. There's certainly no guidance or particular interest. As our focus is on .com and .net. We've actually made investments in our VSS business. We are pursuing .web as a growth opportunity. We do have additional IDNs that we expect to deploy in the future. Security and stability in our current growth plans that we've talked about are what we're prepared to talk about. There's not anything else that I would speculate about or guide to. I would just say that as you heard George and myself comment earlier, the guidance that we've given for 2020 does not include any provision for price increases, doesn't include any revenue from .web. We tend to be more conservative in those areas, and that's probably as much as I can tell you at this time.
Understood. Thank you.
That will conclude today's question and answer session. I'll now turn the conference over to Mr. David Atchley for any additional closing remarks.
Thank you, Operator. Please call the investor relations department with any follow-up questions from this call. Thank you for your participation. This concludes our call. Have a good evening.