VeriSign Reports 10% Year-Over-Year Revenue Growth in Third Quarter 2010
DULLES, VA, Oct 28, 2010 (MARKETWIRE via COMTEX News Network) -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, today reported financial results for the third quarter ended September 30, 2010.
Third Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("VeriSign") reported revenue of $173 million from continuing operations for the third quarter of 2010, up 2% from the prior quarter and up 10% from the same quarter in 2009. Continuing operations consist primarily of the results of the Naming Services business which is comprised of Registry Services and Network Intelligence and Availability (NIA) Services. NIA Services include the Managed Domain Name System (Managed DNS), iDefense and Distributed Denial of Service (DDoS) mitigation businesses. VeriSign reported net income attributable to VeriSign, Inc. stockholders of $785 million and earnings per share attributable to VeriSign, Inc. stockholders of $4.48 on a diluted basis for the third quarter of 2010, reflecting a net gain of $737 million, net of tax of $244 million, on the sale of the Authentication Services business. This compared to net income attributable to VeriSign, Inc. stockholders of $54 million and earnings per share attributable to VeriSign, Inc. stockholders of $0.28 on a diluted basis in the same quarter in 2009. The operating margin was 34.4% for the third quarter of 2010 compared to 21.7% for the same quarter in 2009.
VeriSign reported segment revenue for Naming Services of $172 million for the third quarter of 2010, up 3% from the prior quarter and up 11% from the same quarter in 2009.
Third Quarter Non-GAAP Financial Results
VeriSign reported net income attributable to VeriSign, Inc. stockholders of $48 million and earnings per share attributable to VeriSign, Inc. stockholders of $0.27 on a diluted basis for the third quarter of 2010, compared to net income attributable to VeriSign, Inc. stockholders of $32 million and earnings per share attributable to VeriSign, Inc. stockholders of $0.16 on a diluted basis in the same quarter in 2009. The operating margin was 43.1% for the third quarter of 2010 compared to 33.7% for the same quarter in 2009. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.
"We are pleased with the third quarter results and the continued rebounding of Internet trends that impact our business," said Mark McLaughlin, president and chief executive officer of VeriSign. "Our focus as we look forward is to continue to provide an essential and unparalleled service and to leverage our expertise in running a highly complex network to create new opportunities."
"The transition following the close of the sale of our Authentication Services business is on track," said Brian Robins, chief financial officer of VeriSign. "Our continued operating discipline allows us to optimize our cost structure while supporting topline growth opportunities for the company."
Financial Highlights
-- On August 9, 2010, VeriSign sold its Authentication Services business
for cash consideration of approximately $1.14 billion, net of cash
held by transferred subsidiaries of $127.5 million and transaction
costs of $10.8 million, subject to definitive adjustment to reflect
the actual working capital balance as of the closing date.
-- VeriSign ended the third quarter with Cash, Cash Equivalents,
Marketable Securities and Restricted Cash of $2.55 billion, an
increase of $1.21 billion from the prior quarter and an increase of
$1.12 billion from the same quarter in 2009.
-- In the third quarter, VeriSign repurchased 5.1 million shares of its
common stock for a cost of $146 million.
-- Cash used in operating activities, on a consolidated basis, was $82
million for the third quarter due to taxes owed on the sale of
Authentication Services. Excess tax benefits of $155 million that
are associated with stock-based compensation were classified as
financing cash flows.
-- Deferred revenue on September 30, 2010 totaled $654 million, an
increase of $13 million from the prior quarter and $74 million from the
same quarter in 2009.
-- Capital expenditures, on a consolidated basis, were $26 million in the
third quarter and $69 million year-to-date, approximately 22% of which
was related to the Authentication Services business in 2010 prior to
its sale.
Business and Corporate Highlights
-- VeriSign Registry Services ended the quarter with approximately 103.5
million active domain names in the adjusted zone for .com and .net,
representing a 9% increase year-over-year.
-- In the third quarter, VeriSign added 7.5 million new domain name
registrations, representing a 7% increase year-over-year.
-- VeriSign experienced an average daily query load of 66 billion in the
quarter, compared to 63 billion in the prior quarter and 54 billion in
the same quarter in 2009.
-- VeriSign ended the third quarter of 2010 with approximately 1,100
employees, compared to 2,225 employees at the end of the prior quarter
before the close of the sale of Authentication Services.
-- In September, VeriSign signed a lease for an office building located in
Reston, Virginia, that will commence in mid-2011 and will serve as
company headquarters.
Non-GAAP Items
Non-GAAP financial results exclude the following items that are included under GAAP: discontinued operations, results of Other Services, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring costs and non-cash interest expense. Non-GAAP financial information is also adjusted for a 30% tax rate which differs from the GAAP tax rate. A table reconciling the GAAP to non-GAAP net income is appended to this release. All non-GAAP figures for each period presented herein have been conformed to exclude the foregoing items under GAAP. Prior disclosures of non-GAAP figures do not exclude the same items and as such should not be used for comparison purposes.
Today's Conference Call
VeriSign will host a live teleconference call today at 5:00 p.m. (EDT) to review the third quarter results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-0966 (international). A listen-only live web cast and accompanying slide presentation of the earnings conference call will also be available at http://investor.verisign.com. A replay of this call will be available at (888) 203-1112 or (719) 457-0820 (passcode: 7949245) beginning at 8:00 p.m. (EDT) on October 28 and will run through November 4 at 8:00 p.m (EDT). This press release and the financial information discussed on today's conference call are available on the Investor Relations section of the VeriSign website at http://investor.verisign.com.
About VeriSign
VeriSign, Inc. (NASDAQ: VRSN) is the trusted provider of Internet infrastructure services for the networked world. Billions of times each day, VeriSign helps companies and consumers all over the world connect online with confidence. Additional news and information about the company is available at www.verisign.com.
VRSNF
Statements in this announcement other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These statements involve risks and uncertainties that could cause VeriSign's actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results due to such factors as increasing competition, pricing pressure from competing services offered at prices below our prices and changes in marketing practices including those of third-party registrars; the current global economic downturn; challenges to ongoing privatization of Internet administration; the outcome of legal or other challenges resulting from our activities or the activities of registrars or registrants; new or existing governmental laws and regulations; changes in customer behavior; the inability of VeriSign to successfully develop and market new services; the uncertainty of whether our new services will achieve market acceptance or result in any revenues; system interruptions; security breaches; attacks on the Internet by hackers, viruses, or intentional acts of vandalism; the uncertainty of the expense and duration of transition services and requests for indemnification relating to completed divestitures; and the uncertainty of whether Project Apollo will achieve its stated objectives. More information about potential factors that could affect the company's business and financial results is included in VeriSign's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. VeriSign undertakes no obligation to update any of the forward-looking statements after the date of this announcement.
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
September 30, December 31,
2010 2009
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,060,195 $ 1,477,166
Marketable securities 488,948 185
Accounts receivable, net 16,826 63,133
Prepaid expenses and other current assets 90,935 168,574
----------- -----------
Total current assets 2,656,904 1,709,058
----------- -----------
Property and equipment, net 191,426 403,821
Goodwill 52,527 289,980
Other intangible assets, net 2,943 22,420
Other assets 20,282 44,865
----------- -----------
Total long-term assets 267,178 761,086
----------- -----------
Total assets $ 2,924,082 $ 2,470,144
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 162,997 $ 243,967
Deferred revenues 448,759 642,507
----------- -----------
Total current liabilities 611,756 886,474
----------- -----------
Long-term deferred revenues 205,003 245,734
Convertible debentures, including contingent
interest derivative 578,262 574,378
Other long-term liabilities 283,605 164,894
----------- -----------
Total long-term liabilities 1,066,870 985,006
----------- -----------
Total liabilities 1,678,626 1,871,480
----------- -----------
Commitments and contingencies
Stockholders' equity:
VeriSign, Inc. stockholders' equity:
Preferred stock - par value $.001 per share;
Authorized shares: 5,000,000;
Issued and outstanding shares: none - -
Common stock - par value $.001 per share;
Authorized shares: 1,000,000,000;
Issued and outstanding shares: 171,746,536
excluding 140,119,856 held in treasury, at
September 30, 2010; and 183,299,463,
excluding 124,434,684 held in treasury, at
December 31, 2009 312 308
Additional paid-in capital 21,566,531 21,736,209
Accumulated deficit (20,322,963) (21,194,435)
Accumulated other comprehensive income 1,576 7,659
----------- -----------
Total VeriSign, Inc. stockholders' equity 1,245,456 549,741
Noncontrolling interest in subsidiary - 48,923
----------- -----------
Total stockholders' equity 1,245,456 598,664
----------- -----------
Total liabilities and stockholders' equity $ 2,924,082 $ 2,470,144
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues $ 172,649 $ 156,807 $ 503,827 $ 460,797
--------- --------- --------- ---------
Costs and expenses:
Cost of revenues 40,266 42,159 120,588 130,380
Sales and marketing 18,450 20,545 63,080 54,620
Research and development 14,537 13,245 40,731 40,050
General and administrative 33,644 35,315 101,624 111,196
Restructuring, impairment
and other charges, net 6,303 11,455 14,141 14,269
--------- --------- --------- ---------
Total costs and expenses 113,200 122,719 340,164 350,515
--------- --------- --------- ---------
Operating income 59,449 34,088 163,663 110,282
Other loss, net (7,500) (9,056) (22,776) (24,489)
--------- --------- --------- ---------
Income from continuing
operations before income taxes 51,949 25,032 140,887 85,793
Income tax expense (7,193) (4,132) (40,098) (26,944)
--------- --------- --------- ---------
Income from continuing
operations, net of tax 44,756 20,900 100,789 58,849
Income from discontinued
operations, net of tax 740,789 33,699 773,570 97,037
--------- --------- --------- ---------
Net income 785,545 54,599 874,359 155,886
Less: Income from discontinued
operations, net of tax,
attributable to noncontrolling
interest in subsidiary (642) (988) (2,887) (2,381)
--------- --------- --------- ---------
Net income attributable to
VeriSign, Inc. stockholders $ 784,903 $ 53,611 $ 871,472 $ 153,505
========= ========= ========= =========
Basic income per share
attributable to VeriSign, Inc.
stockholders from:
Continuing operations $ 0.26 $ 0.11 $ 0.56 $ 0.31
Discontinued operations 4.26 0.17 4.30 0.49
--------- --------- --------- ---------
Net income $ 4.52 $ 0.28 $ 4.86 $ 0.80
========= ========= ========= =========
Diluted income per share
attributable to VeriSign, Inc.
stockholders from:
Continuing operations $ 0.26 $ 0.11 $ 0.56 $ 0.30
Discontinued operations 4.22 0.17 4.26 0.49
--------- --------- --------- ---------
Net income $ 4.48 $ 0.28 $ 4.82 $ 0.79
========= ========= ========= =========
Shares used to compute net
income per share attributable
to VeriSign, Inc.
stockholders:
Basic 173,572 192,619 179,240 192,527
========= ========= ========= =========
Diluted 175,034 193,472 180,634 193,235
========= ========= ========= =========
Amounts attributable to
VeriSign, Inc. stockholders:
Income from continuing
operations, net of tax $ 44,756 $ 20,900 $ 100,789 $ 58,849
Income from discontinued
operations, net of tax 740,147 32,711 770,683 94,656
--------- --------- --------- ---------
Net income attributable to
VeriSign, Inc. stockholders $ 784,903 $ 53,611 $ 871,472 $ 153,505
========= ========= ========= =========
The following table presents the classification of stock-based
compensation:
Three Months Ended Nine Months Ended
Septemer 30, September 30,
--------------------- ---------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
(In thousands)
Stock-based compensation:
Cost of revenues $ 1,010 $ 1,000 $ 3,321 $ 2,887
Sales and marketing 360 272 2,984 2,374
Research and development 1,508 852 3,824 2,384
General and administrative 4,944 3,946 15,438 14,638
Restructuring, impairment and
other charges, net 932 33 1,065 581
---------- ---------- ---------- ----------
Stock-based compensation for
continuing operations 8,754 6,103 26,632 22,864
Discontinued operations 8,137 5,206 15,569 16,541
---------- ---------- ---------- ----------
Total stock-based compensation $ 16,891 $ 11,309 $ 42,201 $ 39,405
========== ========== ========== ==========
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September
------------------------
2010 2009
----------- -----------
Cash flows from operating activities:
Net income $ 874,359 $ 155,886
Adjustments to reconcile net income to net cash
provided by operating activities:
Net (gain) loss on sale of discontinued
operations, net of tax (735,491) 12,707
Depreciation of property and equipment and
amortization of other intangible assets 53,379 61,715
Stock-based compensation 42,201 39,405
Excess tax benefit associated with
stock-based compensation (167,194) (100,583)
Other, net 8,435 8,286
Changes in operating assets and liabilities,
excluding the effects of acquisitions and
divestitures:
Accounts receivable 11,154 14,519
Prepaid expenses and other assets 2,074 (7,271)
Accounts payable and accrued liabilities 8,607 5,368
Deferred revenues 70,955 32,010
----------- -----------
Net cash provided by operating activities 168,479 222,042
----------- -----------
Cash flows from investing activities:
Proceeds from maturities and sales of
marketable securities and investments 239,680 117,901
Purchases of marketable securities and
investments (714,592) (750)
Purchases of property and equipment (68,646) (66,067)
Proceeds received from divestiture of
businesses, net of cash contributed and
transaction costs 1,165,030 282,178
Other investing activities (4,688) (2,550)
----------- -----------
Net cash provided by investing activities 616,784 330,712
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock purchase
plans 56,442 32,906
Repurchases of common stock (434,234) (51,682)
Excess tax benefit associated with stock-based
compensation 167,194 100,583
Other financing activities (736) (113)
----------- -----------
Net cash (used in) provided by financing
activities (211,334) 81,694
----------- -----------
Effect of exchange rate changes on cash and
cash equivalents 9,100 8,790
----------- -----------
Net increase in cash and cash equivalents 583,029 643,238
Cash and cash equivalents at beginning of
period 1,477,166 789,068
----------- -----------
Cash and cash equivalents at end of period $ 2,060,195 $ 1,432,306
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized
interest $ 39,628 $ 39,256
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
September 30, 2010 September 30, 2009
------------------------- -------------------------
Net Income Net Income
attributable attributable
to to
Operating VeriSign, Inc. Operating VeriSign, Inc.
Income stockholders Income stockholders
------------ ----------- ------------ -----------
GAAP as reported $ 59,449 $ 784,903 $ 34,088 $ 53,611
Discontinued
operations (740,147) (32,711)
Other Services (1)
(2) 426 426 2,115 2,200
Adjustments:
Stock-based
compensation 7,795 7,795 6,051 6,051
Amortization of
other intangible
assets 324 324 145 145
Impairment of other
Intangible assets - - 9,684 9,684
Restructuring costs 6,269 6,269 285 285
Non-cash interest
expense 1,983 1,710
Tax adjustment (3) (13,431) (9,401)
------------ ----------- ------------ -----------
Non-GAAP as adjusted $ 74,263 $ 48,122 $ 52,368 $ 31,574
============ =========== ============ ===========
Diluted shares 175,034 193,472
Per diluted share,
non-GAAP as adjusted $ 0.27 $ 0.16
=========== ===========
(1) As of September 30, 2010, the Company's business consists of the
following reportable segments: (a) Naming Services, which consists of
Registry Services and Network Intelligence and Availability ("NIA")
Services; and (b) Other Services, which consists of the continuing
operations of Content Portal Services ("CPS").
(2) Results of Other Services during the three months ended September 30,
2010 and 2009 includes stock-based compensation of $27 and $19
respectively.
(3) Non-GAAP tax is calculated as 30% of income from continuing operations.
VeriSign provides quarterly and annual financial statements that are
prepared in accordance with generally accepted accounting principles
(GAAP). Along with this information, we typically disclose and discuss
certain non-GAAP financial information in our quarterly earnings release,
on investor conference calls and during investor conferences and related
events. This non-GAAP financial information does not include the following
types of financial measures that are included in GAAP: discontinued
operations, results of Other Services, stock-based compensation,
amortization of other intangible assets, impairments of goodwill and other
intangible assets, restructuring costs and non-cash interest expense.
Non-GAAP financial information is also adjusted for a 30% tax rate which
differs from the GAAP tax rate. All non-GAAP figures for each period
presented above have been conformed to exclude the foregoing items under
GAAP. Prior disclosures of non-GAAP figures do not exclude the same items
and as such should not be used for comparison purposes.
Management believes that this non-GAAP financial data supplements our GAAP
financial data by providing investors with additional information that
allows them to have a clearer picture of the company's core operations. The
presentation of this additional information is not meant to be considered
in isolation nor as a substitute for results prepared in accordance with
GAAP. We believe that the non-GAAP information enhances the investors'
overall understanding of our financial performance and the comparability of
the company's operating results from period to period. Above, we have
provided a reconciliation of the non-GAAP financial information that we
provide each quarter with the comparable financial information reported in
accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
Three months ended
----------------------------------------------------------
September 30, June 30, March 31, December 31, September 30,
2010 2010 2010 2009 2009
------------ --------- --------- ------------ ------------
Revenues from
Naming
Services (1) $ 172,286 $ 167,881 $ 161,583 $ 158,740 $ 155,481
============ ========= ========= ============ ============
Contacts Investor Relations: Nancy Fazioli nfazioli@verisign.com 650-316-6569 Media Relations: Deana Alvy dalvy@verisign.com 703-948-4179
SOURCE: VeriSign, Inc.
mailto:nfazioli@verisign.com mailto:dalvy@verisign.com
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