Verisign Reports 13 Percent Year-Over-Year Revenue Growth in 2012
Fourth Quarter GAAP Financial Results
Fourth Quarter Non-GAAP Financial Results
"In 2012,
2012 GAAP Financial Results
For the year ended
2012 Non-GAAP Financial Results
Financial Highlights
Verisign ended the fourth quarter of 2012 with Cash, Cash Equivalents,Marketable Securities and Restricted Cash of$1.56 billion , an increase of$211 million from year-end 2011.- Cash flow from operations was
$171 million for the fourth quarter of 2012 and$538 million for the full year 2012, compared with$124 million for the same quarter in 2011 and$336 million for the full year 2011. - Deferred revenues ended the fourth quarter of 2012 totaling
$813 million , an increase of$84 million from year-end 2011. - Capital expenditures were
$13 million in the fourth quarter and$53 million for the full year. - During the fourth quarter,
Verisign repurchased approximately 2.3 million shares of its common stock for a cost of$94 million . During the full year 2012,Verisign repurchased approximately 7.7 million shares of its common stock for a cost of$315 million . OnDec. 5, 2012 , the Board of Directors authorized the repurchase of up to approximately$458.8 million of our common stock, in addition to the approximately$541.2 million of our common stock remaining available for repurchase under the previous 2010 Share Buyback Program, for a total repurchase of up to$1.0 billion ofVerisign common stock. AtDec. 31, 2012 , approximately$976 million remained available and authorized for share repurchases. - For purposes of calculating diluted EPS, the fourth quarter diluted share count included 6.4 million shares related to the convertible debentures. These represent dilutive shares and not shares that have been issued. There was no dilution from the convertible debentures in the same quarter of 2011.
- Due to the stock price not exceeding the convertible debentures trigger during the fourth quarter of 2012, the debentures are no longer convertible starting
Jan. 1, 2013 . Consequently, the debt component of the convertible debentures, the related embedded derivative, and deferred tax liability were reclassified from current liabilities to long-term liabilities, while the associated unamortized debt issuance costs were reclassified from current assets to long-term assets, as ofDec. 31, 2012 .
Business and Corporate Highlights
- Verisign Registry Services added 1.25 million net new names and ended the fourth quarter with 121.1 million active domain names in the zone for .com and .net, representing a 6.4 percent increase year over year.
Verisign processed 8.0 million and 33.1 million new domain name registrations for .com and .net, representing 0.9 percent and 3.0 percent increase year over year, in the fourth quarter and full year 2012 periods, respectively.- On
Nov. 30, 2012 ,Verisign announced that theU.S. Department of Commerce approved the renewal ofVerisign's revised agreement, on the terms described in that announcement, with theInternet Corporation for Assigned Names and Numbers (ICANN), to serve as the authoritative registry operator for the .com registry for the term commencing onDec. 1, 2012 throughNov. 30, 2018 . - On
Dec. 19, 2012 ,Verisign announced that as ofJuly 1, 2013 , the registry fee for .net domain names will increase from$5.11 to$5.62 .
Non-GAAP Items
Non-GAAP financial results exclude the following items that are included under GAAP: Discontinued operations, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring charges, contingent interest payments to holders of our Convertible Debentures, unrealized gain/loss on contingent interest derivative on Convertible Debentures, and non-cash interest expense. Non-GAAP financial information is also adjusted for a 28 percent tax rate starting from the third quarter of 2012, and 30 percent for the other periods presented herein, both of which differ from the GAAP tax rate. A table reconciling the GAAP to non-GAAP operating income and net income is appended to this release.
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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
©2013 VeriSign, Inc. All rights reserved.
VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
December 31, December 31,
2012 2011
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 130,736 $ 1,313,349
Marketable securities 1,425,700 32,860
Accounts receivable, net 11,477 14,974
Deferred tax assets 82,812 64,751
Prepaid expenses and other current assets 30,795 21,847
------------- -------------
Total current assets 1,681,520 1,447,781
------------- -------------
Property and equipment, net 333,861 327,136
Goodwill and other intangible assets, net 52,527 53,848
Long-term deferred tax assets 7,299 2,758
Other long-term assets 25,325 24,656
------------- -------------
Total long-term assets 419,012 408,398
------------- -------------
Total assets $ 2,100,532 $ 1,856,179
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 130,391 $ 156,385
Deferred revenues 564,627 502,538
Total current liabilities 695,018 658,923
------------- -------------
Long-term deferred revenues 247,955 226,033
Convertible debentures, including contingent
interest derivative 597,614 590,086
Long-term debt 100,000 100,000
Long-term deferred tax liabilities 424,970 325,527
Other long-term tax liabilities 44,298 43,717
------------- -------------
Total long-term liabilities 1,414,837 1,285,363
------------- -------------
Total liabilities 2,109,855 1,944,286
------------- -------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock--par value $.001 per share;
Authorized shares: 5,000; Issued and
outstanding shares: none -- --
Common stock--par value $.001 per share;
Authorized shares: 1,000,000; Issued
shares: 318,722 at December 31, 2012 and
316,781 at December 31, 2011 ; Outstanding
shares: 153,392 at December 31, 2012 and
159,422 at December 31, 2011 319 317
Additional paid-in capital 19,891,291 20,135,237
Accumulated deficit (19,900,545) (20,220,577)
Accumulated other comprehensive loss (388) (3,084)
------------- -------------
Total stockholders' deficit (9,323) (88,107)
------------- -------------
Total liabilities and stockholders'
deficit $ 2,100,532 $ 1,856,179
============= =============
VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
--------- --------- --------- ---------
Revenues $ 230,196 $ 203,646 $ 873,592 $ 771,978
--------- --------- --------- ---------
Costs and expenses:
Cost of revenues 42,040 42,016 167,600 165,246
Sales and marketing 20,753 27,772 97,809 97,432
Research and development 16,059 13,121 61,694 53,277
General and administrative 16,024 24,512 89,927 111,122
Restructuring charges (35) 3,352 (765) 15,512
--------- --------- --------- ---------
Total costs and expenses 94,841 110,773 416,265 442,589
--------- --------- --------- ---------
Operating income 135,355 92,873 457,327 329,389
Interest expense (12,657) (11,859) (50,196) (147,332)
Non-operating income, net 8,596 (3,688) 5,564 11,530
--------- --------- --------- ---------
Income from continuing
operations before income taxes 131,294 77,326 412,695 193,587
Income tax expense (30,205) (31,997) (100,210) (55,031)
--------- --------- --------- ---------
Income from continuing
operations, net of tax 101,089 45,329 312,485 138,556
Income from discontinued
operations, net of tax 4,552 8,485 7,547 4,335
--------- --------- --------- ---------
Net income 105,641 53,814 320,032 142,891
--------- --------- --------- ---------
Foreign currency translation
adjustments -- 112 -- 110
Increase (decrease) in
unrealized gain on
investments, net of tax 221 (15) 2,757 688
Realized (gain) loss on
investments, net of tax,
included in net income (6) 3 (61) (2,548)
--------- --------- --------- ---------
Other comprehensive income
(loss) 215 100 2,696 (1,750)
--------- --------- --------- ---------
Comprehensive income $ 105,856 $ 53,714 $ 322,728 $ 141,141
========= ========= ========= =========
Basic income per share:
Continuing operations $ 0.65 $ 0.28 $ 1.99 $ 0.84
Discontinued operations 0.03 0.06 0.05 0.03
--------- --------- --------- ---------
Net income $ 0.68 $ 0.34 $ 2.04 $ 0.87
========= ========= ========= =========
Diluted income per share:
Continuing operations $ 0.62 $ 0.28 $ 1.91 $ 0.83
Discontinued operations 0.03 0.06 0.04 0.03
--------- --------- --------- ---------
Net income $ 0.65 $ 0.34 $ 1.95 $ 0.86
========= ========= ========= =========
Shares used to compute net
income per share
Basic 154,642 159,226 156,953 165,408
========= ========= ========= =========
Diluted 162,034 160,087 163,909 166,887
========= ========= ========= =========
VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended December 31,
------------------------
2012 2011
----------- -----------
Cash flows from operating activities:
Net income $ 320,032 $ 142,891
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property and equipment and
amortization of other intangible assets 54,819 55,706
Stock-based compensation 33,362 43,272
Excess tax benefit associated with stock-based
compensation (18,436) (13,420)
Other, net 10,981 12,965
Changes in operating assets and liabilities
Accounts receivable 3,327 (251)
Prepaid expenses and other assets (31,946) 11,043
Accounts payable and accrued liabilities 81,480 18,162
Deferred revenues 84,011 65,533
----------- -----------
Net cash provided by operating activities 537,630 335,901
----------- -----------
Cash flows from investing activities:
Proceeds from maturities and sales of marketable
securities 1,234,156 546,006
Purchases of marketable securities (2,622,898) (78,975)
Purchases of property and equipment (53,023) (192,660)
Other investing activities (588) (1,129)
----------- -----------
Net cash (used in) provided by investing
activities (1,442,353) 273,242
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock purchase
plans 29,303 49,983
Repurchases of common stock (325,680) (550,097)
Payment of dividends to stockholders -- (463,498)
Excess tax benefit associated with stock-based
compensation 18,436 13,420
Proceeds received from borrowings -- 100,000
Repayment of borrowings -- (1,067)
Other financing activities 189 (939)
----------- -----------
Net cash used in financing activities (277,752) (852,198)
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents (138) (3,224)
----------- -----------
Net decrease in cash and cash equivalents (1,182,613) (246,279)
Cash and cash equivalents at beginning of period 1,313,349 1,559,628
----------- -----------
Cash and cash equivalents at end of period $ 130,736 $ 1,313,349
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized
interest $ 41,276 $ 140,193
=========== ===========
Cash paid for income taxes, net of refunds
received $ 19,436 $ 6,567
=========== ===========
VERISIGN, INC.
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
December 31, 2012 December 31, 2011
------------------- -------------------
Operating Net Operating Net
Income Income Income Income
--------- -------- --------- --------
GAAP as reported $ 135,355 $105,641 $ 92,873 $ 53,814
Discontinued operations (4,552) (8,485)
Adjustments:
Stock-based compensation 6,971 6,971 7,165 7,165
Amortization of other
intangible assets 533 533 325 325
Restructuring charges (35) (35) 3,352 3,352
Unrealized (gain)loss on
contingent interest
derivative on Convertible
Debentures (7,549) 1,625
Non-cash interest expense 1,961 1,555
Tax adjustment (7,085) 4,593
--------- -------- --------- --------
Non-GAAP as adjusted $ 142,824 $ 95,885 $ 103,715 $ 63,944
========= ======== ========= ========
Revenues $ 230,196 $ 203,646
Non-GAAP operating margin 62.0% 50.9%
========= =========
Diluted shares 162,034 160,087
Per diluted share, non-GAAP as
adjusted $ 0.59 $ 0.40
======== ========
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 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
The following table presents the classification of stock-based compensation:
Three Months Ended
December 31,
2012 2011
----------- -----------
Cost of revenues $ 1,275 $ 1,376
Sales and marketing 1,045 1,206
Research and development 1,832 961
General and administrative 2,819 3,622
----------- -----------
Total stock-based compensation expense $ 6,971 $ 7,165
=========== ===========
VERISIGN, INC.
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Year Ended Year Ended
December 31, 2012 December 31, 2011
------------------- -------------------
Operating Net Operating Net
Income Income Income Income
--------- -------- --------- --------
GAAP as reported $ 457,327 $320,032 $ 329,389 $142,891
Discontinued operations (7,547) (4,335)
Adjustments:
Stock-based compensation 33,362 33,362 37,571 37,571
Amortization of other
intangible assets 1,321 1,321 1,293 1,293
Restructuring charges (765) (765) 15,512 15,512
Contingent interest payment to
holders of Convertible
Debentures -- 100,020
Unrealized (gain)loss on
contingent interest
derivative on Convertible
Debentures (422) 1,125
Non-cash interest expense 7,370 6,540
Tax adjustment (30,860) (51,663)
--------- -------- --------- --------
Non-GAAP as adjusted $ 491,245 $322,491 $ 383,765 $248,954
========= ======== ========= ========
Revenues $ 873,592 $ 771,978
Non-GAAP operating margin 56.2% 49.7%
========= =========
Diluted shares 163,909 166,887
Per diluted share, non-GAAP as
adjusted $ 1.97 $ 1.49
======== ========
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 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
The following table presents the classification of stock-based compensation:
Year Ended December 31,
2012 2011
----------- -----------
Cost of revenues $ 5,754 $ 6,655
Sales and marketing 6,091 6,062
Research and development 6,023 4,926
General and administrative 15,494 19,928
Restructuring charges -- 5,701
----------- -----------
Total stock-based compensation expense $ 33,362 $ 43,272
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