Verisign Reports 13 Percent Year-Over-Year Revenue Growth in Second Quarter 2012
Second Quarter GAAP Financial Results
Second Quarter Non-GAAP Financial Results
"The second quarter results demonstrate our continued strong operating performance and financial discipline," commented
Financial Highlights
Verisign ended the second quarter with Cash, Cash Equivalents,Marketable Securities and Restricted Cash of$1.44 billion , an increase of$92 million from year end 2011.- Cash flow from operations was
$135 million for the second quarter compared with$13 million for the same quarter in 2011, which was reduced by a$100 million payment of contingent interest to holders of convertible debentures in the second quarter of 2011. - Deferred revenues ended the second quarter of 2012 totaling
$804 million , an increase of$75 million from year end 2011. - Capital expenditures were
$13 million in the second quarter of 2012. - During the second quarter,
Verisign repurchased approximately 1.9 million shares of its common stock for a cost of$76 million . AtJune 30, 2012 , approximately$687 million remained available and authorized under the current share repurchase program. - For purposes of calculating diluted EPS, the second quarter diluted share count included 5.6 million shares related to the convertible debentures, compared with 1.2 million shares in the same quarter in 2011 for the non-GAAP diluted EPS calculation. These represent dilutive shares and not shares that have been issued.
Business Highlights
- On
June 23, 2012 , the board of directors ofInternet Corporation of Assigned Names and Numbers ("ICANN") approved the renewal ofVerisign's agreement to serve as the authoritative registry operator for the .com registry for the term commencing onDec. 1, 2012 , throughNov. 30, 2018 . The board of directors ofVerisign approved the renewal of the .com registry agreement onJune 16, 2012 . TheU.S. Department of Commerce (the Department) is now reviewing the renewal of the .com registry agreement under the terms of the Cooperative Agreement between the Department andVerisign . - Verisign Registry Services added 1.81 million net new names and ended the second quarter with approximately 118.5 million active domain names in the zone for .com and .net, representing a 7.8 percent increase year-over-year.
- In the second quarter,
Verisign processed a second quarter record 8.4 million new domain name registrations, representing an increase of 4.2 percent year-over-year.
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 30 percent tax rate which differs from the GAAP tax rate. A table reconciling the GAAP to non-GAAP operating income and net income attributable to
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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
©2012 VeriSign, Inc. All rights reserved.
VERISIGN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) June 30, December 31, 2012 2011 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 315,621 $ 1,313,349 Marketable securities 1,122,397 32,860 Accounts receivable, net 12,653 14,974 Deferred tax assets and other current assets 79,940 86,598 ------------- ------------- Total current assets 1,530,611 1,447,781 ------------- ------------- Property and equipment, net 329,328 327,136 Goodwill and other intangible assets, net 53,202 53,848 Other assets 28,883 27,414 ------------- ------------- Total long-term assets 411,413 408,398 ------------- ------------- Total assets $ 1,942,024 $ 1,856,179 ============= ============= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued liabilities $ 112,508 $ 156,385 Deferred revenues 560,127 502,538 ------------- ------------- Total current liabilities 672,635 658,923 ------------- ------------- Long-term deferred revenues 243,622 226,033 Convertible debentures, including contingent interest derivative 597,935 590,086 Long-term debt 100,000 100,000 Long-term deferred tax liabilities 341,733 325,527 Other long-term liabilities 45,294 43,717 ------------- ------------- Total long-term liabilities 1,328,584 1,285,363 ------------- ------------- Total liabilities 2,001,219 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: 317,982 atJune 30, 2012 and 316,781 atDecember 31, 2011 ; Outstanding shares: 156,667 atJune 30, 2012 and 159,422 at December 31, 2011 318 317 Additional paid-in capital 20,027,665 20,135,237 Accumulated deficit (20,084,096) (20,220,577) Accumulated other comprehensive loss (3,082) (3,084) ------------- ------------- Total stockholders' deficit (59,195) (88,107) ------------- ------------- Total liabilities and stockholders' deficit $ 1,942,024 $ 1,856,179 ============= =============
VERISIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2012 2011 2012 2011 --------- --------- --------- --------- Revenues $ 214,142 $ 189,844 $ 419,868 $ 371,367 --------- --------- --------- --------- Costs and expenses: Cost of revenues 42,844 40,667 84,100 81,536 Sales and marketing 26,313 22,179 54,128 44,570 Research and development 15,461 13,074 30,226 26,668 General and administrative 22,726 28,206 46,234 61,835 Restructuring charges (182) 3,659 (730) 9,189 --------- --------- --------- --------- Total costs and expenses 107,162 107,785 213,958 223,798 --------- --------- --------- --------- Operating income 106,980 82,059 205,910 147,569 Interest expense (12,580) (111,856) (24,920) (123,676) Non-operating (loss) income, net (2,097) 6,149 (1,290) 11,627 --------- --------- --------- --------- Income (loss) from continuing operations before income taxes 92,303 (23,648) 179,700 35,520 Income tax (expense) benefit (23,831) 15,967 (45,123) (908) --------- --------- --------- --------- Income (loss) from continuing operations, net of tax 68,472 (7,681) 134,577 34,612 (Loss) income from discontinued operations, net of tax - (2,929) 1,904 (4,451) --------- --------- --------- --------- Net income (loss) 68,472 (10,610) 136,481 30,161 --------- --------- --------- --------- Foreign currency translation adjustments - 48 - 76 Change in unrealized gain on investments, net of tax 42 1,077 37 609 Realized gain on investments, net of tax, included in net income (loss) (30) (1,398) (35) (1,415) --------- --------- --------- --------- Other comprehensive income (loss) 12 (273) 2 (730) --------- --------- --------- --------- Comprehensive income (loss) $ 68,484 $ (10,883) $ 136,483 $ 29,431 ========= ========= ========= ========= Basic income (loss) per share: Continuing operations $ 0.43 $ (0.05) $ 0.85 $ 0.20 Discontinued operations - (0.01) 0.01 (0.02) --------- --------- --------- --------- Net income (loss) $ 0.43 $ (0.06) $ 0.86 $ 0.18 ========= ========= ========= ========= Diluted income (loss) per share: Continuing operations $ 0.42 $ (0.05) $ 0.82 $ 0.20 Discontinued operations - (0.01) 0.01 (0.02) --------- --------- --------- --------- Net income (loss) $ 0.42 $ (0.06) $ 0.83 $ 0.18 ========= ========= ========= ========= Shares used to compute net income per share Basic 157,599 167,471 158,471 169,751 ========= ========= ========= ========= Diluted 164,178 167,471 163,530 171,850 ========= ========= ========= =========
VERISIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2012 2011 ------------- ------------- Cash flows from operating activities: Net income $ 136,481 $ 30,161 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment and amortization of other intangible assets 26,273 27,642 Stock-based compensation 16,584 29,014 Excess tax benefit associated with stock- based compensation (11,638) (854) Other, net 10,947 1,627 Changes in operating assets and liabilities Accounts receivable 2,213 354 Deferred tax assets and other assets 5,855 (12,786) Accounts payable and accrued liabilities (16,644) (22,736) Deferred revenues 75,178 50,814 ------------- ------------- Net cash provided by operating activities 245,249 103,236 ------------- ------------- Cash flows from investing activities: Proceeds from maturities and sales of marketable securities 8,101 369,586 Purchases of marketable securities (1,097,669) (44,038) Purchases of property and equipment (26,242) (29,481) Other investing activities (520) (1,181) ------------- ------------- Net cash (used in) provided by investing activities (1,116,330) 294,886 ------------- ------------- Cash flows from financing activities: Proceeds from issuance of common stock from option exercises and employee stock purchase plans 15,348 32,445 Repurchases of common stock (152,725) (310,671) Payment of dividends to stockholders - (463,498) Excess tax benefit associated with stock- based compensation 11,638 854 Other financing activities 189 - ------------- ------------- Net cash used in financing activities (125,550) (740,870) ------------- ------------- Effect of exchange rate changes on cash and cash equivalents (1,097) 3,285 ------------- ------------- Net decrease in cash and cash equivalents (997,728) (339,463) Cash and cash equivalents at beginning of period 1,313,349 1,559,628 ------------- ------------- Cash and cash equivalents at end of period $ 315,621 $ 1,220,165 ============= ============= Supplemental cash flow disclosures: Cash paid for interest, net of capitalized interest $ 20,476 $ 120,082 ============= ============= Cash paid for income taxes, net of refunds received $ 21,193 $ 4,737 ============= =============
VERISIGN, INC. STATEMENTS OF OPERATIONS RECONCILIATION (In thousands, except per share data) (Unaudited) Three Months Ended Three Months Ended June 30, 2012 June 30, 2011 ---------------------- ---------------------- Operating Operating Net (Loss) Income Net Income Income Income ---------- ---------- ---------- ---------- GAAP as reported $ 106,980 $ 68,472 $ 82,059 $ (10,610) Discontinued operations - 2,929 Adjustments: Stock-based compensation 8,454 8,454 12,075 12,075 Amortization of other intangible assets 325 325 322 322 Restructuring charges (182) (182) 3,659 3,659 Contingent interest payment to holders of Convertible Debentures - 100,020 Unrealized loss (gain) on contingent interest derivative on Convertible Debentures 3,147 (700) Non-cash interest expense 1,871 1,679 Tax adjustment (7,944) (43,989) ---------- ---------- ---------- ---------- Non-GAAP as adjusted $ 115,577 $ 74,143 $ 98,115 $ 65,385 ========== ========== ========== ========== Revenues $ 214,142 $ 189,844 Non-GAAP operating margin 54.0% 51.7% ========== ========== Diluted shares 164,178 169,882 Per diluted share, non-GAAP as adjusted $ 0.45 $ 0.38 ========== ==========
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 June 30, 2012 2011 ------------- ------------- Cost of revenues $ 1,451 $ 1,846 Sales and marketing 1,833 1,697 Research and development 1,327 1,353 General and administrative 3,843 7,179 Restructuring charges - 1,989 ------------- ------------- Total stock-based compensation expense $ 8,454 $ 14,064 ============= =============
VERISIGN, INC. STATEMENTS OF OPERATIONS RECONCILIATION (In thousands, except per share data) (Unaudited) Six Months Ended Six Months Ended June 30, 2012 June 30, 2011 ---------------------- ---------------------- Operating Operating Income Net Income Income Net Income ---------- ---------- ---------- ---------- GAAP as reported $ 205,910 $ 136,481 $ 147,569 $ 30,161 Discontinued operations (1,904) 4,451 Adjustments: Stock-based compensation 16,584 16,584 24,036 24,036 Amortization of other intangible assets 648 648 645 645 Restructuring charges (730) (730) 9,189 9,189 Contingent interest payment to holders of Convertible Debentures - 100,020 Unrealized loss (gain) on contingent interest derivative on Convertible Debentures 3,960 (250) Non-cash interest expense 3,491 3,343 Tax adjustment (15,972) (50,843) ---------- ---------- ---------- ---------- Non-GAAP as adjusted $ 222,412 $ 142,558 $ 181,439 $ 120,752 ========== ========== ========== ========== Revenues $ 419,868 $ 371,367 Non-GAAP operating margin 53.0% 48.9% ========== ========== Diluted shares 163,530 171,850 Per diluted share, non-GAAP as adjusted $ 0.87 $ 0.70 ========== ==========
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:
Six Months Ended June 30, 2012 2011 ------------- ------------- Cost of revenues $ 2,988 $ 3,836 Sales and marketing 3,349 3,551 Research and development 2,569 2,871 General and administrative 7,678 13,778 Restructuring charges - 4,978 ------------- ------------- Total stock-based compensation expense $ 16,584 $ 29,014 ============= =============
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