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Verisign Reports 13 Percent Year-Over-Year Revenue Growth in Second Quarter 2012

July 26, 2012

RESTON, VA -- (Marketwire) -- 07/26/12 -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, today reported financial results for the second quarter ended June 30, 2012.

Second Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $214 million for the second quarter of 2012, up 13 percent from the same quarter in 2011. Verisign reported net income of $68 million and diluted earnings per share (EPS) of $0.42 for the second quarter of 2012, compared to a net loss of $(11) million and diluted net loss per share of $(0.06) in the same quarter in 2011. The operating margin was 50.0 percent for the second quarter of 2012 compared to 43.2 percent for the same quarter in 2011.

Second Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $74 million and diluted EPS of $0.45 for the second quarter of 2012, compared to net income of $65 million and diluted EPS of $0.38 for the same quarter in 2011. The non-GAAP operating margin was 54.0 percent for the second quarter of 2012 compared to 51.7 percent for the same quarter in 2011. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"The second quarter results demonstrate our continued strong operating performance and financial discipline," commented Jim Bidzos, executive chairman, president and chief executive officer of Verisign. "Our share repurchases in the quarter, of $76 million, underscore our commitment to creating and delivering shareholder value."

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. At June 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 of Internet Corporation of Assigned Names and Numbers ("ICANN") approved the renewal of Verisign's agreement to serve as the authoritative registry operator for the .com registry for the term commencing on Dec. 1, 2012, through Nov. 30, 2018. The board of directors of Verisign approved the renewal of the .com registry agreement on June 16, 2012. The U.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 and Verisign.
  • 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 Verisign stockholders is appended to this release. All non-GAAP figures for each period presented herein have been conformed to exclude the foregoing items under GAAP.

Today's Conference Call
Verisign will host a live conference call today at 4:30 p.m. (EDT) to review the second quarter 2012 results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (913) 312-0402 (international). A listen-only live webcast and accompanying slide presentation of the second quarter 2012 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 (pass code: 6410522) beginning at 8:00 p.m. (EDT) on July 26, 2012, and will run through Aug. 2, 2012, at 7:00 p.m. (EDT). An audio archive of the call will be available at https://investor.verisign.com/events.cfm. This press release and the financial information discussed on today's conference call are available 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 between the dots. Additional news and information about the company is available at www.VerisignInc.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; challenging global economic conditions; 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, or litigation generally; new or existing governmental laws and regulations; changes in customer behavior, Internet platforms and web-browsing patterns; the uncertainty of whether Verisign will 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; the uncertainty of whether Project Apollo will achieve its stated objectives; the impact of the introduction of new gTLDs and whether our gTLD applications or the applicants' gTLD applications for which we have contracted to provide back-end registry services will be successful; and the uncertainty of whether the .com Registry Agreement renewal will occur on or before November 30, 2012, if at all. 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, 2011, 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.

©2012 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN logo, and other trademarks, service marks, and designs are registered or unregistered trademarks of VeriSign, Inc. and its subsidiaries in the United States and in foreign countries. All other trademarks are property of their respective owners.




                               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 at June 30, 2012 and

   316,781 at December 31, 2011; Outstanding

   shares: 156,667 at June 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

                                         ==========              ==========

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, 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% 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.

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

                                         ==========              ==========

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, 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% 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.

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

                                                 ============= =============



Source: VeriSign, Inc.

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