Verisign Reports 13 Percent Year-Over-Year Revenue Growth in Third Quarter 2012
Third Quarter GAAP Financial Results
Third Quarter Non-GAAP Financial Results
"We continue to see benefits in our results from our restructuring, focus, and continued operational discipline," commented
"We remain committed to providing unparalleled network and registry services performance as we work with the
Financial Highlights
Verisign ended the third quarter with Cash, Cash Equivalents,Marketable Securities and Restricted Cash of$1.50 billion , an increase of$147 million from year-end 2011.- Cash flow from operations was
$122 million for the third quarter compared with$108 million for the same quarter in 2011. - Deferred revenues ended the third quarter of 2012 totaling
$809 million , an increase of$80 million from year-end 2011. - Capital expenditures were
$14 million in the third quarter of 2012. - During the third quarter,
Verisign repurchased 1.7 million shares of its common stock for a cost of$77 million . AtSept. 30, 2012 , approximately$610 million remained available and authorized for share repurchases. - For purposes of calculating diluted EPS, the third quarter diluted share count included 9.2 million shares related to the convertible debentures, compared with no dilutive effect in the same quarter in 2011. These represent dilutive shares and not shares that have been issued.
- Due to the stock price exceeding the convertible debentures trigger during the third quarter of 2012, holders have the option to convert the debentures into common stock during the fourth quarter of 2012. Consequently, the debt component of the convertible debentures, the related embedded derivative, and deferred tax liability were reclassified from long-term liabilities to current liabilities, while the associated unamortized debt issuance costs were reclassified from long-term assets to current assets, as of
Sept. 30, 2012 .
Business Highlights
- Verisign Registry Services added 1.37 million net new names and ended the third quarter with approximately 119.9 million active domain names in the zone for .com and .net, representing a 7.1 percent increase year over year.
- In the third quarter,
Verisign processed 7.8 million new domain name registrations for .com and .net, representing a 1.1 percent decrease 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 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 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
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VERISIGN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) September 30, December 31, 2012 2011 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 270,455 $ 1,313,349 Marketable securities 1,221,797 32,860 Accounts receivable, net 11,270 14,974 Deferred tax assets -- 64,751 Prepaid expenses and other current assets 26,967 21,847 ------------- ------------- Total current assets 1,530,489 1,447,781 ------------- ------------- Property and equipment, net 329,358 327,136 Goodwill and other intangible assets, net 53,062 53,848 Long-term deferred tax assets 55,193 2,758 Other long-term assets 15,162 24,656 ------------- ------------- Total long-term assets 452,775 408,398 ------------- ------------- Total assets $ 1,983,264 $ 1,856,179 ============= ============= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued liabilities $ 106,137 $ 156,385 Convertible debentures, including contingent interest derivative 603,113 -- Deferred revenues 563,706 502,538 Deferred tax liabilities 344,404 -- ------------- ------------- Total current liabilities 1,617,360 658,923 ------------- ------------- Long-term deferred revenues 244,939 226,033 Convertible debentures, including contingent interest derivative -- 590,086 Long-term debt 100,000 100,000 Long-term deferred tax liabilities 3,322 325,527 Other long-term tax liabilities 44,255 43,717 ------------- ------------- Total long-term liabilities 392,516 1,285,363 ------------- ------------- Total liabilities 2,009,876 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: 318,560 atSeptember 30, 2012 and 316,781 atDecember 31, 2011 ; Outstanding shares: 155,541 atSeptember 30, 2012 and 159,422 at December 31, 2011 319 317 Additional paid-in capital 19,979,858 20,135,237 Accumulated deficit (20,006,186) (20,220,577) Accumulated other comprehensive loss (603) (3,084) ------------- ------------- Total stockholders' deficit (26,612) (88,107) ------------- ------------- Total liabilities and stockholders' deficit $ 1,983,264 $ 1,856,179 ============= ============= VERISIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- --------- Revenues $ 223,528 $ 196,965 $ 643,396 $ 568,332 --------- --------- --------- --------- Costs and expenses: Cost of revenues 41,460 41,694 125,560 123,230 Sales and marketing 22,928 25,090 77,056 69,660 Research and development 15,409 13,488 45,635 40,156 General and administrative 27,669 24,775 73,903 86,610 Restructuring charges -- 2,971 (730) 12,160 --------- --------- --------- --------- Total costs and expenses 107,466 108,018 321,424 331,816 --------- --------- --------- --------- Operating income 116,062 88,947 321,972 236,516 Interest expense (12,619) (11,797) (37,539) (135,473) Non-operating (loss) income, net (1,742) 3,591 (3,032) 15,218 --------- --------- --------- --------- Income from continuing operations before income taxes 101,701 80,741 281,401 116,261 Income tax expense (24,882) (22,126) (70,005) (23,034) --------- --------- --------- --------- Income from continuing operations, net of tax 76,819 58,615 211,396 93,227 Income (loss) from discontinued operations, net of tax 1,091 301 2,995 (4,150) --------- --------- --------- --------- Net income 77,910 58,916 214,391 89,077 --------- --------- --------- --------- Foreign currency translation adjustments -- (78) -- (2) Change in unrealized gain on investments, net of tax 2,499 94 2,536 703 Realized gain on investments, net of tax, included in net income (20) (1,136) (55) (2,551) --------- --------- --------- --------- Other comprehensive income (loss) 2,479 (1,120) 2,481 (1,850) --------- --------- --------- --------- Comprehensive income $ 80,389 $ 57,796 $ 216,872 $ 87,227 ========= ========= ========= ========= Basic income (loss) per share: Continuing operations $ 0.49 $ 0.36 $ 1.34 $ 0.56 Discontinued operations 0.01 -- 0.02 (0.03) --------- --------- --------- --------- Net income $ 0.50 $ 0.36 $ 1.36 $ 0.53 ========= ========= ========= ========= Diluted income (loss) per share: Continuing operations $ 0.46 $ 0.36 $ 1.28 $ 0.55 Discontinued operations 0.01 -- 0.02 (0.02) --------- --------- --------- --------- Net income $ 0.47 $ 0.36 $ 1.30 $ 0.53 ========= ========= ========= ========= Shares used to compute net income per share Basic 156,261 163,046 157,729 167,492 ========= ========= ========= ========= Diluted 166,575 163,902 164,540 169,176 ========= ========= ========= =========
VERISIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, ------------------------ 2012 2011 ----------- ----------- Cash flows from operating activities: Net income $ 214,391 $ 89,077 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment and amortization of other intangible assets 39,652 41,455 Stock-based compensation 26,391 36,107 Excess tax benefit associated with stock-based compensation (20,765) (1,851) Other, net 15,650 6,804 Changes in operating assets and liabilities Accounts receivable 3,602 (38) Prepaid expenses and other assets 17,087 (12,434) Accounts payable and accrued liabilities (9,211) (7,338) Deferred revenues 80,074 59,905 ----------- ----------- Net cash provided by operating activities 366,871 211,687 ----------- ----------- Cash flows from investing activities: Proceeds from maturities and sales of marketable securities 393,677 543,503 Purchases of marketable securities (1,579,234) (75,705) Purchases of property and equipment (39,868) (63,444) Other investing activities (638) (1,179) ----------- ----------- Net cash (used in) provided by investing activities (1,226,063) 403,175 ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock from option exercises and employee stock purchase plans 26,573 41,510 Repurchases of common stock (231,391) (548,803) Payment of dividends to stockholders -- (463,498) Excess tax benefit associated with stock-based compensation 20,765 1,851 Other financing activities 189 (1,117) ----------- ----------- Net cash used in financing activities (183,864) (970,057) ----------- ----------- Effect of exchange rate changes on cash and cash equivalents 162 (1,645) ----------- ----------- Net decrease in cash and cash equivalents (1,042,894) (356,840) Cash and cash equivalents at beginning of period 1,313,349 1,559,628 ----------- ----------- Cash and cash equivalents at end of period $ 270,455 $ 1,202,788 =========== =========== Supplemental cash flow disclosures: Cash paid for interest, net of capitalized interest $ 40,829 $ 140,047 =========== =========== Cash paid for income taxes, net of refunds received $ 19,975 $ 5,299 =========== =========== VERISIGN, INC. STATEMENTS OF OPERATIONS RECONCILIATION (In thousands, except per share data) (Unaudited) Three Months Ended Three Months Ended September 30, 2012 September 30, 2011 -------------------- -------------------- Operating Net Operating Net Income Income Income Income --------- --------- --------- --------- GAAP as reported $ 116,062 $ 77,910 $ 88,947 $ 58,916 Discontinued operations (1,091) (301) Adjustments: Stock-based compensation 9,807 9,807 6,370 6,370 Amortization of other intangible assets 140 140 323 323 Restructuring charges -- -- 2,971 2,971 Unrealized loss (gain) on contingent interest derivative on Convertible Debentures 3,167 (250) Non-cash interest expense 1,916 1,642 Tax adjustment (7,803) (5,413) --------- --------- --------- --------- Non-GAAP as adjusted $ 126,009 $ 84,046 $ 98,611 $ 64,258 ========= ========= ========= ========= Revenues $ 223,528 $ 196,965 Non-GAAP operating margin 56.4% 50.1% Diluted shares 166,575 163,902 Per diluted share, non-GAAP as adjusted $ 0.50 $ 0.39 ========= =========
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 September 30, 2012 2011 ---------- ---------- Cost of revenues $ 1,491 $ 1,443 Sales and marketing 1,697 1,305 Research and development 1,622 1,094 General and administrative 4,997 2,528 Restructuring charges -- 723 ---------- ---------- Total stock-based compensation expense $ 9,807 $ 7,093 ========== ========== VERISIGN, INC. STATEMENTS OF OPERATIONS RECONCILIATION (In thousands, except per share data) (Unaudited) Nine Months Ended Nine Months Ended September 30, 2012 September 30, 2011 -------------------- -------------------- Operating Net Operating Net Income Income Income Income --------- --------- --------- --------- GAAP as reported $ 321,972 $ 214,391 $ 236,516 $ 89,077 Discontinued operations (2,995) 4,150 Adjustments: Stock-based compensation 26,391 26,391 30,406 30,406 Amortization of other intangible assets 788 788 968 968 Restructuring charges (730) (730) 12,160 12,160 Contingent interest payment to holders of Convertible Debentures -- 100,020 Unrealized loss (gain) on contingent interest derivative on Convertible Debentures 7,127 (500) Non-cash interest expense 5,409 4,985 Tax adjustment (23,775) (56,256) --------- --------- --------- --------- Non-GAAP as adjusted $ 348,421 $ 226,606 $ 280,050 $ 185,010 ========= ========= ========= ========= Revenues $ 643,396 $ 568,332 Non-GAAP operating margin 54.2% 49.3% ========= ========= Diluted shares 164,540 169,176 Per diluted share, non-GAAP as adjusted $ 1.38 $ 1.09 ========= =========
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: Nine Months Ended September 30, 2012 2011 ---------- ---------- Cost of revenues $ 4,479 $ 5,279 Sales and marketing 5,046 4,856 Research and development 4,191 3,965 General and administrative 12,675 16,306 Restructuring charges -- 5,701 ---------- ---------- Total stock-based compensation expense $ 26,391 $ 36,107 ========== ==========
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