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Verisign Reports 13% Year-Over-Year Revenue Growth in Second Quarter 2011

July 28, 2011

DULLES, VA -- (MARKET WIRE) -- 07/28/11 -- 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, 2011.

Second Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $190 million for the second quarter of 2011, up 5% from the prior quarter and up 13% from the same quarter in 2010. Verisign reported net loss of $(11) million and diluted net loss per share of $(0.06) for the second quarter of 2011, reflecting a $100 million payment of contingent interest to holders of the 3.25% Junior Subordinated Convertible Debentures due 2037 ("Convertible Debentures") in connection with a special dividend in May 2011, and a corresponding offsetting discrete income tax benefit of $40 million, which on a net basis reduced diluted earnings per share by $0.35. This is compared to net income attributable to Verisign stockholders of $35 million and earnings per share attributable to Verisign stockholders of $0.19 on a diluted basis in the same quarter in 2010. The operating margin was 43.2% for the second quarter of 2011 compared to 30.3% for the same quarter in 2010. Operating margin and diluted earnings per share for the second quarter of 2011 include a $6 million accrued expense reversal offset by a $4 million stock compensation charge, both of which are non-recurring in nature, which on a net basis, increased operating margin by 1% and increased diluted earnings per share by $0.02.

Second Quarter Non-GAAP Financial Results
Verisign reported net income of $65 million and diluted earnings per share of $0.38 for the second quarter of 2011, compared to net income of $42 million and diluted earnings per share of $0.23 in the same quarter in 2010. The operating margin was 51.7% for the second quarter of 2011 compared to 40.5% for the same quarter in 2010. Operating margin and diluted earnings per share for the second quarter of 2011 include a pre-tax $6 million accrued expense reversal, which is non-recurring in nature, which increased operating margin by 3.1% and increased diluted earnings per share by $0.02. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"We are pleased with our performance in the second quarter," said Mark McLaughlin, president and chief executive officer of Verisign. "We are proud of our track record of maintaining 100 percent operational uptime for .com and .net and that we have been entrusted with the operation of .net for an additional 6 years."

"We remain committed to delivering value to our shareholders through continued strategic focus, execution, and operating discipline," said Brian Robins, chief financial officer of Verisign. "In addition to paying out the special dividend during the second quarter, we utilized $100 million to repurchase shares of our common stock."

In addition, Verisign announced that Mark McLaughlin submitted his resignation to become the CEO of a private company. His last day with the company will be August 25, 2011. Mark concluded his board service at the regularly scheduled board of directors meeting on July 27, 2011 and resigned as president and chief executive officer effective August 1, 2011. Jim Bidzos, Verisign's founder and previous CEO, will become the president and chief executive officer effective August 1, 2011.

"We can't thank Mark enough for his contributions as CEO over the last two years, as well as during his tenure with Verisign going back to 2000," said Jim Bidzos, founder and chairman of Verisign. "We all wish him the very best in his new opportunity. I am especially appreciative that Mark will stay until August 25th to assist with the transition."

Financial Highlights

  • On April 28, Verisign announced a special cash dividend of $2.75 per share of its common stock or $463 million that was paid on May 18, 2011 to shareholders of record at the close of business on May 9, 2011. In addition, contingent interest totaling $100 million was paid on May 18, 2011 to holders of record of Convertible Debentures at the close of business on May 9, 2011.
  • During the second quarter of 2011, Verisign repurchased approximately 2.8 million shares of our common stock for a cost of $100 million.
  • Verisign ended the second quarter of 2011 with Cash, Cash Equivalents, Marketable Securities and Restricted Cash of $1.399 billion, a decrease of $552 million from the prior quarter and an increase of $60 million from the same quarter in 2010.
  • Cash flow from operations was $13 million for the second quarter of 2011, reflecting a $100 million payment of contingent interest to holders of Convertible Debentures. A decrease in excess tax benefits of $(3) million for the second quarter of 2011 that are associated with stock-based compensation were classified as financing cash flows.
  • Deferred revenues ended the second quarter of 2011 totaling $714 million, an increase of $15 million from the prior quarter and $73 million from the same quarter in 2010.
  • Capital expenditures were $14 million in the second quarter of 2011.

Business and Corporate Highlights

  • Verisign Registry Services ended the quarter with 110 million active domain names in the adjusted zone for .com and .net, representing an 8% increase year-over-year.
  • In the second quarter of 2011, Verisign processed 8.1 million new domain name registrations, representing a 2% increase year-over-year.
  • On May 11, 2011, Verisign announced that it had entered into a Settlement Agreement and Mutual Release with the Coalition for ICANN Transparency, Inc. (CFIT), CFIT's members and specified related parties that resolved the over five year long CFIT litigation.
  • On June 28, 2011, Verisign announced that the Internet Corporation for Assigned Names and Numbers (ICANN) and Verisign have renewed Verisign's contract to serve as the authoritative registry operator for the .net registry for another six years.
  • On July 14, 2011, Verisign announced that as of January 15, 2012, the registry fee for .com domain names will increase from $7.34 to $7.85 and that the registry fee for .net domain names will increase from $4.65 to $5.11.
  • Verisign ended the second quarter of 2011 with approximately 1,040 employees, unchanged from the end of the prior quarter.
  • During the second quarter, ICANN announced that its Board of Directors had approved a plan to increase the number of generic top-level domains (gTLDs).

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% 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. 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 4:30 p.m. (EDT) to review the second quarter results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-6692 (international). A listen-only live web cast and accompanying slide presentation of the earnings conference call will also be available on the Investor Relations section of the Verisign website at www.verisigninc.com. A telephone replay of this call will remain available at (888) 203-1112 or (719) 457-0820 (passcode: 8273489) for one week after the conference call. 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 www.verisigninc.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.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; the sluggish economic recovery; 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, Internet platforms and web-browsing patterns; 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; the uncertainty of whether Project Apollo will achieve its stated objectives; potential introduction of new gTLDs; and the uncertainty of whether the .com Registry Agreement renewal will occur by December 1, 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, 2010, 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.

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In thousands, except par value)

                                (Unaudited)



                                                   June 30,    December 31,

                                                     2011          2010

                                                 ------------  ------------

                     ASSETS

Current assets:

  Cash and cash equivalents                      $  1,220,165  $  1,559,628

  Marketable securities                               174,585       501,238

  Accounts receivable, net                             14,516        14,874

  Prepaid expenses and other current assets           115,874       102,217

                                                 ------------  ------------

    Total current assets                            1,525,140     2,177,957

                                                 ------------  ------------

Property and equipment, net                           194,771       190,319

Goodwill and other intangible assets, net              54,495        55,146

Other assets                                           21,195        20,584

                                                 ------------  ------------

    Total long-term assets                            270,461       266,049

                                                 ------------  ------------

    Total assets                                 $  1,795,601  $  2,444,006

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



 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:

  Accounts payable and accrued liabilities       $    156,995  $    195,235

  Deferred revenues                                   494,769       457,478

                                                 ------------  ------------

    Total current liabilities                         651,764       652,713

                                                 ------------  ------------

Long-term deferred revenues                           219,083       205,560

Convertible debentures, including contingent

 interest derivative                                  584,965       581,626

Long-term deferred tax liabilities                    326,112       309,696

Other long-term liabilities                            17,880        17,981

                                                 ------------  ------------

    Total long-term liabilities                     1,148,040     1,114,863

                                                 ------------  ------------

    Total liabilities                               1,799,804     1,767,576

                                                 ------------  ------------

Commitments and contingencies



Stockholders' (deficit) equity:

    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: 315,643 at June 30, 2011 and

     313,313 at December 31, 2010; Outstanding

     shares: 166,348 at June 30, 2011 and

     172,736 at December 31, 2010                         316           313

    Additional paid-in capital                     20,330,852    21,040,919

    Accumulated deficit                           (20,333,307)  (20,363,468)

    Accumulated other comprehensive loss               (2,064)       (1,334)

                                                 ------------  ------------

    Total stockholders' (deficit) equity               (4,203)      676,430

                                                 ------------  ------------

    Total liabilities and stockholders'

     (deficit) equity                            $  1,795,601  $  2,444,006

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









                               VERISIGN, INC.

               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                    (In thousands, except per share data)

                                (Unaudited)



                                  Three Months Ended     Six Months Ended

                                       June 30,              June 30,

                                 --------------------  --------------------

                                    2011       2010       2011       2010

                                 ---------  ---------  ---------  ---------



Revenues                         $ 189,844  $ 167,881  $ 371,367  $ 329,463

                                 ---------  ---------  ---------  ---------



Costs and expenses:

  Cost of revenues                  40,667     39,846     81,536     78,660

  Sales and marketing               22,179     23,139     44,570     44,449

  Research and development          13,074     13,738     26,668     26,015

  General and administrative        28,206     32,797     61,835     67,641

  Restructuring charges              3,659      7,539      9,189      7,773

                                 ---------  ---------  ---------  ---------

    Total costs and expenses       107,785    117,059    223,798    224,538

                                 ---------  ---------  ---------  ---------

Operating income                    82,059     50,822    147,569    104,925

Interest expense (2011 amounts

 include $100,020 contingent

 interest)                        (111,856)   (11,966)  (123,676)   (23,964)

Non-operating income, net            6,149      3,850     11,627      8,678

                                 ---------  ---------  ---------  ---------

(Loss) income from continuing

 operations before income taxes    (23,648)    42,706     35,520     89,639

Income tax benefit (expense)        15,967    (16,121)      (908)   (33,045)

                                 ---------  ---------  ---------  ---------

(Loss) income from continuing

 operations, net of tax             (7,681)    26,585     34,612     56,594

(Loss) income from discontinued

 operations, net of tax             (2,929)     9,789     (4,451)    32,220

                                 ---------  ---------  ---------  ---------

Net (loss) income                  (10,610)    36,374     30,161     88,814

Less: Net income from

 discontinued operations, net of

 tax, attributable to

 noncontrolling interest in

 subsidiary                              -     (1,161)         -     (2,245)

                                 ---------  ---------  ---------  ---------

Net (loss) income attributable

 to Verisign stockholders        $ (10,610) $  35,213  $  30,161  $  86,569

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



Basic (loss) income per share attributable to Verisign stockholders from:



  Continuing operations          $   (0.05) $    0.15  $    0.20  $    0.31

  Discontinued operations            (0.01)      0.04      (0.02)      0.17

                                 ---------  ---------  ---------  ---------

  Net (loss) income              $   (0.06) $    0.19  $    0.18  $    0.48

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



Diluted (loss) income per share attributable to Verisign stockholders from:



  Continuing operations          $   (0.05) $    0.15  $    0.20  $    0.31

  Discontinued operations            (0.01)      0.04      (0.02)      0.16

                                 ---------  ---------  ---------  ---------

  Net (loss) income              $   (0.06) $    0.19  $    0.18  $    0.47

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



Shares used to compute net (loss) income per share attributable to Verisign

 stockholders:



  Basic                            167,471    181,120    169,751    182,121

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

  Diluted                          167,471    182,753    171,850    183,480

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



Amounts attributable to Verisign stockholders:

  (Loss) income from continuing

   operations, net of tax        $  (7,681) $  26,585  $  34,612  $  56,594

  (Loss) income from

   discontinued operations, net

   of tax                           (2,929)     8,628     (4,451)    29,975

                                 ---------  ---------  ---------  ---------

Net (loss) income attributable

 to Verisign stockholders        $ (10,610) $  35,213  $  30,161  $  86,569

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



The following table presents the classification of stock-based compensation:



  Cost of revenues               $   1,846  $   1,348  $   3,836  $   2,269

  Sales and marketing                1,697      1,484      3,551      2,604

  Research and development           1,353      1,234      2,871      2,304

  General and administrative         7,179      5,256     13,778     10,485

  Restructuring charges              1,989          -      4,978        112

                                 ---------  ---------  ---------  ---------

Stock-based compensation for

 continuing operations              14,064      9,322     29,014     17,774

Discontinued operations                  -      3,903          -      7,536

                                 ---------  ---------  ---------  ---------

Total stock-based compensation

 expense                         $  14,064  $  13,225  $  29,014  $  25,310

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









                               VERISIGN, INC.

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (In thousands)

                                 (Unaudited)



                                                       Six Months Ended

                                                           June 30,

                                                   ------------------------

                                                       2011         2010

                                                   -----------  -----------



Cash flows from operating activities:

  Net income                                       $    30,161  $    88,814

  Adjustments to reconcile net income to net cash

   provided by operating activities:

    Depreciation of property and equipment and

     amortization of other intangible assets            27,642       39,806

    Stock-based compensation                            29,014       25,310

    Excess tax benefit associated with stock-based

     compensation                                         (854)     (12,453)

    Other, net                                           1,627       12,949

    Changes in operating assets and liabilities,

     excluding the effects of acquisitions and

     divestitures:

      Accounts receivable                                  354       10,084

      Prepaid expenses and other assets                (12,786)      27,397

      Accounts payable and accrued liabilities         (22,736)      (2,867)

      Deferred revenues                                 50,814       61,280

                                                   -----------  -----------

        Net cash provided by operating activities      103,236      250,320

                                                   -----------  -----------



Cash flows from investing activities:

  Proceeds from maturities and sales of marketable

   securities and investments                          369,586      196,045

  Proceeds received from divestiture of

   businesses, net of cash contributed                       -       15,583

  Purchases of marketable securities and

   investments                                         (44,038)    (662,275)

  Purchases of property and equipment                  (29,481)     (42,772)

  Other investing activities                            (1,181)      (3,773)

                                                   -----------  -----------

        Net cash provided by (used in) investing

         activities                                    294,886     (497,192)

                                                   -----------  -----------



Cash flows from financing activities:

  Proceeds from issuance of common stock from

   option exercises and employee stock purchase

   plans                                                32,445       28,002

  Repurchases of common stock                         (310,671)    (281,943)

  Payment of dividends to stockholders                (463,498)           -

  Excess tax benefit associated with stock-based

   compensation                                            854       12,453

  Other financing activities                                 -         (736)

                                                   -----------  -----------

        Net cash used in financing activities         (740,870)    (242,224)

                                                   -----------  -----------



Effect of exchange rate changes on cash and cash

 equivalents                                             3,285       (1,791)

Cash and cash equivalents included in assets held

 for sale                                                    -     (123,356)

                                                   -----------  -----------

Net decrease in cash and cash equivalents             (339,463)    (614,243)

Cash and cash equivalents at beginning of period     1,559,628    1,477,166

                                                   -----------  -----------

Cash and cash equivalents at end of period         $ 1,220,165  $   862,923

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



Supplemental cash flow disclosures:

  Cash paid for interest, net of capitalized

   interest                                        $   120,082  $    19,811

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









                               VERISIGN, INC.

                   STATEMENTS OF OPERATIONS RECONCILIATION

                    (In thousands, except per share data)

                                (Unaudited)



                           Three Months Ended         Three Months Ended

                             June 30, 2011              June 30, 2010

                       -------------------------  -------------------------

                                     Net (Loss)

                                       Income                   Net Income

                                    Attributable               Attributable

                        Operating   to Verisign    Operating   to Verisign

                          Income    Stockholders     Income    Stockholders

                       ----------- -------------  ----------- -------------



GAAP as reported       $    82,059 $     (10,610) $    50,822 $      35,213

  Discontinued

   operations                              2,929                     (8,628)

  Adjustments:

    Stock-based

     compensation           12,075        12,075        9,322         9,322

    Amortization of

     other intangible

     assets                    322           322          323           323

    Restructuring

     charges                 3,659         3,659        7,539         7,539

    Contingent

     interest payment

     to holders of

     Convertible

     Debentures                          100,020                          -

    Unrealized gain on

     contingent

     interest

     derivative on

     Convertible

     Debentures                             (700)                    (1,281)

    Non-cash interest

     expense                               1,679                      1,810

  Tax adjustment                         (43,989)                    (2,005)

                       ----------- -------------  ----------- -------------

Non-GAAP as adjusted   $    98,115 $      65,385  $    68,006 $      42,293

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



Diluted shares                           169,882                    182,753



Per diluted share,

 non-GAAP as adjusted              $        0.38              $        0.23

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



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. 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 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

                      ------------------------------------------------------



                      June 30, March 31, December 31, September 30, June 30,

                        2011      2011       2010          2010       2010

                      -------- --------- ------------ ------------- --------



Revenues              $189,844 $ 181,523 $    178,829 $     172,286 $167,881

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










                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                (Unaudited)



                            Six Months Ended           Six Months Ended

                             June 30, 2011              June 30, 2010

                       -------------------------  -------------------------

                                     Net Income                 Net Income

                                    Attributable               Attributable

                        Operating   to Verisign    Operating   to Verisign

                          Income    Stockholders     Income    Stockholders

                       ----------- -------------  ----------- -------------



GAAP as reported       $   147,569 $      30,161  $   104,925 $      86,569

  Discontinued

   operations                              4,451                    (29,975)

  Adjustments:

    Stock-based

     compensation           24,036        24,036       17,662        17,662

    Amortization of

     other intangible

     assets                    645           645          647           647

    Restructuring

     charges                 9,189         9,189        7,773         7,773

    Contingent

     interest payment

     to holders of

     Convertible

     Debentures                          100,020                          -

    Unrealized gain on

     contingent

     interest

     derivative on

     Convertible

     Debentures                             (250)                    (1,750)

    Non-cash interest

     expense                               3,343                      3,651

  Tax adjustment                         (50,843)                    (2,241)

                       ----------- -------------  ----------- -------------

Non-GAAP as adjusted   $   181,439 $     120,752  $   131,007 $      82,336

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



Diluted shares                           171,850                    183,480



Per diluted share,

 non-GAAP as adjusted              $        0.70              $        0.45

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





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. 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 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.

Source: VeriSign, Inc.

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