Verisign Reports 13% Year-Over-Year Revenue Growth in Second Quarter 2011
Second Quarter GAAP Financial Results
Second Quarter Non-GAAP Financial Results
"We are pleased with our performance in the second quarter," said
"We remain committed to delivering value to our shareholders through continued strategic focus, execution, and operating discipline," said
In addition,
"We can't thank Mark enough for his contributions as CEO over the last two years, as well as during his tenure with
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 onMay 18, 2011 to shareholders of record at the close of business onMay 9, 2011 . In addition, contingent interest totaling$100 million was paid onMay 18, 2011 to holders of record of Convertible Debentures at the close of business onMay 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 theCoalition 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 theInternet Corporation for Assigned Names and Numbers (ICANN) andVerisign have renewedVerisign'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 ofJanuary 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
Today's Conference Call
About
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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
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 atJune 30, 2011 and 313,313 atDecember 31, 2010 ; Outstanding shares: 166,348 atJune 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 toVerisign 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 toVerisign 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 toVerisign stockholders: Basic 167,471 181,120 169,751 182,121 ========= ========= ========= ========= Diluted 167,471 182,753 171,850 183,480 ========= ========= ========= ========= Amounts attributable toVerisign 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 ============= =============
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 ============= =============
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.
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