VeriSign Reports 18% Year-Over-Year Revenue Growth in Third Quarter 2008
MOUNTAIN VIEW, CA, Nov 06, 2008 (MARKET WIRE via COMTEX News Network) -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services, today reported financial results for the third quarter ended September 30, 2008.
VeriSign reported revenue of $246 million from continuing operations for the third quarter of 2008. On a GAAP basis, VeriSign reported a consolidated net loss of $200 million and a net loss per share of $1.02 on a fully-diluted basis. These GAAP results reflect a $237 million non-cash impairment charge for estimated losses on certain assets held for sale, all of which is recorded in discontinued operations. Also recorded were restructuring charges of $13 million, $7 million of which is recorded in discontinued operations related to assets held for sale.
VeriSign reported segment revenue for Internet Infrastructure and Identity Services (3IS), or the "core businesses" of Naming, SSL and IAS, of $240 million, up 3% from Q2 2008 and up 18% year over year.
On a non-GAAP basis (which excludes items described below) for our core businesses, VeriSign reported net income of $48 million for the third quarter of 2008 and fully-diluted earnings per share of $0.25, including a $0.03 write-down related to investments affected by the Lehman Brothers bankruptcy. A table reconciling the GAAP to the non-GAAP results reported above is appended to this release.
"We're very pleased with our operating results this quarter, especially in light of the current market conditions," said Jim Bidzos, executive chairman of the board of directors, president and chief executive officer on an interim basis of VeriSign. "While it's difficult to predict what will happen with the broader economy, we feel very good about the strength and stability of our core businesses. We are fortunate to be in a market leadership position with good revenue growth, expanding operating margins and backed by the strength of the VeriSign brand. As we move forward in these uncertain times, we remain focused on protecting and growing our core services for the long term."
"Third quarter was another solid quarter for VeriSign with 18% year over year revenue growth and non-GAAP operating margin of 35.5%," said Brian Robins, acting chief financial officer of VeriSign. "Our non-GAAP earnings per share was strong as well after considering an unanticipated $0.03 charge related to investment losses, and we exited the quarter with a strong balance sheet and healthy cash flow of $115 million for the third quarter. As we contemplate our 2009 plan, we are realistic about the current economic environment and remain fully committed to our strategy to focus the business on our core Internet infrastructure services."
Business and Corporate Highlights
-- VeriSign Naming Services ended the quarter with approximately 89.4
million active domain names in the adjusted zone for .com and .net,
representing a 16% increase year over year.
-- As of October 1, 2008, the registry fee for .com domain names
increased 7% to $6.86 and the registry fee for .net domain names increased
10% to $4.23.
-- In October, VeriSign announced an additional infrastructure deployment
in Europe with a new site in Madrid to fortify its Internet infrastructure
as part of Project Titan.
-- VeriSign SSL Services ended the quarter with 1,095,000 SSL
certificates in the installed base, an increase of 14% over the same
quarter last year.
-- Market penetration of EV compatible browsers is approximately 60%.
-- As of September 30, 2008, there are more than 2 million credentials in
distribution for our VIP network and one time password (OTP) programs.
Financial Highlights
-- Revenue from discontinued operations was $143 million while non-core
businesses reported $6 million of revenue as part of continuing operations
during the third quarter of 2008.
-- Other Income, on a non-GAAP basis, showed a loss of $15 million, $8
million higher than Q2 due primarily to an $8 million charge related to
investments affected by the Lehman Brothers bankruptcy.
-- VeriSign ended the third quarter of 2008 with Cash, Cash Equivalents,
Restricted Cash and Short-term Investments of $654 million, a decrease of
$14 million from the prior quarter.
-- Cash flow from operations for the quarter was $115 million and $359
million year-to-date.
-- Capital expenditures, on a consolidated basis, were approximately $19
million for the third quarter of 2008 and $79 million year-to-date.
-- Deferred revenue on September 30, 2008, totaled $798 million for
continuing operations, an increase of $17 million from the prior quarter.
-- In July 2008, VeriSign repurchased approximately 3.5 million shares of
its common stock for a cost of $120 million. In July 2008, VeriSign also
received an additional 1.4 million shares under an Accelerated Share
Repurchase agreement. As of November 6, 2008, $1 billion is available in
aggregate under the company's 2006 and 2008 stock repurchase programs.
-- On October 7, 2008, VeriSign announced the sale of its minority share
of the mobile entertainment joint venture to News Corporation for
approximately $200 million.
Non-GAAP Items
Non-GAAP results exclude the following items which are included under GAAP: discontinued operations, non-core businesses in continuing operations, stock-based compensation, amortization of other intangible assets, restructuring costs, non-recurring costs, and gains and losses on derivatives and equity investments. 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 net income is appended to this release.
Today's Conference Call
VeriSign will host a live teleconference call today at 2:00 pm (PST) to review the quarter's results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-1457 (international). A listen-only live web cast and accompanying slide presentation of the 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 (passcode: 3410716) beginning at 5:00 pm (PST) on November 6 and will run through November 12. 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 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 engage in communications and commerce with confidence. Additional news and information about the company is available at www.verisign.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 and pricing pressure from competing services offered at prices below our prices, market acceptance of our existing services and the current global economic downturn, the inability of VeriSign to successfully develop and market new services, and the uncertainty of whether new services as provided by VeriSign will achieve market acceptance or result in any revenues and the risk that the planned divestitures of certain businesses may be delayed, may generate less proceeds than expected or may incur unanticipated costs or otherwise negatively affect VeriSign's financial condition, results of operations or cash flows, and the uncertainty of whether Project Titan will achieve its stated objectives. 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, 2007, 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 press release.
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
September December
30, 2008 31, 2007
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 403,525 $ 1,376,722
Short-term investments 248,794 1,011
Accounts receivable, net of allowance for
doubtful accounts of $1,931 and $6,329 at
September 30, 2008, and December 31, 2007,
respectively 68,189 208,799
Prepaid expenses and other current assets 94,462 163,041
Assets held for sale 692,981 -
----------- -----------
Total current assets 1,507,951 1,749,573
----------- -----------
Property and equipment, net 374,097 621,917
Goodwill 355,057 1,082,420
Other intangible assets, net 29,305 121,792
Restricted cash 2,113 46,936
Other assets 296,342 290,647
Investments in unconsolidated entities 125,307 109,828
----------- -----------
Total long-term assets 1,182,221 2,273,540
----------- -----------
Total assets $ 2,690,172 $ 4,023,113
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 264,832 $ 398,124
Accrued restructuring costs 32,942 2,878
Deferred revenues 591,750 552,070
Other liabilities 2,758 2,632
Liabilities related to assets held for sale 76,865 -
----------- -----------
Total current liabilities 969,147 955,704
----------- -----------
Long-term deferred revenues 206,018 186,719
Long-term accrued restructuring costs 1,161 1,473
Convertible debentures 1,263,613 1,265,296
Other long-term liabilities 25,382 41,133
----------- -----------
Total long-term liabilities 1,496,174 1,494,621
----------- -----------
Total liabilities 2,465,321 2,450,325
----------- -----------
Commitments and contingencies
Minority interest in subsidiaries 59,950 54,485
Stockholders' equity:
Preferred stock--par value $.001 per share;
Authorized shares: 5,000,000;
Issued and outstanding shares: none - -
Common stock--par value $.001 per share;
Authorized shares: 1,000,000,000;
Issued and outstanding shares: 193,946,072
excluding 110,010,950 held in treasury, at
September 30, 2008, and 222,849,348 excluding
73,720,953 shares held in treasury, at
December 31, 2007 303 297
Additional paid-in capital 21,470,824 22,559,045
Accumulated deficit (21,317,195) (21,043,014)
Accumulated other comprehensive income 10,969 1,975
----------- -----------
Total stockholders' equity 164,901 1,518,303
----------- -----------
Total liabilities and stockholders' equity $ 2,690,172 $ 4,023,113
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenues $ 246,052 $ 215,744 $ 724,992 $ 636,457
---------- ---------- ---------- ----------
Costs and expenses
Cost of revenues 55,880 60,523 168,719 185,729
Sales and marketing 41,298 55,407 133,349 180,832
Research and development 22,337 25,263 72,089 78,676
General and
administrative 49,896 59,268 154,369 178,663
Restructuring,
impairments and other
charges (reversals),
net 5,973 (1,030) 107,366 33,601
Amortization of other
intangible assets 2,865 4,478 8,623 14,641
---------- ---------- ---------- ----------
Total costs and
Expenses 178,249 203,909 644,515 672,142
---------- ---------- ---------- ----------
Operating income (loss) 67,803 11,835 80,477 (35,685)
Other (loss) income, net (12,688) (6,408) (20,107) 86,109
---------- ---------- ---------- ----------
Income from continuing
operations before income
taxes, (loss) earnings
from unconsolidated
entities and minority
interest 55,115 5,427 60,370 50,424
---------- ---------- ---------- ----------
Income tax (expense)
benefit (8,071) 7,964 (6,642) (5,241)
(Loss) earnings from
unconsolidated entities,
net of tax (2,509) 216 (3,099) 2,412
Minority interest, net of
tax (815) (2,054) (2,710) (2,541)
---------- ---------- ---------- ----------
Income from continuing
Operations 43,720 11,553 47,919 45,054
Discontinued operations,
net of tax (243,754) 3,401 (322,100) 26,936
---------- ---------- ---------- ----------
Net (loss) income $ (200,034) $ 14,954 $ (274,181) $ 71,990
========== ========== ========== ==========
Basic (loss) income per
share from:
Continuing operations $ 0.23 $ 0.05 $ 0.24 $ 0.19
Discontinued operations (1.26) 0.01 (1.62) 0.11
---------- ---------- ---------- ----------
Net (loss) income $ (1.03) $ 0.06 $ (1.38) $ 0.30
========== ========== ========== ==========
Diluted (loss) income per
share from:
Continuing operations $ 0.22 $ 0.05 $ 0.24 $ 0.18
Discontinued operations (1.24) 0.01 (1.59) 0.11
---------- ---------- ---------- ----------
Net (loss) income $ (1.02) $ 0.06 $ (1.35) $ 0.29
========== ========== ========== ==========
Shares used in per share
computation:
Basic 193,853 240,054 198,622 242,570
========== ========== ========== ==========
Diluted 195,930 245,537 202,951 247,752
========== ========== ========== ==========
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
------------------------
2008 2007
----------- -----------
Cash flows from operating activities:
Net (loss) income $ (274,181) $ 71,990
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Gain on divestiture of businesses, net of tax (32,853) (76,356)
Unrealized gain on joint venture call options - (7,747)
Unrealized (gain) loss on contingent interest
derivative on convertible debentures (1,664) 12,589
Depreciation of property and equipment 85,454 85,195
Amortization of other intangible assets 22,758 90,693
Impairments and other charges 354,558 13,797
Provision for doubtful accounts 1,119 (116)
Stock-based compensation 75,368 66,863
Loss on sale of property and equipment 80,487 -
Net loss on sale and other-than-temporary
impairment of investments 6,571 3,429
Loss (earnings) from unconsolidated entities,
net of tax 3,099 (2,412)
Minority interest, net of tax 2,710 2,541
Excess tax benefit associated with stock
options (7,094) -
Deferred income taxes (13,380) 16,442
Changes in operating assets and liabilities:
Accounts receivable 30,548 (113,268)
Prepaid expenses and other current assets 17,044 133,053
Accounts payable and accrued liabilities (114,394) (129,133)
Accrued restructuring costs 29,752 2,926
Deferred revenues 93,164 96,719
----------- -----------
Net cash provided by operating
activities 359,066 267,205
----------- -----------
Cash flows from investing activities:
Proceeds from maturities and sales of
investments 1,440 144,849
Purchases of investments - (311)
Reclassification of cash equivalents to
short-term investments (256,571) -
Proceeds from sale of property and equipment 48,843 -
Purchases of property and equipment (79,022) (97,234)
Proceeds received from divestiture of businesses,
net of cash contributed 60,613 165,422
Investments in unconsolidated entities (15,679) (17,150)
Proceeds from repayment of promissory note by
unconsolidated entities 4,494 -
Cash received from trust, previously restricted 45,000 -
Proceeds from contingent purchase price
adjustment 1,175 -
Other assets 3,087 3,639
----------- -----------
Net cash (used in) provided by investing
activities (186,620) 199,215
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock purchase
plans 120,469 219,994
Change in net assets of minority interest 134 (436)
Repurchases of common stock (1,276,683) (1,154,763)
Proceeds from credit facility 200,000 -
Repayment of short-term debt related to credit
facility (200,000) (199,000)
Proceeds from issuance of convertible debentures,
net of issuance costs - 1,224,600
Excess tax benefit associated with stock options 7,094 -
Dividend paid to minority interest holders in
subsidiary (741) -
----------- -----------
Net cash (used in) provided by financing
activities (1,149,727) 90,395
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents 4,084 2,713
----------- -----------
Net (decrease) increase in cash and cash
equivalents (973,197) 559,528
Cash and cash equivalents at beginning of period 1,376,722 501,784
----------- -----------
Cash and cash equivalents at end of period $ 403,525 $ 1,061,312
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest $ 40,755 $ 1,945
=========== ===========
Amounts payable for purchases of property and
equipment $ 5,960 $ -
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 2008 September 30, 2008
---------------------- ----------------------
Operating Net (Loss) Operating Net (Loss)
Income Income Income Income
---------- ---------- ---------- ----------
GAAP as reported $ 67,803 $ (200,034) $ 80,477 $ (274,181)
Discontinued operations 243,754 322,100
Non-core businesses in
continuing operations
(1) 1,856 5,351 11,322 14,953
Adjustments to core
businesses: (1)
Stock-based
compensation 9,009 9,009 39,465 39,465
Amortization of other
intangible assets 2,500 2,500 7,529 7,529
Restructuring costs 4,349 4,349 100,371 100,371
Non-recurring costs (2) (350) (350) (6,639) (6,639)
Gains and losses on
derivatives and equity
investments (882) (3,290)
Tax adjustment (3) (15,338) (58,318)
---------- ---------- ---------- ----------
Non-GAAP as adjusted $ 85,167 $ 48,359 $ 232,525 $ 141,990
========== ========== ========== ==========
Diluted shares 195,930 195,930 202,951 202,951
---------- ---------- ---------- ----------
Per diluted share $ 0.43 $ 0.25 $ 1.15 $ 0.70
========== ========== ========== ==========
(1) As of September 30, 2008, the Company's business consists of the
following reportable segments: Internet Infrastructure and Identity
Services ("3IS") and Other Services which represents continuing operations
of non-core businesses and legacy products and services. The 3IS segment is
also referred to as "core businesses" which are Naming, SSL, and IAS.
(2) For the nine months ended September 30, 2008, non-recurring costs
primarily consists of a reversal of certain previously accrued litigation
costs.
(3) Non-GAAP tax is calculated as 30% of income from continuing operations,
excluding minority interest which is presented net of tax on the Statement
of Operations.
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, non-core businesses in continuing operations, stock-based
compensation, amortization of other intangible assets, restructuring costs,
non-recurring costs, and gains and losses on derivatives and equity
investments. Non-GAAP financial information is also adjusted for a 30% tax
rate which differs from the GAAP tax rate.
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 core operations. The
presentation of this additional information is not meant to be considered
in isolation or 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
-----------------------------------------------------
September June March December September
30, 2008 30, 2008 31, 2008 31, 2007 30, 2007
--------- --------- --------- --------- ---------
Revenues from core
business $ 239,728 $ 232,963 $ 223,085 $ 212,408 $ 202,916
========= ========= ========= ========== =========
SOURCE: VeriSign, Inc.
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