VeriSign Reports Fourth Quarter and Fiscal 2008 Results
MOUNTAIN VIEW, CA, Feb 05, 2009 (MARKET WIRE via COMTEX News Network) -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services, today reported financial results for the fourth quarter and fiscal year ended December 31, 2008.
Q4 2008 Financial Results
On a GAAP basis, VeriSign reported revenue of $247 million from continuing operations for the fourth quarter of 2008. On a GAAP basis, VeriSign reported consolidated net income of $39 million and earnings per share of $0.20 on a fully-diluted basis. These GAAP results reflect a $91 million non-cash impairment charge on certain long-lived assets, loss on sale of discontinued operations, and estimated losses on certain assets held for sale, $32 million of which was recorded in discontinued operations. Also recorded were restructuring charges of $12 million, $8 million of which was recorded in discontinued operations related to assets held for sale. In light of ongoing economic developments, we continue to review the level of impairment charge on long-lived assets, loss on sale of discontinued operations, and estimated losses on certain assets held for sale, including those carried as discontinued operations.
Because the company has not fully completed the tax provision calculation process, tax provisions for both the fourth quarter and fiscal year 2008 are still preliminary and therefore GAAP net income/loss and GAAP earnings/loss per share for these periods are also preliminary. Final tax provisions, GAAP net income/loss, and GAAP earnings/loss per share will be updated in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 to be filed with the SEC and may differ materially from the amounts reported above.
On a GAAP basis, VeriSign reported segment revenue for Internet Infrastructure and Identity Services (3IS), or the "core businesses" of Naming, SSL and IAS, of $245 million, up 3% from Q3 2008 and up 16% year-over-year. GAAP operating margin for the fourth quarter was -3.7%.
On a non-GAAP basis (which excludes items described below) for its core businesses, VeriSign reported net income of $54 million for the fourth quarter of 2008 and fully-diluted earnings per share of $0.28. Non-GAAP operating margins for the fourth quarter were 35.1%. A table reconciling the GAAP to the non-GAAP results reported above is appended to this release.
"VeriSign again demonstrated solid performance in extremely difficult economic conditions, with 16% year-over-year revenue growth and greater than 35% non-GAAP operating margin for the fourth quarter," said Jim Bidzos, executive chairman of the board of directors and chief executive officer on an interim basis of VeriSign. "We believe our growth and financial performance reflect that our strategy of divesting non-core businesses and focusing on our strong core units is the right one. While we have not achieved all of our divestiture goals, we did sell seven of 12 non-core businesses since late 2007, and we remain very focused, despite the challenging environment, on completing sales of the remaining larger businesses."
2008 Financial Results
On a GAAP basis, for the year ended December 31, 2008, VeriSign reported revenue of $962 million from continuing operations. On a GAAP basis, VeriSign reported a consolidated net loss of $240 million for 2008 and a loss per share of $1.20 on a fully-diluted basis. These full-year GAAP results reflect a $413 million non-cash impairment charge for certain long-lived assets, loss on sale of discontinued operations, and estimated losses on certain assets held for sale, of which $355 million is recorded in discontinued operations. Also recorded were restructuring charges of $150 million, $39 million of which is recorded in discontinued operations related to assets held for sale. As noted above, our tax provision for fiscal year 2008 is preliminary, and therefore GAAP net income/loss and GAAP earnings/loss per share are also preliminary.
On a GAAP basis, for 2008, VeriSign reported segment revenue for Internet Infrastructure and Identity Services (3IS), or the "core businesses," of $936 million, up 20% year-over-year.
On a non-GAAP basis for its core businesses, VeriSign reported net income of $193 million for 2008 and fully-diluted earnings per share of $0.96. A table reconciling the GAAP to the non-GAAP results reported above is appended to this release.
"We're very pleased with our performance this year, especially in light of the weakening economy," said Brian Robins, acting chief financial officer of VeriSign. "In addition to reporting solid revenue and earnings for the year, we generated approximately $475 million in cash flow from operations in 2008, ending the year with nearly $800 million in cash and equivalents. Furthermore, we believe that our divide and focus approach to managing our businesses has paid off as our execution this quarter continued to be strong."
Business and Corporate Highlights
-- Subsequent to the end of the quarter, VeriSign announced it had named
Mark McLaughlin as president and chief operating officer. Mr. McLaughlin
will be responsible for the day-to-day operations of the Naming, SSL and
IAS businesses including full responsibility for results of operations.
Additionally, Mr. McLaughlin will oversee the company's Technology and
Strategy organizations.
-- VeriSign's Naming business ended the quarter with approximately 90.4
million active domain names in the adjusted zone for .com and .net,
representing a 12% increase year-over-year.
-- VeriSign SSL Services ended the quarter with 1.12 million SSL
certificates in the installed base, an increase of 13% over the same
quarter last year.
-- Extended Validation (EV) SSL customer wins, during the fourth quarter,
included JetBlue, Japan Airlines, and HSBC US.
-- In January, VeriSign announced that the IRS issued new e-file Security
and Privacy Standards that strongly encourage all online tax filing
services to safeguard their sites with EV SSL certificates.
-- VeriSign 2009 Analyst Day will be held on Thursday, May 14, 2009 in
Mountain View, CA. Details on the event agenda and registration will be
announced at a later date.
Q4 Financial Highlights
-- Revenue from discontinued operations was $136 million while non-core
businesses reported $1.8 million of revenue as part of continuing
operations during the fourth quarter of 2008.
-- VeriSign ended the fourth quarter of 2008 with Cash and Equivalents of
$791 million, an increase of $137 million from the prior quarter. At year-
end, approximately $150 million of funds held by the Reserve were
reclassified as Other Current Assets.
-- Cash flow from operations for the quarter was approximately $115
million and approximately $475 million for fiscal year 2008.
-- Capital expenditures, on a consolidated basis, were approximately $25
million for the fourth quarter of 2008 and $104 million for the full year.
-- Deferred revenue on December 31, 2008 totaled $845 million for
continuing operations, an increase of $8 million from the prior quarter.
-- In the fourth quarter, VeriSign repurchased approximately 2.6 million
shares of its common stock for a cost of $50 million. For the full year,
VeriSign repurchased approximately 39 million shares for a total of $1.31
billion, compared to 38 million shares for $1.15 billion in 2007.
-- Also during the fourth quarter, VeriSign completed the sales of the
Post-Pay billing business, inCode communications consulting service and
3united mobile solutions.
Non-GAAP Items
Non-GAAP results exclude the following items that are included under GAAP: discontinued operations, non-core businesses in continuing operations, stock-based compensation, amortization of other intangible assets, restructuring costs, impairment of long-lived assets, gains and losses on derivatives and equity investments, and non-recurring costs. 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 p.m. (PST) to review the fourth quarter and fiscal year 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: 6496729) beginning at 5:00 p.m. (PST) on February 5 and will run through February 11. 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, the uncertainty of whether new services as provided by VeriSign will achieve market acceptance or result in any revenues, the risk that pending acquisitions will not be completed, will not be integrated successfully or will not be integrated successfully without incurring unanticipated costs, 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
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
December 31,
------------------------
2008 2007
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 789,068 $ 1,376,722
Accounts receivable, net of allowance for
doubtful accounts of $1,208 at December 31,
2008 and $6,329 at December 31, 2007 83,749 208,799
Prepaid expenses and other current assets 250,651 164,052
Assets held for sale 608,240 -
----------- -----------
Total current assets 1,731,708 1,749,573
----------- -----------
Property and equipment, net 382,241 621,917
Goodwill 283,109 1,082,420
Other intangible assets, net 35,312 121,792
Restricted cash and investments 1,858 46,936
Other assets 291,620 290,647
Investments in unconsolidated entities - 109,828
----------- -----------
Total long-term assets 994,140 2,273,540
----------- -----------
Total assets $ 2,725,848 $ 4,023,113
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 257,729 $ 398,124
Accrued restructuring costs 28,920 2,878
Deferred revenues 629,800 581,355
Deferred tax liabilities 5,521 2,632
Liabilities related to assets held for sale 49,160 -
----------- -----------
Total current liabilities 971,130 984,989
----------- -----------
Long-term deferred revenues 215,281 192,980
Long-term accrued restructuring costs 3,037 1,473
Convertible debentures 1,261,655 1,265,296
Long-term tax liability 57,026 41,133
----------- -----------
Total long-term liabilities 1,536,999 1,500,882
----------- -----------
Total liabilities 2,508,129 2,485,871
----------- -----------
Commitments and contingencies
Minority interest in subsidiaries 49,208 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: 191,547,795
excluding 112,717,587 held in treasury, at
December 31, 2008; and 222,849,348,
excluding 73,720,953 held in treasury, at
December 31, 2007 304 297
Additional paid-in capital 21,457,001 22,559,045
Accumulated deficit (21,318,531) (21,078,560)
Accumulated other comprehensive income 29,737 1,975
----------- -----------
Total stockholders' equity 168,511 1,482,757
----------- -----------
Total liabilities and stockholders' equity $ 2,725,848 $ 4,023,113
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
(1) (1) (1)
Revenues $ 247,008 $ 221,655 $ 961,735 $ 847,457
---------- ---------- ---------- ----------
Costs and expenses
Cost of revenues 59,575 56,412 227,351 240,962
Sales and marketing 36,832 57,663 167,184 236,729
Research and development 21,819 23,901 91,508 100,213
General and
administrative 53,565 85,205 206,294 263,862
Restructuring,
impairments and other
charges (reversals), net 81,928 201,388 188,551 234,977
Amortization of other
intangible assets 2,540 3,671 10,069 16,506
---------- ---------- ---------- ----------
Total costs and
expenses 256,259 428,240 890,957 1,093,249
---------- ---------- ---------- ----------
Operating income (loss) (9,251) (206,585) 70,778 (245,792)
Other income, net 72,541 8,455 52,473 94,618
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes, loss
from unconsolidated
entities and minority
interest 63,290 (198,130) 123,251 (151,174)
---------- ---------- ---------- ----------
Income tax (expense)
benefit (37,983) 13,095 (47,091) 6,863
Loss from unconsolidated
entities, net of tax (769) (4,430) (3,868) (2,018)
Minority interest, net of
tax 18,719 (1,299) 16,009 (3,840)
---------- ---------- ---------- ----------
Income (loss) from
continuing operations 43,257 (190,764) 88,301 (150,169)
(Loss) income from
discontinued operations,
net of tax (4,381) (28,393) (328,272) (1,632)
---------- ---------- ---------- ----------
Net (loss) income $ 38,876 $ (219,157) $ (239,971) $ (151,801)
========== ========== ========== ==========
Basic (loss) income per
share from:
Continuing operations $ 0.22 $ (0.85) $ 0.45 $ (0.63)
Discontinued operations (0.02) (0.13) (1.67) (0.01)
---------- ---------- ---------- ----------
Net (loss) income $ 0.20 $ (0.98) $ (1.22) $ (0.64)
========== ========== ========== ==========
Diluted (loss) income per
share from:
Continuing operations $ 0.22 $ (0.85) $ 0.44 $ (0.63)
Discontinued operations (0.02) (0.13) (1.64) (0.01)
---------- ---------- ---------- ----------
Net (loss) income $ 0.20 $ (0.98) $ (1.20) $ (0.64)
========== ========== ========== ==========
Shares used in per share
computation:
Basic 192,969 223,274 197,201 237,707
========== ========== ========== ==========
Diluted 193,587 223,274 200,602 237,707
========== ========== ========== ==========
(1) During the fourth quarter of 2008, the Company identified certain
matters related to historical timing of revenue recognition. In
presenting its Consolidated Statements of Operations, the Company has
adjusted its revenues and net loss, as reported, for the three months
ended December 31, 2007 and for the year ended December 31, 2007. The
Company has also adjusted its revenues and net loss, as reported, for
the nine months ended September 30, 2008, which is included in the
results of operations for the year ended December 31, 2008. The Company
reduced its revenues and increased its net loss, as reported, by $1.7
million and $6.3 million for the three months ended December 31, 2007,
and for the year ended December 31, 2007, respectively. The Company
reduced its revenues and increased its net loss, as reported, by $4.7
million for the nine months ended September 30, 2008. The Company is
in the process of determining the impact of income taxes on the
adjustments.
VERISIGN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended
December 31,
------------------------
2008 2007
----------- -----------
Cash flows from operating activities:
Net (loss) income (239,971) (151,801)
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Loss (gain) on divestiture of businesses, net
of tax (6,970) (72,857)
Gain on sale of investments in unconsolidated
entities, net of tax (48,028) -
Unrealized gain on joint venture call options - (10,925)
Unrealized (gain) loss on contingent interest
derivative on convertible debentures (3,615) 15,301
Depreciation of property and equipment and
other 100,131 115,441
Amortization of other intangible assets 25,663 116,064
Impairment of long-lived assets and other
charges 494,612 262,822
Acquired in-process research and development - -
Provision for doubtful accounts 1,916 850
Stock-based compensation 90,066 90,914
Net loss on sale and other-than-temporary
impairment of investments 6,364 1,787
Loss (earnings) from unconsolidated entities,
net of tax 3,868 2,018
Minority interest, net of tax (16,009) 3,840
Deferred income taxes (21,758) (17,460)
Changes in operating assets and liabilities,
excluding the effects of acquisitions and
divestitures:
Accounts receivable 47,485 (104,340)
Prepaid expenses and other assets 33,270 135,049
Accounts payable and accrued liabilities (112,884) (46,272)
Accrued restructuring costs 27,606 (404)
Deferred revenues 95,902 131,961
----------- -----------
Net cash provided by operating activities 477,648 471,989
----------- -----------
Cash flows from investing activities:
Proceeds from maturities and sales of
investments 99,635 206,707
Purchases of investments - (311)
Reclassification of cash equivalents to other
current assets (256,709) -
Purchases of property and equipment (103,716) (152,992)
Proceeds from sale of property and equipment 48,843 -
Cash paid in business combinations, net of cash
acquired (11,733) -
Proceeds received from divestiture of
businesses, net of cash contributed 74,918 171,802
Investments in unconsolidated entities (15,679) (17,150)
Proceeds from sale of investments in
unconsolidated entities 203,856 -
Proceeds received on long term note receivable - -
Cash received from trust, previously restricted 45,000 -
Proceeds from contingent purchase price
adjustment 3,856 -
Other investing activities 265 2,501
----------- -----------
Net cash provided by (used in) investing
activities 88,536 210,557
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock purchase
plans 122,549 307,864
Repurchases of common stock (1,327,379) (1,156,491)
Proceeds from credit facility, net of issuance
costs 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 - 1,223,691
Excess tax benefit associated with stock
options 36,161 12,607
Repayment of long-term liabilities - -
Dividend paid to minority interest holders in
subsidiary (745) -
----------- -----------
Net cash provided by (used in) financing
activities (1,169,414) 188,671
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents 15,575 3,721
----------- -----------
Net increase in cash and cash equivalents (587,655) 874,938
Cash and cash equivalents at beginning of year 1,376,722 501,784
----------- -----------
Cash and cash equivalents at end of year 789,068 1,376,722
Cash and cash equivalents of discontinued
operations at end of year - -
----------- -----------
Cash and cash equivalents of continuing
operations at end of year $ 789,068 $ 1,376,722
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest $ 40,755 $ 1,453
=========== ===========
Cash paid for income taxes, net of refunds
received $ 14,712 $ 21,300
=========== ===========
Preferred stock received as consideration for
divestiture of business $ - $ 3,750
=========== ===========
Note received from divestiture of business $ - $ 15,000
=========== ===========
Amounts payable for purchases of property and
equipment $ 10,885 $ -
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, 2008 December 31, 2008
---------------------- ----------------------
Operating Operating
Income Net Income Income Net Income
---------- ---------- ---------- ----------
GAAP as reported $ (9,251) $ 38,876 $ 70,778 $ (239,971)
Discontinued operations 4,381 328,272
Non-core businesses in
continuing operations(1) (907) (71,353) 6,398 (57,991)
---------- ---------- ---------- ----------
Core operations (10,158) (28,096) 77,176 30,310
Adjustments to core
operations (1):
Stock-based compensation 9,635 9,635 49,100 49,100
Amortization of other
intangible assets 2,540 2,540 10,069 10,069
Restructuring costs 4,133 4,133 104,505 104,505
Impairment of long-lived
assets (2) 80,058 61,049 80,058 61,049
Gains and losses on
derivatives and equity
investments (2,169) (5,459)
Non-recurring costs (3) (84) (84) (6,724) (6,724)
Tax adjustment (4) 7,220 (49,758)
---------- ---------- ---------- ----------
Non-GAAP as adjusted $ 86,124 $ 54,228 $ 314,184 $ 193,092
========== ========== ========== ==========
Diluted shares 193,587 193,587 200,602 200,602
Per diluted share, core
operations $ (0.05) $ (0.15) $ 0.38 $ 0.15
========== ========== ========== ==========
Per diluted share, non-GAAP
as adjusted $ 0.44 $ 0.28 $ 1.57 $ 0.96
========== ========== ========== ==========
(1) As of December 31, 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 Authentication.
(2) During 2008, the Company recorded an impairment charge for certain
long-lived assets related to its VeriSign Japan business, of which
$19.0 million is related to minority interest.
(3) During 2008, non-recurring costs primarily consist of a reversal of
certain previously accrued litigation matters.
(4) 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,
impairment of long-lived assets, gains and losses on derivatives and equity
investments, and non-recurring costs. 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 Year Ended
------------------------------------------- ----------
December September June March December
31, 30, 30, 31, 31,
2008 2008 2008 2008 2008
---------- ---------- ---------- ---------- ----------
Revenues from core
operations (1) $ 245,207 $ 238,418 $ 231,578 $ 221,115 $ 936,317
========== ========== ========== ========== ==========
Three Months Ended Year Ended
------------------------------------------- ----------
December September June March December
31, 30, 30, 31, 31,
2007 2007 2007 2007 2007
---------- ---------- ---------- ---------- ----------
Revenues from core
operations (1) $ 210,725 $ 201,519 $ 191,786 $ 179,141 $ 783,171
========== ========== ========== ========== ==========
Contacts Investor Relations: Nancy Fazioli ir@verisign.com 650-426-5146 Media Relations: Christina Rohall crohall@verisign.com 650-336-4663
SOURCE: VeriSign, Inc.
mailto:ir@verisign.com mailto:crohall@verisign.com
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