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VeriSign Reports Second Quarter 2006 Results

July 20, 2006

MOUNTAIN VIEW, Calif., July 20, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- VeriSign, Inc. (Nasdaq: VRSN), the leading provider of intelligent infrastructure services for the Internet and telecommunications networks, today reported its results for the second quarter ended June 30, 2006.

VeriSign reported total revenue of $392 million for the second quarter of 2006. On a GAAP basis, VeriSign reported net income of $350 million for the second quarter of 2006 and earnings per share of $1.42 per fully-diluted share. Net income on a GAAP basis for the second quarter of 2006 included a non-cash stock-based compensation charge of $13.2 million for stock option expensing and tax benefits totaling $327 million.

On a non-GAAP basis, using a 30% effective tax rate on non-GAAP pre-tax income of $84 million, earnings per share for the second quarter was $0.24 per diluted share. These non-GAAP results exclude the following items which are included under GAAP: amortization and impairment of intangible assets, acquired in-process research and development, non-cash stock-based compensation, litigation settlements, restructuring and other charges (reversals), net gain on the sale of investments, and income taxes. A table reconciling the GAAP to non-GAAP net income reported above is appended to this release.

"We are pleased with our execution in the first half of 2006," said Stratton Sclavos, Chairman and Chief Executive Officer of VeriSign. "As our results indicate, demand for our intelligent infrastructure services continues to grow as our customers accelerate their migration to network-based interactions with their business partners, employees and customers."

"Our second quarter results reflect solid performance in the core business and higher than forecasted revenue in the mobile content business, leading to strong operating income for the quarter," said Dana Evan, Chief Financial Officer of VeriSign. "Driven by our recurring revenue model, these results improved our deferred revenue to $560 million and allowed us to deliver solid operating cash flows of over $90 million this quarter."

During the second quarter within the Internet Services Group (ISG), VeriSign Security Services (VSS) announced that Charles Schwab selected VeriSign to provide a full set of security services for their clients. Under the terms of the agreement, Charles Schwab will deploy both the VeriSign Identity Protection (VIP) Fraud Detection Service and VIP Authentication Service to secure client login and transaction information. VSS also signed a definitive agreement to acquire GeoTrust, a leading supplier of SSL and other solutions to secure e-business transactions, for approximately $125 million in cash. The acquisition is expected to close in the second half of this year subject to regulatory approvals and is expected to be accretive to earnings per share in 2007.

VeriSign Communications Services (VCS) announced a number of significant customer wins in the quarter for its core solutions, including providing iRoam services to Metro PCS, network connectivity and database services to US LEC and SMS alerts for eBay and Oracle users. As part of VCS's strategy to expand internationally, VCS signed an agreement to jointly market advance services with IDT Telecom to emerging international markets. In addition, VCS has signed a multi-year deal with SK Telecom to provide a variety of services including Signaling System 7 (SS7) network connectivity. VCS also completed the acquisition of m-Qube, a leading mobile channel enabler, for $266 million in cash during the quarter.

As previously disclosed on June 27, 2006, VeriSign's Board of Directors has commenced an internal review and analysis of VeriSign's historical stock option grants. This internal review is currently in progress. The Board of Directors is being assisted in its review by independent legal counsel. Facts may come to light once the review is completed that may require us to change our accounting treatment of stock options granted in prior periods which may have a material adverse effect on our results of operations for those periods or other periods.

    Additional Financial Information

    -- VeriSign ended the second quarter with Cash, Cash Equivalents,
       Restricted Cash and Short-term Investments of $734 million, a decrease
       of $76 million from the prior quarter and down $197 million year over
       year.  During Q2, VeriSign repurchased approximately 3 million shares
       of its common stock for a net purchase price of $60 million.  In
       addition VeriSign acquired m-Qube for $266 million in cash.
    -- VeriSign announced that its Board of Directors has authorized a new
       $1 billion stock repurchase program.  The 2006 program succeeds the
       2005 program which authorized the repurchase of up to $500 million of
       VeriSign common stock which was completed in Q2.
    -- Cash flow from operations was $91 million for the second quarter of
       2006.
    -- Deferred revenue on the balance sheet was $560 million as of June 30,
       2006, an increase of $21 million from the prior quarter and up
       approximately $83 million year over year.
    -- Net days sales outstanding (Net DSO), which takes into account the
       change in deferred revenue balances was 53 days for Q2 and within
       VeriSign's targeted range.
    -- Capital expenditures for the second quarter of 2006 were approximately
       $37 million.
    -- Non-GAAP operating income for Q2 was $79 million, an increase of
       approximately $4 million from the prior quarter.
    -- VeriSign has released its valuation allowance previously applied to
       certain U.S. deferred tax assets in the amount of $214 million.
       Additionally, VeriSign received a favorable ruling from the IRS which
       resulted in a one-time benefit to tax expense in the amount of
       $113 million.
    -- During the quarter, VeriSign put in place a $500 million credit
       facility.

    Internet Services Group

    -- The Internet Services Group (ISG) -- which includes VeriSign Security
       Services (VSS) and VeriSign Information Services (VIS) -- delivered
       $186 million of revenue in the second quarter of 2006.
    -- The VeriSign Web site certificate business issued approximately 139,000
       new and renewal certificates in Q2, ending the quarter with a base of
       more than 520,000 certificates, up from 508,000 at the end of the first
       quarter of 2006.  Year over year the base is up over 10%.
    -- The VeriSign Information Services business ended the quarter with
       approximately 57.5 million active domain names in .com and .net, a net
       increase of approximately 3.5 million names or 6% over Q1.

    Communications Services Group

    -- VeriSign Communications Services (VCS) Group -- which provides
       intelligent communications, commerce and content services to
       telecommunications carriers and next generation service providers --
       delivered revenues of $206 million in the second quarter of 2006.
    -- Within VCS, the Communications and Commerce group generated revenues of
       $120 million. The Content group generated revenues of $86 million,
       which includes $74 million for Jamba!/Jamster B2C services and
       $12 million from B2B services which includes the m-Qube acquisition.
    -- VeriSign Communications Services Group ended Q2 with a base of
       approximately 8.9 million wireless billing customer subscribers, an
       increase of approximately 24% year over year.
    -- The VCS business supported 16.4 billion database queries in Q2 2006, up
       14% year over year.

    Today's Conference Call

VeriSign will be hosting a teleconference call today at 2:00 pm (PDT) to review the quarter's results. The call will be accessible by direct dial at (800) 263-8506 (US) or (719) 457-2681 (international). A listen-only live webcast 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 (passcode: 4621310) or (719) 457-0820 (international) beginning at 5:00 pm (PDT) on July 20 and will run through July 27. This press release and the financial information discussed on today's conference call are available on Investor Relations tab in the company's website at http://investor.verisign.com .

About VeriSign

VeriSign, Inc., operates intelligent infrastructure services that enable and protect billions of interactions every day across the world's voice and data networks. 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 and Section 21E of the Securities Exchange Act of 1934. 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 and market acceptance of our existing services, 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 acquired businesses will not be integrated successfully and unanticipated costs of such integration. 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, 2005 and quarterly reports on Form 10-Q. 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 data)
                                   (Unaudited)
                                             June 30,        December 31,
                                               2006             2005

                       Assets
    Current assets:
        Cash and cash equivalents            $426,935         $476,826
        Short-term investments                256,538          378,006
        Accounts receivable, net              303,336          271,883
        Prepaid expenses and other
         current assets                        98,004           80,079
        Deferred tax assets                   114,028           16,186
        Current assets of discontinued
         operations                             6,397            5,295
                Total current assets        1,205,238        1,228,275
        Property and equipment, net           572,810          553,036
        Goodwill                            1,348,913        1,071,910
        Other intangible assets, net          329,061          225,302
        Restricted cash                        50,972           50,972
        Long-term deferred tax assets         152,486               --
        Long-term note receivable                  --           26,419
        Other assets, net                      22,581           16,985
                Total long-term assets      2,476,823        1,944,624
                Total assets               $3,682,061       $3,172,899

           Liabilities and Stockholders' Equity
    Current liabilities:
        Accounts payable and accrued
         liabilities                         $520,586         $555,458
        Accrued restructuring costs             6,442            7,440
        Deferred revenue                      415,470          368,413
        Current liabilities of
         discontinued operations                4,034            6,822
                Total current liabilities     946,532          938,133
        Long-term deferred revenue            144,507          127,175
        Long-term accrued restructuring
         costs                                  9,139           10,876
        Long-term debt                        174,000               --
        Other long-term liabilities             3,753            4,995
        Deferred tax liabilities                   --           18,560
                Total long-term
                 liabilities                  331,399          161,606
                Total liabilities           1,277,931        1,099,739
    Minority interest in subsidiaries          46,846           41,485
    Commitments and contingencies
    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:
          242,890,145 and  246,418,940
            (excluding  35,427,686 and
             28,981,444 shares held in
             treasury
             at June 30, 2006 and
              December 31, 2005,
              respectively)                       243              246
        Additional paid-in capital         23,144,477       23,205,261
        Unearned compensation                      --          (13,911)
        Accumulated deficit               (20,777,730)     (21,147,368)
        Accumulated other comprehensive
         loss                                  (9,706)         (12,553)
                Total stockholders'
                 equity                     2,357,284        2,031,675
                Total liabilities and
                 stockholders' equity      $3,682,061       $3,172,899


                         VERISIGN, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)

                                       Three Months Ended   Six Months Ended
                                            June 30,            June 30,
                                         2006      2005      2006      2005
    Revenues                           $391,852  $430,408  $765,456  $817,675
    Costs and expenses:
     Cost of revenues (1)               146,776   134,232   285,688   256,620
     Sales and marketing (1)             92,273   137,203   182,660   263,384
     Research and development (1)        30,430    24,832    58,463    45,031
     General and administrative (1)      54,912    49,675   113,405    91,774
     Restructuring and other
      (reversals) charges                   (77)     (133)    1,382    (2,008)
     Amortization of other intangible
      assets                             31,832    24,821    59,832    47,661
     Impairment of other intangible
      assets                                 --        --     1,950        --
     Acquired in-process research and
      development                         4,600     4,300    15,500     4,300
        Total costs and expenses        360,746   374,930   718,880   706,762
        Operating income                 31,106    55,478    46,576   110,913
    Non-operating income:
       Other income, net                  5,119    14,084    33,916    29,361
       Minority interest in net income
         of subsidiaries                   (758)   (1,048)   (1,405)   (2,176)
    Income from continuing operations
     before income taxes                 35,467    68,514    79,087   138,098
    Income tax (benefit) expense       (314,318)   31,568  (289,691)   55,992
         Net income from continuing
          operations, net of tax        349,785    36,946   368,778    82,106
         Net income from discontinued
          operations, net of tax             82     4,349       860     8,364

         Net income                    $349,867   $41,295  $369,638   $90,470

    Basic net income per share:
        Income from continuing
         operations                       $1.43     $0.14     $1.51     $0.32
        Income from discontinued
         operations                          --      0.02        --      0.03
        Net income per share              $1.43     $0.16     $1.51     $0.35

    Diluted net income per share:
        Income from continuing
         operations                       $1.42     $0.14     $1.50     $0.31
        Income from discontinued
         operations                          --      0.01        --      0.03
        Net income per share              $1.42     $0.15     $1.50     $0.34


    Shares used in per share
     computation:
        Basic                           244,744   263,538   245,171   258,018
        Diluted                         246,587   272,888   247,069   266,871

    (1) Includes the following amounts
     related to stock-based
     compensation:
            Cost of revenue              $3,151      $121    $6,932      $171
            Sales and marketing           2,957       194     6,078       252
            Research and development      2,087       451     4,239       465
            General and administrative    5,049       394    11,141       650
              Total stock-based
               compensation             $13,244    $1,160   $28,390    $1,538


                         VERISIGN, INC. AND SUBSIDIARIES

                       STATEMENTS OF INCOME RECONCILIATION
                      (In thousands, except per share data)
                                   (Unaudited)

                                               Three Months Ended June 30,
                                                  2006              2005

    Revenue reconciliation

    Revenue from continuing operations          $391,852          $430,408
           Discontinued operations
            revenue (1)                               79            14,422
    Revenue including discontinued
     operations                                 $391,931          $444,830

    (1) For the three months ended June 30, 2006 and 2005, discontinued
    operations revenue represents activity related to the Payments Gateway
    business. VeriSign previously provided investors and analysts forecasts
    for the three months ended June 30, 2005 that included revenue up until
    an estimated disposition date of the Payments business. For GAAP
    purposes, revenue for this and all periods is reclassified to net income
    from discontinued operations.


    Statement of Income Reconciliation

    Net income on a GAAP basis                  $349,867           $41,295
           Amortization of other
            intangible assets                     31,832            24,821
           Acquired in-process research
            and development                        4,600             4,300
           Stock-based compensation               13,244             1,160
           Litigation settlements                 (1,500)               --
           Restructuring and other
            (reversals)                              (77)             (133)
           Net gain on sale of
            investments                               28                58
           Income tax (benefit) expense         (314,318)(2)        33,693(3)
       Non-GAAP income before income
        taxes                                     83,676           105,194
       Non-GAAP tax rate in lieu of the
        GAAP rate                                (25,103)          (31,558)
    Net income on a non-GAAP basis               $58,573           $73,636

    Statement of Income Reconciliation per Share

    Diluted net income per share on a
     GAAP basis                                    $1.42             $0.15
           Amortization of other
            intangible assets                       0.13              0.09
           Acquired in-process research
            and development                         0.02              0.02
           Stock-based compensation                 0.05                --
           Litigation settlements                     --                --
           Restructuring and other
            (reversals)                               --                --
           Net gain on sale of
            investments                               --                --
           Non-GAAP tax rate of 30% in
            lieu of the GAAP rate                  (1.38)             0.01
    Diluted net income per share on a
     non-GAAP basis                                $0.24             $0.27

    Shares used in calculation of net
     income per share                            246,587           272,888


    (2) Includes the net release of a valuation allowance and favorable IRS
    ruling.
    (3) Includes income tax expense from discontinued operations of $2,125.

    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 releases,
    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: amortization and
    impairment of intangible assets, acquired in-process research and
    development, stock-based compensation, litigation settlements,
    restructuring and other charges (reversals), net gain on the sale of
    investments and income taxes. The 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 which
    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.


                         VERISIGN, INC. AND SUBSIDIARIES

                       STATEMENTS OF INCOME RECONCILIATION
                      (In thousands, except per share data)
                                   (Unaudited)

                                                  Six Months Ended June 30,
                                                     2006        2005

    Revenue reconciliation

    Revenue from continuing operations            $765,456     $817,675
           Discontinued operations
            revenue (1)                                 27       28,146
    Revenue including discontinued
     operations                                   $765,483     $845,821

    (1) For the six months ended June 30, 2006 and 2005, discontinued
    operations revenue represents activity related to the Payments Gateway
    business. VeriSign previously provided investors and analysts forecasts
    for the six months ended June 30, 2005 that included revenue up until an
    estimated disposition date of the Payments business. For GAAP purposes,
    revenue for this and all periods is reclassified to net income from
    discontinued operations.

    Statement of Income Reconciliation

    Net income on a GAAP basis                    $369,638      $90,470
           Amortization of other
            intangible assets                       59,832       47,661
           Impairment of other intangible
            assets                                   1,950           --
           Acquired in-process research
            and development                         15,500        4,300
           Stock-based compensation                 28,390        1,538
           Litigation settlements                      500           --
           Restructuring and other
            charges (reversals)                      1,382       (2,008)
           Net gain on sale of
            investments                            (20,220)      (2,217)
           Income tax (benefit) expense           (289,691)(2)   60,079(3)
       Non-GAAP income before income
        taxes                                      167,281      199,823
       Non-GAAP tax rate in lieu of the
        GAAP rate                                  (50,184)     (59,947)
    Net income on a non-GAAP basis                $117,097     $139,876

    Statement of Income Reconciliation
     per Share


    Diluted net income per share on a
     GAAP basis                                      $1.50        $0.34
           Amortization of other
            intangible assets                         0.24         0.18
           Impairment of other intangible
            assets                                    0.01           --
           Acquired in-process research
            and development                           0.06         0.02
           Stock-based compensation                   0.11           --
           Litigation settlements                       --           --
           Restructuring and other
            charges (reversals)                       0.01        (0.01)
           Net gain on sale of
            investments                              (0.08)       (0.01)
           Non-GAAP tax rate of 30% in
            lieu of the GAAP rate                    (1.38)          --
    Diluted net income per share on a
     non-GAAP basis                                  $0.47        $0.52

    Shares used in calculation of net
     income per share                              247,069      266,871


    (2) Includes the net release of a valuation allowance and favorable IRS
    ruling.
    (3) Includes income tax expense from discontinued operations of $4,087.

    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 releases,
    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: amortization and
    impairment of intangible assets, acquired in-process research and
    development, stock-based compensation, litigation settlements,
    restructuring and other charges (reversals), net gain on the sale of
    investments and income taxes. The 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 which
    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.


                         VERISIGN, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)
                                                   Six Months Ended
                                                      June 30,
                                                2006              2005
    Cash flow from operating activities:
       Net income                             $369,638           $90,470
       Adjustments to reconcile net
        income to net cash provided
        by operating activities:
             Depreciation of property
              and equipment                     49,292            42,582
             Amortization of other
              intangible assets                 59,832            47,661
             Impairment of other
              intangible assets                  1,950                --
             Acquired in-process
              research and  development         15,500             4,300
             Provision for doubtful accounts    (1,301)            2,489
             Stock-based compensation           28,688             2,722
             Non-cash restructuring
              and other charges                     32               146
             Net gain on sale and impairment of
              investments                      (21,822)              (96)
             Minority interest in net
              income of subsidiary               1,450             2,176
             Tax benefit associated
              with stock options                    --            16,337
             Deferred income taxes            (279,702)           (7,115)
             Loss on disposal of
              property and equipment                --               186
       Changes in operating assets
        and liabilities:
             Accounts receivable                43,318           (77,227)
             Prepaid expenses and
              other current assets             (14,661)          (54,048)
             Accounts payable and
              accrued liabilities             (131,677)           83,386
             Deferred revenue                   62,083            59,957
                        Net cash provided by
                         operating
                         activities            182,620           213,926
    Cash flow from investing activities:
             Purchases of investments         (536,716)         (204,065)
             Proceeds from maturities
              and sales of investments         657,224           178,091
             Purchases of property
              and equipment                    (63,586)          (45,820)
             Cash paid in business
              combinations, net of
              cash acquired                   (426,499)          (18,002)
             Net proceeds received on
              long-term note receivable and
              investment                        47,786            17,213
             Other assets                       (1,513)          (11,484)
                    Net cash used in
                     investing activities     (323,304)          (84,067)
    Cash flow from financing activities:
             Proceeds from issuance
              of common stock from
              option exercises and employee
              stock purchase plan               39,543            35,898
             Change in net assets of
              subsidiary                          (588)              165
             Repurchase of common
              stock                           (134,996)          (42,477)
             Proceeds from drawdown
              of long-term debt                174,000                --
             Debt issuance costs                (3,381)               --
             Excess tax benefits from
              stock-based
              compensation                      18,366                --
             Repayment of long-term
              liabilities                       (1,466)           (1,100)
                    Net cash provided by
                     (used in) financing
                     activities                 91,478            (7,514)
    Effect of exchange rate changes              1,439            (3,407)
    Net (decrease) increase in cash and
     cash equivalents                          (47,767)          118,938
    Cash and cash equivalents at
     beginning of period                       478,660           330,641
    Cash and cash equivalents at end of
     period                                   $430,893          $449,579
    Cash and cash equivalents of
     discontinued operations                    (3,958)           (1,864)
                                              $426,935          $447,715


SOURCE VeriSign, Inc.

Brian O'Shaughnessy, Media Relations, +1-650-426-5270, or
boshaughnessy@verisign.com, or Tom McCallum, Investor Relations, +1-650-426-3744, or
tmccallum@verisign.com, both of VeriSign, Inc.
http://www.prnewswire.com

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