VeriSign Reports Second Quarter 2008 Results
MOUNTAIN VIEW, CA, Aug 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 second quarter ended June 30, 2008.
VeriSign reported revenue of $303 million for the second quarter of 2008. On a GAAP basis, VeriSign reported a net loss of $68 million and a net loss per share of $0.35. These GAAP results reflect a $92 million non-cash impairment charge on certain long-lived assets and assets held for sale. Also recorded were restructuring charges of $98 million in continuing and discontinued operations.
VeriSign reported segment revenue for Internet Infrastructure and Identity Services (3IS), or the "core businesses" of Naming, SSL and IAS, of $233 million, up 4% from Q1 2008 and up 21% year over year.
On a non-GAAP basis (which excludes items described below) for our core businesses, VeriSign reported net income of $50 million for the second quarter of 2008 and fully-diluted earnings per share of $0.25. A table reconciling the GAAP to the non-GAAP results reported above is appended to this release.
"Our revenue performance and non-GAAP earnings validate our strategy to focus on our core businesses, a strategy to which we are firmly committed," said Jim Bidzos, executive chairman of the board of directors, president and chief executive officer on an interim basis of VeriSign. "As we look toward the future, we will work to identify opportunities that align with our core competencies and extend what we believe to be our leading position as the trusted third party of the Internet."
"We are pleased by our performance during the second quarter," said Brian Robins, acting chief financial officer of VeriSign. "Company-wide disciplined expense management contributed to non-GAAP operating margin improvement for the core services of nearly 400 basis points since last quarter, and the solid performance of our core services coupled with other positive working capital contributions resulted in strong cash flow of $169 million in the quarter."
Business and Corporate Highlights
-- VeriSign Naming Services ended the quarter with approximately 87.3
million active domain names in the adjusted zone for .com and .net,
representing a 3% increase over Q1 2008 and 20% increase year over year.
-- In June, VeriSign announced additional infrastructure deployments in
Europe with new sites in France and Belgium to fortify its Internet
infrastructure as part of Project Titan.
-- VeriSign's Naming Services business continues to stimulate demand for
.com by seeking new distribution partners. VeriSign recently announced the
first .com/.net ICANN accredited registrar in Mexico, Interplanet.
-- VeriSign SSL Services ended the quarter with 1,056,000 SSL
certificates in the installed base, up 3% from 1,024,000 in Q1 2008 and an
increase of 14% from 923,000 for certificates for the same quarter last
year.
-- VeriSign EV SSL customers announced in Q2 include Buy.com, Blue Nile
and Overtons.
-- As of June 30, 2008, there are more than 1.9 million credentials in
distribution for our VIP network and one time password (OTP) programs.
-- VeriSign was selected during the quarter by Microsoft as an OpenID
provider for users of HealthVault.
-- On July 3, we announced that Jim Bidzos, founder of VeriSign, was
appointed executive chairman, president and chief executive, on an interim
basis. A search for a permanent president and chief executive is currently
underway.
-- VeriSign 2008 Analyst Day will be held on Wednesday, November 12, 2008
in New York City. Details on the event agenda and registration will be
announced at a later date.
Financial Highlights
-- Non-core businesses delivered $70 million of revenue in the second
quarter of 2008, and revenue from discontinued operations was $89 million.
-- VeriSign ended the second quarter of 2008 with Cash, Cash Equivalents,
Restricted Cash and Short-term Investments of $669 million, an increase of
$137 million from the prior quarter.
-- Cash flow from operations for the quarter was $169 million and $244
million year-to-date.
-- Capital expenditures were approximately $34 million for the second
quarter of 2008 and $60 million year-to-date.
-- During the second quarter of 2008, the balance of $140 million on the
line of credit was paid in full.
-- In June 2008, the company completed the sale and leaseback of two
headquarter buildings in Mountain View, California. The buildings were
sold for net cash proceeds of $48 million.
-- Deferred revenue on June 30, 2008 totaled $780 million, an increase of
$19 million from the prior quarter.
-- On August 5, 2008, the Board of Directors approved an additional
authorization for share repurchases of $680 million, which brings the total
amount authorized to $1 billion.
The financial statements in this press release include an immaterial revision to reduce the income tax expense for the first quarter of 2008.
Non-GAAP Items
Non-GAAP results exclude the following items which are included under GAAP: income or loss from discontinued operations, loss from non-core businesses, stock-based compensation, amortization of intangible assets, restructuring costs, non-recurring costs, and gains and losses on investments and derivatives. 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 (PDT) to review the quarter's results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-0976 (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: 9794237) beginning at 5:00 pm (PDT) on August 6 and will run through August 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 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 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)
June 30, December 31,
2008 2007
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 621,017 $ 1,376,722
Short-term investments 548 1,011
Accounts receivable, net of allowance for
doubtful accounts of $3,729 and $6,329 at
June 30, 2008, and December 31, 2007,
respectively 125,138 208,799
Prepaid expenses and other current assets 160,203 163,041
Assets held for sale 466,204 -
----------- -----------
Total current assets 1,373,110 1,749,573
----------- -----------
Property and equipment, net 435,971 621,917
Goodwill 617,524 1,082,420
Other intangible assets, net 62,386 121,792
Restricted cash 47,209 46,936
Other assets 300,976 290,647
Investments in unconsolidated entities 112,137 109,828
----------- -----------
Total long-term assets 1,576,203 2,273,540
----------- -----------
Total assets $ 2,949,313 $ 4,023,113
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 318,110 $ 398,124
Accrued restructuring costs 31,544 2,878
Deferred revenues 581,833 552,070
Other liabilities 2,844 2,632
Liabilities related to assets held for sale 9,041 -
----------- -----------
Total current liabilities 943,372 955,704
----------- -----------
Long-term deferred revenues 198,486 186,719
Long-term accrued restructuring costs 1,208 1,473
Convertible debentures 1,263,199 1,265,296
Other long-term liabilities 39,846 41,133
----------- -----------
Total long-term liabilities 1,502,739 1,494,621
----------- -----------
Total liabilities 2,446,111 2,450,325
----------- -----------
Commitments and contingencies
Minority interest in subsidiaries 58,715 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: 196,687,528
excluding 104,896,643 held in treasury, at
June 30, 2008, and 222,849,348 excluding
73,720,953 shares held in treasury, at
December 31, 2007 301 297
Additional paid-in capital 21,551,301 22,559,045
Accumulated deficit (21,117,891) (21,043,014)
Accumulated other comprehensive income 10,776 1,975
----------- -----------
Total stockholders' equity 444,487 1,518,303
----------- -----------
Total liabilities and stockholders' equity $ 2,949,313 $ 4,023,113
=========== ===========
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues $ 303,240 $ 258,988 $ 599,873 $ 528,884
--------- --------- --------- ---------
Costs and expenses
Cost of revenues 86,033 82,675 177,620 169,561
Sales and marketing 51,993 62,545 109,581 139,732
Research and development 32,891 31,868 68,752 71,937
General and administrative 57,783 74,355 120,380 122,846
Restructuring, impairments
and other charges, net 136,958 14,319 157,071 38,434
Amortization of other
intangible assets 5,495 16,461 14,193 34,631
--------- --------- --------- ---------
Total costs and expenses 371,153 282,223 647,597 577,141
--------- --------- --------- ---------
Operating loss (67,913) (23,235) (47,724) (48,257)
Other (loss) income, net (5,171) 11,934 (7,743) 93,214
--------- --------- --------- ---------
(Loss) income from continuing
operations before income
taxes, earnings (loss)
from unconsolidated entities
and minority interest (73,084) (11,301) (55,467) 44,957
--------- --------- --------- ---------
Income tax benefit (expense) 4,293 (5,632) (1,003) (10,254)
Earnings (loss) from
unconsolidated entities, net
of tax 1,172 1,748 (590) 2,196
Minority interest, net of tax (989) 82 (1,895) (487)
--------- --------- --------- ---------
(Loss) income from continuing
operations (68,608) (15,103) (58,955) 36,412
Discontinued operations, net of
tax 565 10,386 (15,192) 20,624
Net (loss) income $ (68,043) $ (4,717) $ (74,147) $ 57,036
========= ========= ========= =========
Basic (loss) income per share
from:
Continuing operations $ (0.35) $ (0.06) $ (0.29) $ 0.15
Discontinued operations - 0.04 (0.08) 0.08
--------- --------- --------- ---------
Net (loss) income $ (0.35) $ (0.02) $ (0.37) $ 0.23
========= ========= ========= =========
Diluted (loss) income per share
from:
Continuing operations $ (0.35) $ (0.06) $ (0.29) $ 0.15
Discontinued operations - 0.04 (0.08) 0.08
--------- --------- --------- ---------
Net (loss) income $ (0.35) $ (0.02) $ (0.37) $ 0.23
========= ========= ========= =========
Shares used in per share
computation:
Basic 195,515 243,846 201,032 243,849
========= ========= ========= =========
Diluted 195,515 243,846 201,032 246,102
========= ========= ========= =========
In presenting the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008, the Company has adjusted its net loss, as reported, for the three months ended March 31, 2008. Penalties and interest related to late payment of federal and state payroll taxes of $7.3 million previously recorded to general and administrative expense for the three months ended March 31, 2008, were revised to the previous periods in which the charges arose. Additionally, the Company reduced its total income tax expense for the three months ended March 31, 2008, by $5.0 million.
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
2008 2007
---------- ----------
Cash flows from operating activities:
Net (loss) income $ (74,147) $ 57,036
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Gain on divestiture of businesses, net of tax (31,629) (74,999)
Unrealized gain on joint venture call options - (3,755)
Unrealized gain on contingent interest
derivative on convertible debentures (2,084) -
Depreciation of property and equipment 61,084 55,564
Amortization of other intangible assets 17,452 61,456
Impairment of goodwill, other intangible
assets and assets held for sale 117,208 4,849
Provision for doubtful accounts 1,166 (720)
Stock-based compensation 46,096 42,047
Restructuring and other charges, net 45,679 37,342
Loss on sale of property and equipment 80,371 -
Net gain on sale and impairment of
investments (258) (885)
Loss (earnings) from unconsolidated entities,
net of tax 590 (2,196)
Minority interest, net of tax 1,895 487
Deferred income taxes (19,355) (11,469)
Changes in operating assets and liabilities:
Accounts receivable 31,186 (110,843)
Prepaid expenses and other current assets 10,330 130,661
Accounts payable and accrued liabilities (104,105) (106,241)
Deferred revenues 62,302 76,698
---------- ----------
Net cash provided by operating activities 243,781 155,032
---------- ----------
Cash flows from investing activities:
Purchases of investments - (135,882)
Proceeds from sale of property and equipment 48,843 -
Proceeds from maturities and sales of
investments 100 248,128
Purchases of property and equipment (59,620) (47,511)
Proceeds received from divestiture of
businesses, net of cash contributed 60,613 152,643
Proceeds received from contingent purchase price
adjustment 1,175 -
Other assets 1,950 1,989
---------- ----------
Net cash provided by investing activities 53,061 219,367
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock purchase
plans 92,405 -
Change in net assets of minority interest 134 89
Repurchases of common stock (1,148,380) -
Proceeds from credit facility 200,000 -
Repayment of short-term debt related to credit
facility (200,000) (199,000)
Dividend paid to minority interest (723) -
---------- ----------
Net cash used in financing activities (1,056,564) (198,911)
---------- ----------
Effect of exchange rate changes on cash and cash
equivalents 4,017 (984)
---------- ----------
Net (decrease) increase in cash and cash
equivalents (755,705) 174,504
Cash and cash equivalents at beginning of period 1,376,722 501,784
---------- ----------
Cash and cash equivalents at end of period 621,017 676,288
Cash and cash equivalents of Jamba Service at end
of period - (19,771)
---------- ----------
Cash and cash equivalents of continuing operations
at end of period $ 621,017 $ 656,517
========== ==========
Supplemental cash flow disclosures:
Cash paid for interest $ 20,442 $ 2,649
========== ==========
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, 2008 June 30, 2008
-------------------- --------------------
Operating Net Operating Net
Income Income Income Income
--------- --------- --------- ---------
GAAP as reported $ (67,913) $ (68,043) $ (47,724) $ (74,147)
Discontinued operations and
non-core businesses (1) 52,981 60,828 69,865 87,948
Adjustments to core
businesses: (1)
Stock based compensation 16,549 16,549 30,456 30,456
Amortization of intangibles 2,537 2,537 5,028 5,028
Restructuring costs 81,899 81,899 96,023 96,023
Other non-recurring costs
(2) (6,364) (6,364) (6,289) (6,289)
Gains or losses on
investments and
derivatives (410) (2,408)
Tax adjustment (3) (37,166) (42,980)
--------- --------- --------- ---------
Non-GAAP as adjusted $ 79,689 $ 49,830 $ 147,359 $ 93,631
========= ========= ========= =========
Fully-diluted shares 202,505 202,505 206,488 206,488
--------- --------- --------- ---------
Per fully-diluted share $ 0.39 $ 0.25 $ 0.71 $ 0.45
========= ========= ========= =========
(1) As of June 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) Other non-recurring costs primarily consists of a $6.3 million release
of costs expected to be incurred settling a legal matter.
(3) Non-GAAP tax is calculated as 30% of income from continuing operations,
excluding minority interest, which is presented net of tax on the
Statements 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: income or loss from discontinued operations, loss from non-core businesses, stock-based compensation, amortization of intangible assets, restructuring costs, non- recurring costs, and gains and losses on investments and derivatives. 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
-------------------------------------------------
June 30, March 31, December September June 30,
2008 2008 31, 2007 31, 2007 2007
--------- --------- --------- --------- ---------
Revenues from core
business $ 232,963 $ 223,085 $ 212,408 $ 202,916 $ 193,260
========= ========= ========= ========= =========
SOURCE: VeriSign, Inc.
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