Verisign Reports Third Quarter 2018 Results
Third Quarter GAAP Financial Results
Third Quarter Non-GAAP Financial Results
“The continued dedication of our teams to protecting and managing our business has yielded another solid quarter,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
On
In commenting on the transaction, Jim Bidzos added: “Verisign is
committed to focusing on its core mission of providing critical internet
infrastructure, including Root Zone management, operation of 2 of the 13
global internet root servers, operation of .gov and .edu, and
authoritative resolution for the .com and .net top-level domains, which
support the majority of global e-commerce. For this reason,
Financial Highlights
Verisign ended the third quarter with cash, cash equivalents and marketable securities of$1.18 billion , a decrease of$1.24 billion from year-end 2017.-
Cash flow from operating activities was
$187 million for the third quarter of 2018, compared with$175 million for the same quarter in 2017. -
Deferred revenues on
Sept. 30, 2018 , totaled$1.02 billion , an increase of$25 million from year-end 2017. -
During the third quarter,
Verisign repurchased 1.1 million shares of its common stock for$175 million . AtSept. 30, 2018 ,$638 million remained available and authorized under the current share repurchase program which has no expiration.
Business Highlights
Verisign ended the third quarter with 151.7 million .com and .netdomain name registrations in the domain name base, a 4.0 percent increase from the end of the third quarter of 2017, and a net increase of 1.99 million during the third quarter of 2018.-
In the third quarter,
Verisign processed 9.5 million new domain name registrations for .com and .net, compared to 8.9 million for the same quarter in 2017. - The final .com and .net renewal rate for the second quarter of 2018 was 75.0 percent compared with 74.0 percent for the same quarter in 2017. Renewal rates are not fully measurable until 45 days after the end of the quarter.
Non-GAAP Financial Measures and Adjusted EBITDA
On a quarterly basis,
Management believes that this non-GAAP financial data supplements the GAAP financial data by providing investors with additional information that allows them to have a clearer picture of Verisign’s operations and financial performance and the comparability of Verisign’s operating results from period to period. The presentation of this additional information is not meant to be considered in isolation nor as a substitute for results prepared in accordance with GAAP.
The tables appended to this release include a reconciliation of the non-GAAP financial information to the comparable financial information reported in accordance with GAAP for the given periods.
Today’s Conference Call
About
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 our actual results to differ
materially from those stated or implied by such forward-looking
statements. The potential risks and uncertainties include, among others,
whether the
©2018
VERISIGN, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) |
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September 30, 2018 |
December 31, 2017 |
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ASSETS |
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Current assets: | ||||||||||
Cash and cash equivalents | $ | 231,571 | $ | 465,851 | ||||||
Marketable securities | 947,395 | 1,948,900 | ||||||||
Other current assets | 57,016 | 31,402 | ||||||||
Total current assets | 1,235,982 | 2,446,153 | ||||||||
Property and equipment, net | 256,269 | 263,513 | ||||||||
Goodwill | 52,527 | 52,527 | ||||||||
Deferred tax assets | 167,772 | 15,392 | ||||||||
Deposits to acquire intangible assets | 145,000 | 145,000 | ||||||||
Other long-term assets | 27,078 | 18,603 | ||||||||
Total long-term assets | 648,646 | 495,035 | ||||||||
Total assets | $ | 1,884,628 | $ | 2,941,188 | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: | ||||||||||
Accounts payable and accrued liabilities | $ | 176,121 | $ | 219,603 | ||||||
Deferred revenues | 737,515 | 713,309 | ||||||||
Subordinated convertible debentures | — | 627,616 | ||||||||
Total current liabilities | 913,636 | 1,560,528 | ||||||||
Long-term deferred revenues | 286,735 | 286,097 | ||||||||
Senior notes | 1,784,417 | 1,782,529 | ||||||||
Deferred tax liabilities | — | 444,108 | ||||||||
Other long-term tax liabilities | 300,941 | 128,197 | ||||||||
Total long-term liabilities | 2,372,093 | 2,640,931 | ||||||||
Total liabilities | 3,285,729 | 4,201,459 | ||||||||
Commitments and contingencies | ||||||||||
Stockholders’ deficit: | ||||||||||
Preferred stock—par value $.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none | — | — | ||||||||
Common stock—par value $.001 per share; Authorized shares: 1,000,000; Issued shares: 352,260 at September 30, 2018 and 325,218 at December 31, 2017; Outstanding shares: 121,158 at September 30, 2018 and 97,591 at December 31, 2017 | 352 | 325 | ||||||||
Additional paid-in capital | 15,873,534 | 16,437,135 | ||||||||
Accumulated deficit | (17,271,984 | ) | (17,694,790 | ) | ||||||
Accumulated other comprehensive loss | (3,003 | ) | (2,941 | ) | ||||||
Total stockholders’ deficit | (1,401,101 | ) | (1,260,271 | ) | ||||||
Total liabilities and stockholders’ deficit | $ | 1,884,628 | $ | 2,941,188 | ||||||
VERISIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except per share data) (Unaudited) |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Revenues | $ | 305,777 | $ | 292,428 | $ | 907,517 | $ | 869,594 | ||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of revenues | 48,249 | 47,333 | 143,766 | 145,646 | ||||||||||||||||
Sales and marketing | 13,868 | 18,667 | 47,712 | 56,463 | ||||||||||||||||
Research and development | 13,712 | 12,715 | 42,842 | 39,569 | ||||||||||||||||
General and administrative | 34,951 | 32,654 | 99,771 | 96,626 | ||||||||||||||||
Total costs and expenses | 110,780 | 111,369 | 334,091 | 338,304 | ||||||||||||||||
Operating income | 194,997 | 181,059 | 573,426 | 531,290 | ||||||||||||||||
Interest expense | (22,631 | ) | (37,756 | ) | (92,211 | ) | (95,869 | ) | ||||||||||||
Non-operating income, net | 5,935 | 6,241 | 14,399 | 21,544 | ||||||||||||||||
Income before income taxes | 178,301 | 149,544 | 495,614 | 456,965 | ||||||||||||||||
Income tax expense | (40,621 | ) | (34,645 | ) | (95,320 | ) | (102,554 | ) | ||||||||||||
Net income | 137,680 | 114,899 | 400,294 | 354,411 | ||||||||||||||||
Other comprehensive income | (322 | ) | (264 | ) | (62 | ) | 299 | |||||||||||||
Comprehensive income | $ | 137,358 | $ | 114,635 | $ | 400,232 | $ | 354,710 | ||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 1.13 | $ | 1.15 | $ | 3.60 | $ | 3.51 | ||||||||||||
Diluted | $ | 1.13 | $ | 0.93 | $ | 3.25 | $ | 2.85 | ||||||||||||
Shares used to compute earnings per share | ||||||||||||||||||||
Basic | 121,682 | 99,614 | 111,046 | 101,036 | ||||||||||||||||
Diluted | 122,261 | 124,074 | 123,079 | 124,162 | ||||||||||||||||
VERISIGN, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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Nine Months Ended September 30, |
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2018 | 2017 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 400,294 | $ | 354,411 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation of property and equipment | 36,450 | 37,665 | ||||||||
Stock-based compensation | 41,406 | 40,043 | ||||||||
Loss on debt extinguishment | 6,554 | — | ||||||||
Gain on sale of business | — | (10,421 | ) | |||||||
Amortization of debt discount and issuance costs | 6,428 | 10,827 | ||||||||
Amortization of discount on investments in debt securities | (12,746 | ) | (9,092 | ) | ||||||
Other, net | 1,770 | 150 | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Other assets | (6,917 | ) | 4,566 | |||||||
Accounts payable and accrued liabilities | (29,478 | ) | (24,756 | ) | ||||||
Deferred revenues | 24,844 | 32,790 | ||||||||
Net deferred income taxes and other long-term tax liabilities | 10,662 | 67,385 | ||||||||
Net cash provided by operating activities | 479,267 | 503,568 | ||||||||
Cash flows from investing activities: | ||||||||||
Proceeds from maturities and sales of marketable securities | 3,081,702 | 3,895,675 | ||||||||
Purchases of marketable securities | (2,067,498 | ) | (4,398,787 | ) | ||||||
Purchases of property and equipment | (29,597 | ) | (40,609 | ) | ||||||
Other investing activities | (160 | ) | 11,748 | |||||||
Net cash provided by (used in) investing activities | 984,447 | (531,973 | ) | |||||||
Cash flows from financing activities: | ||||||||||
Repayment of principal on subordinated convertible debentures | (1,250,009 | ) | — | |||||||
Proceeds from employee stock purchase plan | 12,836 | 12,915 | ||||||||
Repurchases of common stock | (459,803 | ) | (474,290 | ) | ||||||
Proceeds from borrowings, net of issuance costs | — | 543,185 | ||||||||
Net cash (used in) provided by financing activities | (1,696,976 | ) | 81,810 | |||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (985 | ) | 1,118 | |||||||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (234,247 | ) | 54,523 | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 475,139 | 241,581 | ||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 240,892 | $ | 296,104 | ||||||
Supplemental cash flow disclosures: | ||||||||||
Cash paid for interest | $ | 87,184 | $ | 86,622 | ||||||
Cash paid for income taxes, net of refunds received | $ | 84,433 | $ | 22,717 | ||||||
VERISIGN, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) |
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Three Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
Operating Income |
Net Income |
Operating Income |
Net Income | |||||||||||||||||
GAAP as reported | $ | 194,997 | $ | 137,680 | $ | 181,059 | $ | 114,899 | ||||||||||||
Adjustments: | ||||||||||||||||||||
Stock-based compensation | 15,130 | 15,130 | 14,105 | 14,105 | ||||||||||||||||
Non-cash interest expense | — | 3,779 | ||||||||||||||||||
Contingent interest payable on subordinated convertible debentures | — | (1,879 | ) | |||||||||||||||||
Tax adjustment | (1,933 | ) | (6,741 | ) | ||||||||||||||||
Non-GAAP | $ | 210,127 | $ | 150,877 | $ | 195,164 | $ | 124,163 | ||||||||||||
Revenues | $ | 305,777 | $ | 292,428 | ||||||||||||||||
Non-GAAP operating margin | 68.7 | % | 66.7 | % | ||||||||||||||||
Diluted shares | 122,261 | 124,074 | ||||||||||||||||||
Diluted EPS, non-GAAP | $ | 1.23 | $ | 1.00 | ||||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
Operating Income |
Net Income |
Operating Income |
Net Income | |||||||||||||||||
GAAP as reported | $ | 573,426 | $ | 400,294 | $ | 531,290 | $ | 354,411 | ||||||||||||
Adjustments: | ||||||||||||||||||||
Stock-based compensation | 41,406 | 41,406 | 40,043 | 40,043 | ||||||||||||||||
Unrealized loss on contingent interest derivative on the subordinated convertible debentures | — | 893 | ||||||||||||||||||
Non-cash interest expense | 5,719 | 10,827 | ||||||||||||||||||
Contingent interest payable on subordinated convertible debentures | — | (9,445 | ) | |||||||||||||||||
Loss on debt extinguishment | 6,554 | — | ||||||||||||||||||
Tax adjustment | (25,524 | ) | (23,872 | ) | ||||||||||||||||
Non-GAAP | $ | 614,832 | $ | 428,449 | $ | 571,333 | $ | 372,857 | ||||||||||||
Revenues | $ | 907,517 | $ | 869,594 | ||||||||||||||||
Non-GAAP operating margin | 67.7 | % | 65.7 | % | ||||||||||||||||
Diluted shares | 123,079 | 124,162 | ||||||||||||||||||
Diluted EPS, non-GAAP | $ | 3.48 | $ | 3.00 | ||||||||||||||||
VERISIGN, INC. RECONCILIATION OF NON-GAAP ADJUSTED EBITDA (In thousands) (Unaudited) |
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The following table reconciles GAAP net income to non-GAAP Adjusted EBITDA for the periods shown below: |
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Three Months Ended September 30, |
Four Quarters Ended September 30, |
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2018 | 2017 | 2018 | |||||||||||
Net Income | $ | 137,680 | $ | 114,899 | $ | 503,131 | |||||||
Interest expense | 22,631 | 37,756 | 132,678 | ||||||||||
Income tax expense | 40,621 | 34,645 | 134,530 | ||||||||||
Depreciation and amortization | 12,256 | 12,493 | 48,663 | ||||||||||
Stock-based compensation | 15,130 | 14,105 | 54,270 | ||||||||||
Unrealized loss (gain) on hedging agreements | 276 | 10 | (27 | ) | |||||||||
Loss on sale of business | — | 186 | — | ||||||||||
Loss on debt extinguishment | — | — | 6,554 | ||||||||||
Non-GAAP Adjusted EBITDA | $ | 228,594 | $ | 214,094 | $ | 879,799 | |||||||
VERISIGN, INC. STOCK-BASED COMPENSATION CLASSIFICATION (In thousands) (Unaudited) |
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The following table presents the classification of stock-based compensation: |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2018 | 2017 | 2018 | 2017 | |||||||||||||
Cost of revenues | $ | 1,755 | $ | 1,774 | $ | 5,183 | $ | 5,311 | ||||||||
Sales and marketing | 1,451 | 1,369 | 4,393 | 4,255 | ||||||||||||
Research and development | 1,623 | 1,575 | 5,032 | 4,553 | ||||||||||||
General and administrative | 10,301 | 9,387 | 26,798 | 25,924 | ||||||||||||
Total stock-based compensation expense | $ | 15,130 | $ | 14,105 | $ | 41,406 | $ | 40,043 | ||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20181025005843/en/
Source:
VeriSign, Inc.
Investor Relations:
David Atchley, 703-948-4643
datchley@verisign.com
or
Media
Relations:
Deana Alvy, 703-948-3800
dalvy@verisign.com