VeriSign, Inc.
Nov 5, 2009
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VeriSign Reports 6% Year-Over-Year Core Revenue Growth in Third Quarter 2009

Active Domain Names, SSL Certificate Installed Base Increase in Q3

MOUNTAIN VIEW, CA, Nov 05, 2009 (MARKETWIRE via COMTEX News Network) -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services, today reported financial results for the third quarter ended September 30, 2009.

On a GAAP basis, VeriSign reported revenue of $258 million from continuing operations for the third quarter of 2009. On a GAAP basis, VeriSign reported net income attributable to VeriSign, Inc. and subsidiaries of $54 million and earnings per share attributable to VeriSign, Inc. and subsidiaries of $0.28 on a diluted basis. GAAP operating margin for the third quarter was 29.1%.

On a GAAP basis, VeriSign reported segment revenue for Internet Infrastructure and Identity Services ("3IS"), or the "core" businesses of Naming Services and Authentication Services, of $257 million for the third quarter of 2009, up 1% from the prior quarter and up 6% year-over-year.

On a non-GAAP basis (which excludes items described below) for its core businesses, VeriSign reported net income attributable to VeriSign, Inc. and subsidiaries of $64 million for the third quarter of 2009 and diluted earnings per share of $0.33. Non-GAAP operating margin for the third quarter was 38.6%. A table reconciling the GAAP to the non-GAAP results reported above is appended to this release.

"We had a good quarter and we're pleased with the strength of our core businesses both in terms of growth and operating leverage," said Mark McLaughlin, president and chief executive officer of VeriSign. "As we enter the last quarter of 2009, and with our divestitures essentially behind us, we are focused on growing VeriSign's core businesses."

"Our execution over the past two years has been strong, even as we implemented a significant refocusing of the business," said Brian Robins, chief financial officer of VeriSign. "We have continued to deliver solid revenue and earnings growth. We believe VeriSign today has the operational focus and financial flexibility we need to deliver for our customers and move the business forward."

Business and Corporate Highlights

--  VeriSign Naming Services ended the quarter with approximately 94.9
    million active domain names in the domain name base for .com and .net,
    representing a 6% increase year-over-year.
--  VeriSign Business Authentication Services ended the quarter with 1.20
    million SSL certificates in the installed base, representing a 9% increase
    year-over-year.
--  VeriSign's average daily query load increased to 54 billion in Q3 from
    49 billion in Q2.
--  In October, VeriSign and RSA announced a technical and sales
    partnership that includes the integration by the end of December 2009 of
    the RSA SecurID Authentication Engine into the VeriSign Identity Protection
    (VIP) Authentication Service.
--  Subsequent to the end of the quarter, VeriSign completed the sales of
    the Global Security Consulting business, and Messaging and Mobile Media
    Services.  The proceeds from the sales of 13 of our former non-core
    businesses from November 2007 to date, including the sale of the remaining
    interest in the Jamba joint venture, are approximately $750 million.
--  VeriSign 2009 Analyst Day will be held on November 19 in New York
    City.  A live webcast of the event will be available at
    http://investor.verisign.com.


Financial Highlights

--  Revenue from discontinued operations was $41 million while the non-
    core Pre-Pay Billing business reported $1 million of revenue as part of
    continuing operations during the third quarter of 2009.
--  Transition services revenue for businesses previously divested is
    included in Other Income/Loss and was $1.2 million in the third quarter of
    2009 compared to $1.1 million in the second quarter.
--  VeriSign ended the third quarter of 2009 with Cash, Cash Equivalents
    and Restricted Cash of $1.4 billion, an increase of $124 million from the
    prior quarter.
--  Cash flow from operations, on a consolidated basis, was approximately
    $105 million for the third quarter of 2009 and $222 million year-to-date,
    after giving effect to a reclassification of $101 million of year-to-date
    excess tax benefits associated with stock-based compensation from operating
    cash flows to financing cash flows.
--  Capital expenditures, on a consolidated basis, were approximately $25
    million for the third quarter of 2009 and $66 million year-to-date.
--  Deferred revenue on September 30, 2009 totaled $881 million for
    continuing operations, an increase of $3 million from the prior quarter.


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, impairments of goodwill and other intangible assets, restructuring costs and non-cash interest expense. 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. All non-GAAP figures for each period presented herein have been conformed to exclude the foregoing items under GAAP. Prior disclosures of non-GAAP figures may not exclude these same items and as such should not be used for comparison purposes.

Today's Conference Call

VeriSign will host a live teleconference call today at 2:00 p.m. (PST) to review the third quarter results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (913) 981-5530 (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: 1432650) beginning at 7:00 p.m. (PST) on November 5 and will run through November 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 and the uncertainty of the expense and duration of transition services and requests for indemnification relating to completed divestitures. 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, 2008, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. VeriSign undertakes no obligation to update any of the forward-looking statements after the date of this press release.

                   VERISIGN, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS
           (In thousands, except share and per share data)
                              (Unaudited)
                                                September 30, December 31,
                                                    2009          2008
                                                ------------  ------------
                       ASSETS
Current assets:
  Cash and cash equivalents                     $  1,432,306  $    789,068
  Accounts receivable, net of allowance for
   doubtful accounts of $668 at September 30,
   2009 and $1,208 at December 31, 2008               73,247        83,749
  Prepaid expenses and other current assets          151,003       268,178
  Assets held for sale                               240,202       483,840
                                                ------------  ------------
    Total current assets                           1,896,758     1,624,835
                                                ------------  ------------
Property and equipment, net                          372,413       385,498
Goodwill                                             290,214       283,109
Other intangible assets, net                          24,681        35,312
Other assets                                          37,397        38,118
                                                ------------  ------------
    Total long-term assets                           724,705       742,037
                                                ------------  ------------
    Total assets                                $  2,621,463  $  2,366,872
                                                ============  ============
       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities      $    246,592  $    263,535
  Accrued restructuring costs                          5,980        28,920
  Deferred revenues                                  656,751       629,800
  Liabilities related to assets held for sale         41,455        49,160
  Other current liabilities                            2,712         5,463
                                                ------------  ------------
    Total current liabilities                        953,490       976,878
                                                ------------  ------------
Long-term deferred revenues                          224,541       215,281
Long-term accrued restructuring costs                  3,114         3,037
Convertible debentures, including contingent
 interest derivative                                 571,526       568,712
Other long-term liabilities                           86,692        84,543
                                                ------------  ------------
    Total long-term liabilities                      885,873       871,573
                                                ------------  ------------
    Total liabilities                              1,839,363     1,848,451
                                                ------------  ------------
Commitments and contingencies
Stockholders' equity:
  VeriSign, Inc. and subsidiaries
   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: 192,271,949
     excluding 115,079,736 held in treasury, at
     September 30, 2009; and 191,547,795
     excluding 112,717,587 held in treasury,
     at December 31, 2008                                307           304
    Additional paid-in capital                    22,009,195    21,891,786
    Accumulated deficit                          (21,286,483)  (21,439,988)
    Accumulated other comprehensive income             9,039        17,111
                                                ------------  ------------
    Total VeriSign, Inc. and subsidiaries
     stockholders' equity                            732,058       469,213
  Noncontrolling interest in subsidiary               50,042        49,208
                                                ------------  ------------
    Total stockholders' equity                       782,100       518,421
                                                ------------  ------------
    Total liabilities and stockholders' equity  $  2,621,463  $  2,366,872
                                                ============  ============
                   VERISIGN, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (In thousands, except per share data)
                            (Unaudited)
                              Three Months Ended       Nine Months Ended
                                 September 30,           September 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Revenues                    $  257,995  $  245,934  $  769,609  $  723,232
                            ----------  ----------  ----------  ----------
Costs and expenses:
  Cost of revenues              56,736      57,265     174,520     172,498
  Sales and marketing           45,015      41,646     128,341     133,779
  Research and development      24,940      21,764      72,976      70,528
  General and
   administrative               42,634      49,677     134,721     152,742
  Restructuring,
   impairments and other
   charges                      10,428       5,909      15,673     107,293
  Amortization of other
   intangible assets             3,112       2,500       9,394       7,675
                            ----------  ----------  ----------  ----------
    Total costs and
     expenses                  182,865     178,761     535,625     644,515
                            ----------  ----------  ----------  ----------
Operating income                75,130      67,173     233,984      78,717
  Other loss, net               (8,669)    (13,450)    (23,228)    (22,308)
                            ----------  ----------  ----------  ----------
Income from continuing
 operations before income
 taxes and loss from
 unconsolidated entities        66,461      53,723     210,756      56,409
                            ----------  ----------  ----------  ----------
Income tax expense              18,111       8,876      71,213       7,466
Loss from unconsolidated
 entities, net of tax                -      (2,509)          -      (3,099)
                            ----------  ----------  ----------  ----------
Income from continuing
 operations, net of tax         48,350      42,338     139,543      45,844
Income (loss) from
 discontinued operations,
 net of tax                      6,249    (242,613)     16,343    (321,463)
                            ----------  ----------  ----------  ----------
Net income (loss)               54,599    (200,275)    155,886    (275,619)
Less: Net income
 attributable to
 noncontrolling interest in
 subsidiary                       (988)       (815)     (2,381)     (2,710)
                            ----------  ----------  ----------  ----------
Net income (loss)
 attributable to VeriSign,
 Inc. and subsidiaries
 common stockholders        $   53,611  $ (201,090) $  153,505  $ (278,329)
                            ==========  ==========  ==========  ==========
Basic income (loss) per
 share attributable to
 VeriSign, Inc. and
 subsidiaries common
 stockholders from:
  Continuing operations     $     0.25  $     0.21  $     0.71  $     0.22
  Discontinued operations         0.03       (1.25)       0.09       (1.62)
                            ----------  ----------  ----------  ----------
  Net income (loss)         $     0.28  $    (1.04) $     0.80  $    (1.40)
                            ==========  ==========  ==========  ==========
Diluted income (loss) per
 share attributable to
 VeriSign, Inc. and
 subsidiaries common
 stockholders from:
  Continuing operations     $     0.24  $     0.21  $     0.71  $     0.21
  Discontinued operations         0.04       (1.24)       0.08       (1.58)
                            ----------  ----------  ----------  ----------
  Net income (loss)         $     0.28  $    (1.03) $     0.79  $    (1.37)
                            ==========  ==========  ==========  ==========
Shares used to compute net
 income (loss) per share
 attributable to
 VeriSign, Inc. and
 subsidiaries common
 stockholders:
  Basic                        192,619     193,853     192,527     198,622
                            ==========  ==========  ==========  ==========
  Diluted                      193,472     195,930     193,235     202,951
                            ==========  ==========  ==========  ==========
Amounts attributable to
 VeriSign, Inc. and
 subsidiaries common
 stockholders:
  Income from continuing
   operations, net of tax   $   47,362  $   41,523  $  137,162  $   43,134
  Income (loss) from
   discontinued
   operations, net of tax        6,249    (242,613)     16,343    (321,463)
                            ----------  ----------  ----------  ----------
  Net income (loss)
   attributable to
   VeriSign, Inc. and
   subsidiaries common
   stockholders             $   53,611  $ (201,090) $  153,505  $ (278,329)
                            ==========  ==========  ==========  ==========
                   VERISIGN, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In thousands)
                              (Unaudited)
                                                     Nine Months Ended
                                                        September 30,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------
Cash flows from operating activities:
  Net income (loss)                               $   155,886  $  (275,619)
  Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
    Loss (gain) on divestiture of businesses,
     net of tax                                        46,000      (32,853)
    Depreciation of property and equipment             52,321       85,593
    Amortization of other intangible assets             9,394       22,758
    Estimated (reversals) losses on assets held
     for sale                                         (33,293)     308,765
    Stock-based compensation                           39,405       75,368
    Loss on sale and impairment of long-lived
     assets                                            14,237       80,534
    Impairment of goodwill                                  -       45,793
    Excess tax benefit associated with stock-based
     compensation                                    (100,583)      (7,094)
    Other, net                                         (5,951)       5,846
  Changes in operating assets and liabilities:
    Accounts receivable, net                           14,519       30,547
    Prepaid expenses and other assets                  (7,271)      12,093
    Accounts payable and accrued liabilities           28,209     (116,273)
    Accrued restructuring costs                       (22,841)      29,752
    Deferred revenues                                  32,010       97,830
                                                  -----------  -----------
      Net cash provided by operating activities       222,042      363,040
                                                  -----------  -----------
Cash flows from investing activities:
  Proceeds from maturities and sales of
   investments                                        117,901        1,440
  Proceeds from sale of property and equipment              -       48,843
  Purchases of property and equipment                 (66,067)     (88,093)
  Reclassification of cash equivalents to
   short-term investments                                   -     (248,403)
  Proceeds received from divestiture of
   businesses, net of cash provided                   282,178       60,613
  Investment in unconsolidated entities                     -      (15,679)
  Cash received from trust, previously restricted           -       45,000
  Other investing activities                           (3,300)       5,697
                                                  -----------  -----------
      Net cash provided by (used in) investing
       activities                                     330,712     (190,582)
                                                  -----------  -----------
Cash flows from financing activities:
  Proceeds from issuance of common stock from
   option exercises and employee stock purchase
   plan                                                32,906      120,591
  Repurchases of common stock                         (51,682)  (1,276,683)
  Proceeds from credit facility                             -      200,000
  Repayment of short-term debt related to credit
   facility                                                 -     (200,000)
  Excess tax benefit associated with stock-based
   compensation                                       100,583        7,094
  Dividend paid to noncontrolling interest in
   subsidiary                                            (113)        (741)
                                                  -----------  -----------
    Net cash provided by (used in) financing
     activities                                        81,694   (1,149,739)
                                                  -----------  -----------
Effect of exchange rate changes on cash and cash
 equivalents                                            8,790        4,084
                                                  -----------  -----------
Net increase (decrease) in cash and cash
 equivalents                                          643,238     (973,197)
Cash and cash equivalents at beginning of period      789,068    1,376,722
                                                  -----------  -----------
Cash and cash equivalents at end of period        $ 1,432,306  $   403,525
                                                  ===========  ===========
Supplemental cash flow disclosures:
  Cash paid for interest, net of capitalized
   interest                                       $    39,256  $    35,677
                                                  ===========  ===========
  Dividend payable to noncontrolling interest in
   subsidiary                                     $       694  $         -
                                                  ===========  ===========
                      VERISIGN, INC. AND SUBSIDIARIES
                  STATEMENTS OF OPERATIONS RECONCILIATION
                   (In thousands, except per share data)
                                (Unaudited)
                          Three Months Ended          Nine Months Ended
                          September 30, 2009         September 30, 2009
                      -------------------------- -------------------------
                                   Net Income                 Net Income
                                    (loss)                     (loss)
                                  attributable               attributable
                                  to VeriSign,               to VeriSign,
                      Operating     Inc. and     Operating     Inc. and
                        Income    Subsidiaries     Income    Subsidiaries
                      ----------- -------------  ----------  -------------
GAAP as reported      $    75,130 $      53,611  $  233,984  $     153,505
  Discontinued
   operations                            (6,249)                   (16,343)
  Non-core
   businesses in
   continuing
   operations (1)             424           417        (686)        (1,646)
  Adjustments:
     Stock-based
      compensation         10,376        10,376      32,604         32,604
     Amortization of
      other intangible
      assets                3,112         3,112       9,394          9,394
     Impairment of
      other intangible
      asset                 9,684         9,684       9,684          9,684
     Restructuring
      costs                   471           471       5,399          5,399
     Non-cash interest
      expense                             1,709                      5,008
  Tax adjustment (2)                     (9,558)                   (10,147)
                      ----------- -------------  ----------  -------------
Non-GAAP as adjusted  $    99,197 $      63,573  $  290,379  $     187,458
                      =========== =============  ==========  =============
Diluted shares                          193,472                    193,235
                                  =============              =============
Per diluted share,
 non-GAAP as adjusted             $        0.33              $        0.97
                                  =============              =============
(1) As of September 30, 2009, the Company's business consists of the
following reportable segments: (a) 3IS and (b) Other Services. 3IS consists
of core operations of Naming Services and Authentication Services.
Authentication Services is comprised of Business Authentication Services,
formerly known as Secure Socket Layer Certificate Services; and User
Authentication Services, formerly known as Identity and Authentication
Services. Other Services consists of non-core businesses in continuing
operations.
(2) Non-GAAP tax is calculated as 30% of income from continuing operations,
excluding noncontrolling interest in subsidiary, 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, impairments of
goodwill and other intangible assets, restructuring costs and non-cash
interest expense.  Non-GAAP financial information is also adjusted for a
30% tax rate which differs from the GAAP tax rate.  All non-GAAP figures
for each period presented herein have been conformed to exclude the
foregoing items under GAAP. Prior disclosures of non-GAAP figures may not
exclude these same items, and as such should not be used for comparison
purposes.
Management believes that this non-GAAP financial data supplements our GAAP
financial data by providing investors with additional information that
allows them to have a clearer picture of the company's core operations.
The presentation of this additional information is not meant to be
considered in isolation or as a substitute for results prepared in
accordance with GAAP. We believe that the non-GAAP information enhances
the investors' overall understanding of our financial performance and
the comparability of the company's operating results from period to
period. Above, we have provided a reconciliation of the non-GAAP financial
information that we provide each quarter with the comparable financial
information reported in accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
                                         Three months ended
                          -------------------------------------------------
                          September                     December  September
                             30,     June 30,  March 31,   31,       30,
                            2009      2009      2009      2008      2008
                          --------- --------- --------- --------- ---------
Revenues from core (3IS)
 operations(1)            $ 256,908 $ 255,248 $ 252,212 $ 248,123 $ 241,322
                          ========= ========= ========= ========= =========

Contacts

Investor Relations:
Nancy Fazioli
ir@verisign.com
650-426-5146

Media Relations:
Brad Williams
brwilliams@verisign.com
650-426-5298


SOURCE: VeriSign, Inc.

mailto:ir@verisign.com
mailto:brwilliams@verisign.com

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