VeriSign, Inc.
Oct 28, 2010
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VeriSign Reports 10% Year-Over-Year Revenue Growth in Third Quarter 2010

DULLES, VA, Oct 28, 2010 (MARKETWIRE via COMTEX News Network) -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, today reported financial results for the third quarter ended September 30, 2010.

Third Quarter GAAP Financial Results

VeriSign, Inc. and subsidiaries ("VeriSign") reported revenue of $173 million from continuing operations for the third quarter of 2010, up 2% from the prior quarter and up 10% from the same quarter in 2009. Continuing operations consist primarily of the results of the Naming Services business which is comprised of Registry Services and Network Intelligence and Availability (NIA) Services. NIA Services include the Managed Domain Name System (Managed DNS), iDefense and Distributed Denial of Service (DDoS) mitigation businesses. VeriSign reported net income attributable to VeriSign, Inc. stockholders of $785 million and earnings per share attributable to VeriSign, Inc. stockholders of $4.48 on a diluted basis for the third quarter of 2010, reflecting a net gain of $737 million, net of tax of $244 million, on the sale of the Authentication Services business. This compared to net income attributable to VeriSign, Inc. stockholders of $54 million and earnings per share attributable to VeriSign, Inc. stockholders of $0.28 on a diluted basis in the same quarter in 2009. The operating margin was 34.4% for the third quarter of 2010 compared to 21.7% for the same quarter in 2009.

VeriSign reported segment revenue for Naming Services of $172 million for the third quarter of 2010, up 3% from the prior quarter and up 11% from the same quarter in 2009.

Third Quarter Non-GAAP Financial Results

VeriSign reported net income attributable to VeriSign, Inc. stockholders of $48 million and earnings per share attributable to VeriSign, Inc. stockholders of $0.27 on a diluted basis for the third quarter of 2010, compared to net income attributable to VeriSign, Inc. stockholders of $32 million and earnings per share attributable to VeriSign, Inc. stockholders of $0.16 on a diluted basis in the same quarter in 2009. The operating margin was 43.1% for the third quarter of 2010 compared to 33.7% for the same quarter in 2009. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"We are pleased with the third quarter results and the continued rebounding of Internet trends that impact our business," said Mark McLaughlin, president and chief executive officer of VeriSign. "Our focus as we look forward is to continue to provide an essential and unparalleled service and to leverage our expertise in running a highly complex network to create new opportunities."

"The transition following the close of the sale of our Authentication Services business is on track," said Brian Robins, chief financial officer of VeriSign. "Our continued operating discipline allows us to optimize our cost structure while supporting topline growth opportunities for the company."

Financial Highlights

--  On August 9, 2010, VeriSign sold its Authentication Services business
    for cash consideration of approximately $1.14 billion, net of cash
    held by transferred subsidiaries of $127.5 million and transaction
    costs of $10.8 million, subject to definitive adjustment to reflect
    the actual working capital balance as of the closing date.
--  VeriSign ended the third quarter with Cash, Cash Equivalents,
    Marketable Securities and Restricted Cash of $2.55 billion, an
    increase of $1.21 billion from the prior quarter and an increase of
    $1.12 billion from the same quarter in 2009.
--  In the third quarter, VeriSign repurchased 5.1 million shares of its
    common stock for a cost of $146 million.
--  Cash used in operating activities, on a consolidated basis, was $82
    million for the third quarter due to taxes owed on the sale of
    Authentication Services.  Excess tax benefits of $155 million that
    are associated with stock-based compensation were classified as
    financing cash flows.
--  Deferred revenue on September 30, 2010 totaled $654 million, an
    increase of $13 million from the prior quarter and $74 million from the
    same quarter in 2009.
--  Capital expenditures, on a consolidated basis, were $26 million in the
    third quarter and $69 million year-to-date, approximately 22% of which
    was related to the Authentication Services business in 2010 prior to
    its sale.

Business and Corporate Highlights

--  VeriSign Registry Services ended the quarter with approximately 103.5
    million active domain names in the adjusted zone for .com and .net,
    representing a 9% increase year-over-year.
--  In the third quarter, VeriSign added 7.5 million new domain name
    registrations, representing a 7% increase year-over-year.
--  VeriSign experienced an average daily query load of 66 billion in the
    quarter, compared to 63 billion in the prior quarter and 54 billion in
    the same quarter in 2009.
--  VeriSign ended the third quarter of 2010 with approximately 1,100
    employees, compared to 2,225 employees at the end of the prior quarter
    before the close of the sale of Authentication Services.
--  In September, VeriSign signed a lease for an office building located in
    Reston, Virginia, that will commence in mid-2011 and will serve as
    company headquarters.

Non-GAAP Items

Non-GAAP financial results exclude the following items that are included under GAAP: discontinued operations, results of Other Services, 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 do not exclude the 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 5:00 p.m. (EDT) to review the third quarter results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-0966 (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: 7949245) beginning at 8:00 p.m. (EDT) on October 28 and will run through November 4 at 8:00 p.m (EDT). 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 connect online 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, pricing pressure from competing services offered at prices below our prices and changes in marketing practices including those of third-party registrars; the current global economic downturn; challenges to ongoing privatization of Internet administration; the outcome of legal or other challenges resulting from our activities or the activities of registrars or registrants; new or existing governmental laws and regulations; changes in customer behavior; the inability of VeriSign to successfully develop and market new services; the uncertainty of whether our new services will achieve market acceptance or result in any revenues; system interruptions; security breaches; attacks on the Internet by hackers, viruses, or intentional acts of vandalism; the uncertainty of the expense and duration of transition services and requests for indemnification relating to completed divestitures; and the uncertainty of whether Project Apollo 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, 2009, 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 announcement.

                        VERISIGN, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share data)
                                  (Unaudited)
                                                 September 30, December 31,
                                                      2010         2009
                                                  -----------  -----------
                   ASSETS
Current assets:
  Cash and cash equivalents                       $ 2,060,195  $ 1,477,166
  Marketable securities                               488,948          185
  Accounts receivable, net                             16,826       63,133
  Prepaid expenses and other current assets            90,935      168,574
                                                  -----------  -----------
    Total current assets                            2,656,904    1,709,058
                                                  -----------  -----------
Property and equipment, net                           191,426      403,821
Goodwill                                               52,527      289,980
Other intangible assets, net                            2,943       22,420
Other assets                                           20,282       44,865
                                                  -----------  -----------
    Total long-term assets                            267,178      761,086
                                                  -----------  -----------
    Total assets                                  $ 2,924,082  $ 2,470,144
                                                  ===========  ===========
    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities        $   162,997  $   243,967
  Deferred revenues                                   448,759      642,507
                                                  -----------  -----------
    Total current liabilities                         611,756      886,474
                                                  -----------  -----------
Long-term deferred revenues                           205,003      245,734
Convertible debentures, including contingent
 interest derivative                                  578,262      574,378
Other long-term liabilities                           283,605      164,894
                                                  -----------  -----------
    Total long-term liabilities                     1,066,870      985,006
                                                  -----------  -----------
    Total liabilities                               1,678,626    1,871,480
                                                  -----------  -----------
Commitments and contingencies
Stockholders' equity:
  VeriSign, Inc. 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: 171,746,536
     excluding 140,119,856 held in treasury, at
     September 30, 2010; and 183,299,463,
     excluding 124,434,684 held in treasury, at
     December 31, 2009                                    312          308
    Additional paid-in capital                     21,566,531   21,736,209
    Accumulated deficit                           (20,322,963) (21,194,435)
    Accumulated other comprehensive income              1,576        7,659
                                                  -----------  -----------
    Total VeriSign, Inc. stockholders' equity       1,245,456      549,741
  Noncontrolling interest in subsidiary                     -       48,923
                                                  -----------  -----------
    Total stockholders' equity                      1,245,456      598,664
                                                  -----------  -----------
    Total liabilities and stockholders' equity    $ 2,924,082  $ 2,470,144
                                                  ===========  ===========
                     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,
                                --------------------  --------------------
                                   2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Revenues                        $ 172,649  $ 156,807  $ 503,827  $ 460,797
                                ---------  ---------  ---------  ---------
Costs and expenses:
  Cost of revenues                 40,266     42,159    120,588    130,380
  Sales and marketing              18,450     20,545     63,080     54,620
  Research and development         14,537     13,245     40,731     40,050
  General and administrative       33,644     35,315    101,624    111,196
  Restructuring, impairment
   and other charges, net           6,303     11,455     14,141     14,269
                                ---------  ---------  ---------  ---------
    Total costs and expenses      113,200    122,719    340,164    350,515
                                ---------  ---------  ---------  ---------
Operating income                   59,449     34,088    163,663    110,282
  Other loss, net                  (7,500)    (9,056)   (22,776)   (24,489)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations before income taxes    51,949     25,032    140,887     85,793
Income tax expense                 (7,193)    (4,132)   (40,098)   (26,944)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations, net of tax            44,756     20,900    100,789     58,849
Income from discontinued
 operations, net of tax           740,789     33,699    773,570     97,037
                                ---------  ---------  ---------  ---------
Net income                        785,545     54,599    874,359    155,886
Less: Income from discontinued
 operations, net of tax,
 attributable to noncontrolling
 interest in subsidiary              (642)      (988)    (2,887)    (2,381)
                                ---------  ---------  ---------  ---------
Net income attributable to
 VeriSign, Inc. stockholders    $ 784,903  $  53,611  $ 871,472  $ 153,505
                                =========  =========  =========  =========
Basic income per share
 attributable to VeriSign, Inc.
 stockholders from:
  Continuing operations         $    0.26  $    0.11  $    0.56  $    0.31
  Discontinued operations            4.26       0.17       4.30       0.49
                                ---------  ---------  ---------  ---------
  Net income                    $    4.52  $    0.28  $    4.86  $    0.80
                                =========  =========  =========  =========
Diluted income per share
 attributable to VeriSign, Inc.
 stockholders from:
  Continuing operations         $    0.26  $    0.11  $    0.56  $    0.30
  Discontinued operations            4.22       0.17       4.26       0.49
                                ---------  ---------  ---------  ---------
  Net income                    $    4.48  $    0.28  $    4.82  $    0.79
                                =========  =========  =========  =========
Shares used to compute net
 income per share attributable
 to VeriSign, Inc.
 stockholders:
  Basic                           173,572    192,619    179,240    192,527
                                =========  =========  =========  =========
  Diluted                         175,034    193,472    180,634    193,235
                                =========  =========  =========  =========
Amounts attributable to
 VeriSign, Inc. stockholders:
  Income from continuing
   operations, net of tax       $  44,756  $  20,900  $ 100,789  $  58,849
  Income from discontinued
   operations, net of tax         740,147     32,711    770,683     94,656
                                ---------  ---------  ---------  ---------
  Net income attributable to
   VeriSign, Inc. stockholders  $ 784,903  $  53,611  $ 871,472  $ 153,505
                                =========  =========  =========  =========
The following table presents the classification of stock-based
 compensation:
                                 Three Months Ended     Nine Months Ended
                                    Septemer 30,          September 30,
                                --------------------- ---------------------
                                  2010       2009       2010       2009
                                ---------- ---------- ---------- ----------
                                             (In thousands)
Stock-based compensation:
  Cost of revenues              $    1,010 $    1,000 $    3,321 $    2,887
  Sales and marketing                  360        272      2,984      2,374
  Research and development           1,508        852      3,824      2,384
  General and administrative         4,944      3,946     15,438     14,638
  Restructuring, impairment and
   other charges, net                  932         33      1,065        581
                                ---------- ---------- ---------- ----------
Stock-based compensation for
 continuing operations               8,754      6,103     26,632     22,864
Discontinued operations              8,137      5,206     15,569     16,541
                                ---------- ---------- ---------- ----------
Total stock-based compensation  $   16,891 $   11,309 $   42,201 $   39,405
                                ========== ========== ========== ==========
                     VERISIGN, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In thousands)
                               (Unaudited)
                                                      Nine Months Ended
                                                          September
                                                  ------------------------
                                                      2010         2009
                                                  -----------  -----------
Cash flows from operating activities:
  Net income                                      $   874,359  $   155,886
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Net (gain) loss on sale of discontinued
     operations, net of tax                          (735,491)      12,707
    Depreciation of property and equipment and
     amortization of other intangible assets           53,379       61,715
    Stock-based compensation                           42,201       39,405
    Excess tax benefit associated with
     stock-based compensation                        (167,194)    (100,583)
    Other, net                                          8,435        8,286
    Changes in operating assets and liabilities,
     excluding the effects of acquisitions and
     divestitures:
      Accounts receivable                              11,154       14,519
      Prepaid expenses and other assets                 2,074       (7,271)
      Accounts payable and accrued liabilities          8,607        5,368
      Deferred revenues                                70,955       32,010
                                                  -----------  -----------
        Net cash provided by operating activities     168,479      222,042
                                                  -----------  -----------
Cash flows from investing activities:
  Proceeds from maturities and sales of
   marketable securities and investments              239,680      117,901
  Purchases of marketable securities and
   investments                                       (714,592)        (750)
  Purchases of property and equipment                 (68,646)     (66,067)
  Proceeds received from divestiture of
   businesses, net of cash contributed and
   transaction costs                                1,165,030      282,178
  Other investing activities                           (4,688)      (2,550)
                                                  -----------  -----------
        Net cash provided by investing activities     616,784      330,712
                                                  -----------  -----------
Cash flows from financing activities:
  Proceeds from issuance of common stock from
   option exercises and employee stock purchase
   plans                                               56,442       32,906
  Repurchases of common stock                        (434,234)     (51,682)
  Excess tax benefit associated with stock-based
   compensation                                       167,194      100,583
  Other financing activities                             (736)        (113)
                                                  -----------  -----------
        Net cash (used in) provided by financing
         activities                                  (211,334)      81,694
                                                  -----------  -----------
Effect of exchange rate changes on cash and
 cash equivalents                                       9,100        8,790
                                                  -----------  -----------
Net increase in cash and cash equivalents             583,029      643,238
Cash and cash equivalents at beginning of
 period                                             1,477,166      789,068
                                                  -----------  -----------
Cash and cash equivalents at end of period        $ 2,060,195  $ 1,432,306
                                                  ===========  ===========
Supplemental cash flow disclosures:
  Cash paid for interest, net of capitalized
   interest                                       $    39,628  $    39,256
                                                  ===========  ===========
                     VERISIGN, INC. AND SUBSIDIARIES
                STATEMENTS OF OPERATIONS RECONCILIATION
                 (In thousands, except per share data)
                              (Unaudited)
                           Three Months Ended        Three Months Ended
                           September 30, 2010        September 30, 2009
                        ------------------------- -------------------------
                                    Net Income                Net Income
                                    attributable             attributable
                                         to                       to
                         Operating  VeriSign, Inc. Operating VeriSign, Inc.
                          Income    stockholders   Income    stockholders
                        ------------ -----------  ------------ -----------
GAAP as reported        $     59,449 $   784,903  $     34,088 $    53,611
  Discontinued
   operations                           (740,147)                  (32,711)
  Other Services (1)
   (2)                           426         426         2,115       2,200
  Adjustments:
    Stock-based
     compensation              7,795       7,795         6,051       6,051
    Amortization of
     other intangible
     assets                      324         324           145         145
    Impairment of other
     Intangible assets             -           -         9,684       9,684
    Restructuring costs        6,269       6,269           285         285
    Non-cash interest
     expense                               1,983                     1,710
  Tax adjustment (3)                     (13,431)                   (9,401)
                        ------------ -----------  ------------ -----------
Non-GAAP as adjusted    $     74,263 $    48,122  $     52,368 $    31,574
                        ============ ===========  ============ ===========
Diluted shares                           175,034                   193,472
Per diluted share,
 non-GAAP as adjusted                $      0.27               $      0.16
                                     ===========               ===========
(1) As of September 30, 2010, the Company's business consists of the
    following reportable segments: (a) Naming Services, which consists of
    Registry Services and Network Intelligence and Availability ("NIA")
    Services; and (b) Other Services, which consists of the continuing
    operations of Content Portal Services ("CPS").
(2) Results of Other Services during the three months ended September 30,
    2010 and 2009 includes stock-based compensation of $27 and $19
    respectively.
(3) Non-GAAP tax is calculated as 30% of income from continuing 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, results of Other Services, 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 above have been conformed to exclude the foregoing items under
GAAP. Prior disclosures of non-GAAP figures do not exclude the 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 nor 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 30, June 30,  March 31, December 31, September 30,
                   2010       2010      2010        2009         2009
               ------------ --------- --------- ------------ ------------
Revenues from
 Naming
 Services (1)  $    172,286 $ 167,881 $ 161,583 $    158,740 $    155,481
               ============ ========= ========= ============ ============

Contacts
Investor Relations:
Nancy Fazioli
nfazioli@verisign.com
650-316-6569

Media Relations:
Deana Alvy
dalvy@verisign.com
703-948-4179


SOURCE: VeriSign, Inc.

mailto:nfazioli@verisign.com
mailto:dalvy@verisign.com

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