VeriSign, Inc.
Oct 27, 2011
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Verisign Reports 14% Year-Over-Year Revenue Growth in Third Quarter 2011

DULLES, VA -- (MARKET WIRE) -- 10/27/11 -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, today reported financial results for the third quarter ended Sept. 30, 2011.

Third Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $197 million for the third quarter of 2011, up 4% from the prior quarter and up 14% from the same quarter in 2010. Verisign reported net income of $59 million and diluted earnings per share of $0.36 for the third quarter of 2011. This is compared to net income attributable to Verisign stockholders of $785 million and earnings per share attributable to Verisign stockholders of $4.48 on a diluted basis in the same quarter in 2010, which included a net gain of $737 million, net of tax of $244 million, on the sale of the Authentication Services business. The operating margin was 45.2% for the third quarter of 2011 compared to 34.8% for the same quarter in 2010.

Third Quarter Non-GAAP Financial Results
Verisign reported net income of $64 million and diluted earnings per share of $0.39 for the third quarter of 2011, compared to net income of $49 million and diluted earnings per share of $0.28 in the same quarter in 2010. The operating margin was 50.1% for the third quarter of 2011 compared to 43.1% for the same quarter in 2010. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"The third quarter was another solid quarter marked by continued strong operating and financial performance," said Jim Bidzos, executive chairman, president and chief executive officer of Verisign.

"We remain committed to our long-term financial priorities of growth and a strong balance sheet," said John Calys, interim chief financial officer of Verisign.

In addition, Verisign announced that the company will not be conducting a search for a new chief executive officer and that Jim Bidzos will stay in this role going forward.

Financial Highlights

Business and Corporate Highlights

Non-GAAP Items
Non-GAAP financial results exclude the following items that are included under GAAP: discontinued operations, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring charges, contingent interest payments to holders of our Convertible Debentures, unrealized gain/loss on contingent interest derivative on Convertible Debentures, 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 operating income and net income attributable to Verisign stockholders 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 4:30 p.m. Eastern Time to review the third quarter results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-0421 (international). A listen-only live web cast and accompanying slide presentation of the earnings conference call will also be available on the Investor Relations section of the Verisign website at www.verisigninc.com. A telephone replay of this call will remain available at (888) 203-1112 or (719) 457-0820 (passcode: 5408944) for one week after the conference call. 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 www.verisigninc.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 between the dots. Additional news and information about the company is available at www.verisigninc.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; challenging global economic conditions; 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, Internet platforms and web-browsing patterns; 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; the uncertainty of whether Project Apollo will achieve its stated objectives; potential introduction of new gTLDs; the uncertainty of whether the .com Registry Agreement renewal will occur by December 1, 2012, if at all; and when a Chief Financial Officer will be named. 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, 2010, 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.

©2011 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN logo, and other trademarks, service marks, and designs are registered or unregistered trademarks of VeriSign, Inc. and its subsidiaries in the United States and in foreign countries. All other trademarks are property of their respective owners


                               VERISIGN, INC.

                   CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In thousands, except par value)

                                (Unaudited)



                                               September 30,   December 31,

                                                    2011           2010

                                               -------------  -------------

                    ASSETS

----------------------------------------------

Current assets:

  Cash and cash equivalents                    $   1,202,788  $   1,559,628

  Marketable securities                               32,136        501,238

  Accounts receivable, net                            14,831         14,874

  Deferred tax assets and other current assets       113,935        102,217

                                               -------------  -------------

    Total current assets                           1,363,690      2,177,957

                                               -------------  -------------

Property and equipment, net                          205,304        190,319

Goodwill and other intangible assets, net             54,172         55,146

Other assets                                          34,543         20,584

                                               -------------  -------------

    Total long-term assets                           294,019        266,049

                                               -------------  -------------

    Total assets                               $   1,657,709  $   2,444,006

                                               =============  =============



LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

----------------------------------------------

Current liabilities:

  Accounts payable and accrued liabilities     $     137,307  $     195,235

  Deferred revenues                                  501,924        457,478

                                               -------------  -------------

    Total current liabilities                        639,231        652,713

                                               -------------  -------------

Long-term deferred revenues                          221,019        205,560

Convertible debentures, including contingent

 interest derivative                                 586,566        581,626

Long-term deferred tax liabilities                   336,880        309,696

Other long-term liabilities                           40,751         17,981

                                               -------------  -------------

    Total long-term liabilities                    1,185,216      1,114,863

                                               -------------  -------------

    Total liabilities                              1,824,447      1,767,576

                                               -------------  -------------

Commitments and contingencies



Stockholders' (deficit) equity:

    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: 316,351 at September 30, 2011 and

     313,313 at December 31, 2010; Outstanding

     shares: 159,032 at September 30, 2011 and

     172,736 at December 31, 2010                        316            313

    Additional paid-in capital                    20,110,522     21,040,919

    Accumulated deficit                          (20,274,391)   (20,363,468)

    Accumulated other comprehensive loss              (3,185)        (1,334)

                                               -------------  -------------

    Total stockholders' (deficit) equity            (166,738)       676,430

                                               -------------  -------------

    Total liabilities and stockholders'

     (deficit) equity                          $   1,657,709  $   2,444,006

                                               =============  =============






                               VERISIGN, INC.

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                   (In thousands, except per share data)

                                (Unaudited)





                                  Three Months Ended     Nine Months Ended

                                     September 30,         September 30,

                                 --------------------  --------------------

                                    2011       2010       2011       2010

                                 ---------  ---------  ---------  ---------



Revenues                         $ 196,965  $ 172,286  $ 568,332  $ 501,749

                                 ---------  ---------  ---------  ---------



Costs and expenses:

    Cost of revenues                41,694     39,751    123,230    118,411

    Sales and marketing             25,090     18,412     69,660     62,861

    Research and development        13,488     14,468     40,156     40,483

    General and administrative      24,775     33,514     86,610    101,155

    Restructuring charges            2,971      6,269     12,160     14,042

                                 ---------  ---------  ---------  ---------

      Total costs and expenses     108,018    112,414    331,816    336,952

                                 ---------  ---------  ---------  ---------

Operating income                    88,947     59,872    236,516    164,797

Interest expense                   (11,797)   (12,140)  (135,473)   (36,104)

Non-operating income, net            3,591      4,640     15,218     13,318

                                 ---------  ---------  ---------  ---------

Income from continuing

 operations before income taxes     80,741     52,372    116,261    142,011

Income tax expense                 (22,126)    (7,267)   (23,034)   (40,312)

                                 ---------  ---------  ---------  ---------

Income from continuing

 operations, net of tax             58,615     45,105     93,227    101,699

Income (loss) from discontinued

 operations, net of tax                301    740,440     (4,150)   772,660

                                 ---------  ---------  ---------  ---------

Net income                          58,916    785,545     89,077    874,359

Less: Net income from

 discontinued operations, net of

 tax, attributable to

 noncontrolling interest in

 subsidiary                              -       (642)         -     (2,887)

                                 ---------  ---------  ---------  ---------

Net income attributable to

 Verisign stockholders           $  58,916  $ 784,903  $  89,077  $ 871,472

                                 =========  =========  =========  =========



Basic income (loss) per share

 attributable to Verisign

 stockholders from:



    Continuing operations        $    0.36  $    0.26  $    0.56  $    0.57

    Discontinued operations              -       4.26      (0.03)      4.29

                                 ---------  ---------  ---------  ---------

    Net income                   $    0.36  $    4.52  $    0.53  $    4.86

                                 =========  =========  =========  =========



Diluted income (loss) per share

 attributable to Verisign

 stockholders from:



    Continuing operations        $    0.36  $    0.26  $    0.55  $    0.56

    Discontinued operations              -       4.22      (0.02)      4.26

                                 ---------  ---------  ---------  ---------

    Net income                   $    0.36  $    4.48  $    0.53  $    4.82

                                 =========  =========  =========  =========



Shares used to compute net

 income per share attributable

 to Verisign stockholders:



    Basic                          163,046    173,572    167,492    179,240

                                 =========  =========  =========  =========

    Diluted                        163,902    175,034    169,176    180,634

                                 =========  =========  =========  =========



Amounts attributable to Verisign

 stockholders:

    Income from continuing

     operations, net of tax      $  58,615  $  45,105  $  93,227  $ 101,699

    Income (loss) from

     discontinued operations,

     net of tax                        301    739,798     (4,150)   769,773

                                 ---------  ---------  ---------  ---------

Net income attributable to

 Verisign stockholders           $  58,916  $ 784,903  $  89,077  $ 871,472

                                 =========  =========  =========  =========



The following table presents the

 classification of stock-based

 compensation:



  Cost of revenues               $   1,443  $     987  $   5,279  $   3,256

  Sales and marketing                1,305        360      4,856      2,964

  Research and development           1,094      1,508      3,965      3,812

  General and administrative         2,528      4,944     16,306     15,429

  Restructuring charges                723        931      5,701      1,043

                                 ---------  ---------  ---------  ---------

Stock-based compensation for

 continuing operations               7,093      8,730     36,107     26,504

Discontinued operations                  -      8,161          -     15,697

                                 ---------  ---------  ---------  ---------

Total stock-based compensation

 expense                         $   7,093  $  16,891  $  36,107  $  42,201

                                 =========  =========  =========  =========





                               VERISIGN, INC.

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (In thousands)

                                (Unaudited)



                                                       Nine Months Ended

                                                         September 30,

                                                   ------------------------

                                                       2011         2010

                                                   -----------  -----------



Cash flows from operating activities:

  Net income                                       $    89,077  $   874,359

  Adjustments to reconcile net income to net cash

   provided by operating activities:

    Net gain on sale of discontinued operations,

     net of tax                                              -     (735,491)

    Depreciation of property and equipment and

     amortization of other intangible assets            41,455       53,379

    Stock-based compensation                            36,107       42,201

    Excess tax benefit associated with stock-based

     compensation                                       (1,851)    (167,194)

    Other, net                                           6,804        8,435

    Changes in operating assets and liabilities,

     excluding the effects of acquisitions and

     divestitures:

      Accounts receivable                                  (38)      11,154

      Deferred tax assets and other assets             (12,434)       2,074

      Accounts payable and accrued liabilities          (7,338)       8,607

      Deferred revenues                                 59,905       70,955

                                                   -----------  -----------

        Net cash provided by operating activities      211,687      168,479

                                                   -----------  -----------



Cash flows from investing activities:

  Proceeds from maturities and sales of marketable

   securities and investments                          543,503      239,680

  Proceeds received from divestiture of

   businesses, net of cash contributed                       -    1,165,030

  Purchases of marketable securities and

   investments                                         (75,705)    (714,592)

  Purchases of property and equipment                  (63,444)     (68,646)

  Other investing activities                            (1,179)      (4,688)

                                                   -----------  -----------

      Net cash provided by investing activities        403,175      616,784

                                                   -----------  -----------



Cash flows from financing activities:

  Proceeds from issuance of common stock from

   option exercises and employee stock purchase

   plans                                                41,510       56,442

  Repurchases of common stock                         (548,803)    (434,234)

  Payment of dividends to stockholders                (463,498)           -

  Excess tax benefit associated with stock-based

   compensation                                          1,851      167,194

  Other financing activities                            (1,117)        (736)

                                                   -----------  -----------

      Net cash used in financing activities           (970,057)    (211,334)

                                                   -----------  -----------



Effect of exchange rate changes on cash and cash

 equivalents                                            (1,645)       9,100

                                                   -----------  -----------

Net (decrease) increase in cash and cash

 equivalents                                          (356,840)     583,029

Cash and cash equivalents at beginning of period     1,559,628    1,477,166

                                                   -----------  -----------

Cash and cash equivalents at end of period         $ 1,202,788  $ 2,060,195

                                                   ===========  ===========



Supplemental cash flow disclosures:

  Cash paid for interest, net of capitalized

   interest                                        $   140,047  $    39,628

                                                   ===========  ===========





                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                (Unaudited)



                              Three Months Ended       Three Months Ended

                              September 30, 2011       September 30, 2010

                           -----------------------  -----------------------

                                       Net Income               Net Income

                                      Attributable             Attributable

                            Operating  to Verisign   Operating  to Verisign

                             Income   Stockholders    Income   Stockholders

                           ---------- ------------  ---------- ------------



GAAP as reported           $   88,947 $     58,916  $   59,872 $    784,903

  Discontinued operations                     (301)                (739,798)

  Adjustments:

    Stock-based

     compensation               6,370        6,370       7,799        7,799

    Amortization of other

     intangible assets            323          323         323          323

    Restructuring charges       2,971        2,971       6,269        6,269

    Unrealized (gain) loss

     on contingent

     interest derivative

     on Convertible

     Debentures                               (250)                     625

    Non-cash interest

     expense                                 1,642                    1,984

  Tax adjustment                            (5,413)                 (13,545)

                           ---------- ------------  ---------- ------------

Non-GAAP as adjusted       $   98,611 $     64,258  $   74,263 $     48,560

                           ========== ============  ========== ============



Diluted shares                             163,902                  175,034



Per diluted share, non-

 GAAP as adjusted                     $       0.39             $       0.28

                                      ============             ============





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, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring charges, contingent interest payments to holders of our Convertible Debentures, unrealized gain/loss on contingent interest derivative on Convertible Debentures, 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 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,

                   2011        2011      2011         2010          2010

              ------------- --------- ---------- ------------- -------------



Revenues      $     196,965 $ 189,844 $  181,523 $     178,829 $     172,286

              ============= ========= ========== ============= =============





                             VERISIGN, INC.

                STATEMENTS OF OPERATIONS RECONCILIATION

                 (In thousands, except per share data)

                              (Unaudited)



                              Nine Months Ended        Nine Months Ended

                              September 30, 2011       September 30, 2010

                           -----------------------  -----------------------

                                       Net Income               Net Income

                                      Attributable             Attributable

                            Operating  to Verisign   Operating  to Verisign

                             Income   Stockholders    Income   Stockholders

                           ---------- ------------  ---------- ------------



GAAP as reported           $  236,516 $     89,077  $  164,797 $    871,472

  Discontinued operations                    4,150                 (769,773)

  Adjustments:

    Stock-based

     compensation              30,406       30,406      25,461       25,461

    Amortization of other

     intangible assets            968          968         970          970

    Restructuring charges      12,160       12,160      14,042       14,042

    Contingent interest

     payment to holders of

     Convertible

     Debentures                            100,020                        -

    Unrealized gain on

     contingent interest

     derivative on

     Convertible

     Debentures                               (500)                  (1,125)

    Non-cash interest

     expense                                 4,985                    5,635

  Tax adjustment                           (56,256)                 (15,786)

                           ---------- ------------  ---------- ------------

Non-GAAP as adjusted       $  280,050 $    185,010  $  205,270 $    130,896

                           ========== ============  ========== ============



Diluted shares                             169,176                  180,634



Per diluted share, non-

 GAAP as adjusted                     $       1.09             $       0.72

                                      ============             ============

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, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring charges, contingent interest payments to holders of our Convertible Debentures, unrealized gain/loss on contingent interest derivative on Convertible Debentures, 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 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.

Source: VeriSign, Inc.

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