VeriSign, Inc.
Jan 26, 2012
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Verisign Reports 13% Year-Over-Year Revenue Growth in 2011

RESTON, VA -- (MARKET WIRE) -- 01/26/12 -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, announced financial results for the fourth quarter of 2011 and year ended Dec. 31, 2011.

Fourth Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $204 million for the fourth quarter of 2011, up 3% from the prior quarter and up 14% from the same quarter in 2010. Verisign reported net income of $54 million and diluted earnings per share (EPS) of $0.34 for the fourth quarter of 2011. This compared to a net loss of $(41) million and a loss per share of $(0.23) in the same quarter in 2010. Results for the fourth quarter of 2011 included a pre-tax, $4 million non-operating accrued expense, which is non-recurring in nature and which reduced diluted EPS by $0.02. The operating margin was 45.6% for the fourth quarter of 2011 compared to 37.7% for the same quarter in 2010.

Fourth Quarter Non-GAAP Financial Results
Verisign reported net income of $64 million and diluted EPS of $0.40 for the fourth quarter of 2011, compared to net income of $55 million and diluted EPS of $0.31 in the same quarter in 2010. Results for the fourth quarter of 2011 included a pre-tax, $4 million non-operating accrued expense, which is non-recurring in nature and which reduced diluted EPS by $0.02. The operating margin was 50.9% for the fourth quarter of 2011 compared to 44.3% 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.

"In a year that saw strong growth in global internet adoption, increased demand on our DNS infrastructure, and a growing need for network security services, Verisign delivered security and stability. We were able to both invest in strengthening our infrastructure, and manage our business for growth. Also in 2011, we completed four years of board-directed restructuring, including divesting non-core businesses, and relocating our corporate headquarters. We returned divestiture proceeds to our shareholders. This restructuring has resulted in a more efficient, focused Verisign that we believe is better prepared for the opportunities ahead. We delivered for both the global community of Internet users that increasingly rely on us, and for our shareholders," said Jim Bidzos, chairman and chief executive officer of Verisign.

2011 GAAP Financial Results
For the year ended Dec. 31, 2011, Verisign reported revenue of $772 million, up 13% from $681 million in 2010. Verisign reported net income of $143 million and diluted EPS of $0.86. This compared to net income attributable to Verisign stockholders of $831 million and diluted EPS attributable to Verisign stockholders of $4.64 in 2010, which benefited from a net gain of $726 million, net of tax of $254 million, on the sale of the Authentication Services business. The operating margin for 2011 was 42.7% compared to 34.1% in 2010.

2011 Non-GAAP Financial Results
Verisign reported net income of $249 million and diluted EPS of $1.49 for 2011, compared to net income attributable to Verisign stockholders of $186 million and diluted EPS attributable to Verisign stockholders of $1.04 in 2010. The operating margin for 2011 was 49.7% compared to 41.8% in 2010. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"In 2011, operating discipline, focus, and the completion of our restructuring yielded solid results for the business, and we completed the return of divestiture proceeds to our shareholders," said John Calys, interim chief financial officer of Verisign.

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 conference call today at 4:30 p.m. (EST) to review the fourth quarter and full year results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-1399 (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: 5973481) for one week after the conference call. An audio archive of the call will be available at https://investor.verisign.com/events.cfm. 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 uncertainty of whether Verisign will 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; the impact of the 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.

©2012 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)



                                                December 31,   December 31,

                                                    2011           2010

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

                    ASSETS

Current assets:

  Cash and cash equivalents                    $   1,313,349  $   1,559,628

  Marketable securities                               32,860        501,238

  Accounts receivable, net                            14,974         14,874

  Deferred tax assets and other current assets        86,598        102,217

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

    Total current assets                           1,447,781      2,177,957

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

Property and equipment, net                          327,136        190,319

Goodwill and other intangible assets, net             53,848         55,146

Other assets                                          27,414         20,584

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

    Total long-term assets                           408,398        266,049

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

    Total assets                               $   1,856,179  $   2,444,006

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



LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities:

  Accounts payable and accrued liabilities     $     156,385  $     195,235

  Deferred revenues                                  502,538        457,478

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

    Total current liabilities                        658,923        652,713

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

Long-term deferred revenues                          226,033        205,560

Convertible debentures, including contingent

 interest derivative                                 590,086        581,626

Long-term debt                                       100,000              -

Long-term deferred tax liabilities                   325,527        309,696

Other long-term liabilities                           43,717         17,981

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

    Total long-term liabilities                    1,285,363      1,114,863

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

    Total liabilities                              1,944,286      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: 316,781 at December 31, 2011 and

   313,313 at December 31, 2010; Outstanding

   shares: 159,422 at December 31, 2011 and

   172,736 at December 31, 2010                          317            313

  Additional paid-in capital                      20,135,237     21,040,919

  Accumulated deficit                            (20,220,577)   (20,363,468)

  Accumulated other comprehensive loss                (3,084)        (1,334)

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

    Total stockholders' (deficit) equity             (88,107)       676,430

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

    Total liabilities and stockholders'

     (deficit) equity                          $   1,856,179  $   2,444,006

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





                               VERISIGN, INC.

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                   (In thousands, except per share data)

                                 (Unaudited)



                               Three Months Ended      Year Ended December

                                  December 31,                 31,

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

                                2011        2010        2011        2010

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



Revenues                     $  203,646  $  178,829  $  771,978  $  680,578

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



Costs and expenses:

  Cost of revenues               42,016      38,265     165,246     156,676

  Sales and marketing            27,772      20,529      97,432      83,390

  Research and development       13,121      13,181      53,277      53,664

  General and administrative     24,512      36,549     111,122     137,704

  Restructuring charges           3,352       2,819      15,512      16,861

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

    Total costs and expenses    110,773     111,343     442,589     448,295

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

Operating income                 92,873      67,486     329,389     232,283

Interest expense                (11,859)   (121,564)   (147,332)   (157,667)

Non-operating (loss) income,

 net                             (3,688)      7,420      11,530      20,738

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

Income (loss) from

 continuing operations

 before income taxes             77,326     (46,658)    193,587      95,354

Income tax (expense) benefit    (31,997)     14,991     (55,031)    (25,322)

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

Income (loss) from

 continuing operations, net

 of tax                          45,329     (31,667)    138,556      70,032

Income (loss) from

 discontinued operations,

 net of tax                       8,485      (8,838)      4,335     763,822

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

Net income (loss)                53,814     (40,505)    142,891     833,854

Less: Net income from

 discontinued operations,

 net of tax, attributable to

 noncontrolling interest in

 subsidiary                           -           -           -      (2,887)

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



Net income (loss)

 attributable to Verisign

 stockholders                $   53,814  $  (40,505) $  142,891  $  830,967

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



Basic income (loss) per share

 attributable to Verisign stockholders

 from:



  Continuing operations      $     0.28  $    (0.18) $     0.84  $     0.39

  Discontinued operations          0.06       (0.05)       0.03        4.29

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

  Net income (loss)          $     0.34  $    (0.23) $     0.87  $     4.68

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



Diluted income (loss) per share

 attributable to Verisign stockholders

 from:



  Continuing operations      $     0.28  $    (0.18) $     0.83  $     0.39

  Discontinued operations          0.06       (0.05)       0.03        4.25

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

  Net income (loss)          $     0.34  $    (0.23) $     0.86  $     4.64

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



Shares used to compute net income per

 share attributable to Verisign

 stockholders:



  Basic                         159,226     172,472     165,408     177,534

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

  Diluted                       160,087     172,472     166,887     178,965

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



Amounts attributable to

 Verisign stockholders:

  Income (loss) from

   continuing operations,

   net of tax                $   45,329  $  (31,667) $  138,556  $   70,032

  Income (loss) from

   discontinued operations,

   net of tax                     8,485      (8,838)      4,335     760,935

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



Net income (loss)

 attributable to Verisign

 stockholders                $   53,814  $  (40,505) $  142,891  $  830,967

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



The following table presents the classification of stock-based compensation:




  Cost of revenues           $    1,376  $    1,217  $    6,655  $    4,473

  Sales and marketing             1,206       1,454       6,062       4,419

  Research and development          961       1,178       4,926       4,989

  General and

   administrative                 3,622       4,707      19,928      20,136

  Restructuring charges               -       1,277       5,701       2,321

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

Stock-based compensation

 for continuing operations        7,165       9,833      43,272      36,338

Discontinued operations               -         144           -      15,840

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

Total stock-based

 compensation expense        $    7,165  $    9,977  $   43,272  $   52,178

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





                               VERISIGN, INC.

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (In thousands)

                                (Unaudited)



                                                  Year Ended December 31,

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

                                                    2011           2010

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



Cash flows from operating activities:

  Net income                                   $     142,891  $     833,854

  Adjustments to reconcile net income to net

   cash provided by operating activities:

    Net gain on sale of discontinued

     operations, net of tax                                -       (725,254)

    Depreciation and amortization                     55,706         67,655

    Stock-based compensation                          43,272         52,178

    Excess tax benefit associated with stock-

     based compensation                              (13,420)      (131,926)

    Other, net                                        12,965          9,474

    Changes in operating assets and

     liabilities, excluding the effects of

     acquisitions and divestitures:

      Accounts receivable                               (251)        13,147

      Deferred tax assets and other assets            11,043        (19,105)

      Accounts payable and accrued liabilities        18,162         34,952

      Deferred revenues                               65,533         80,231

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

        Net cash provided by operating

         activities                                  335,901        215,206

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

Cash flows from investing activities:

  Proceeds received from divestiture of

   businesses, net of cash contributed and

   transaction costs                                       -      1,162,306

  Proceeds from maturities and sales of

   marketable securities and investments             546,006        313,817

  Purchases of marketable securities and

   investments                                       (78,975)      (787,718)

  Purchases of property and equipment               (192,660)       (80,527)

  Other investing activities                          (1,129)        (4,788)

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

        Net cash provided by investing

         activities                                  273,242        603,090

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



Cash flows from financing activities:

  Proceeds from issuance of common stock from

   option exercises and employee stock

   purchase plans                                     49,983         92,510

  Repurchases of common stock                       (550,097)      (449,749)

  Payment of dividends to stockholders              (463,498)      (518,217)

  Excess tax benefit associated with stock-

   based compensation                                 13,420        131,926

  Proceeds received from borrowings                  100,000              -

  Repayment of borrowings                             (1,067)        (1,004)

  Other financing activities                            (939)          (740)

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

        Net cash used in financing activities       (852,198)      (745,274)

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

Effect of exchange rate changes on cash and

 cash equivalents                                     (3,224)         9,440

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

Net (decrease) increase in cash and cash

 equivalents                                        (246,279)        82,462

Cash and cash equivalents at beginning of

 period                                            1,559,628      1,477,166

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

Cash and cash equivalents at end of period     $   1,313,349  $   1,559,628

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



Supplemental cash flow disclosures:

  Cash paid for interest, net of capitalized

   interest                                    $     140,193  $     148,870

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

  Cash paid for income taxes, net of refunds

   received                                    $       6,567  $       8,502

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

Payable to purchaser of divested business      $           -  $      (4,250)

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





                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                 (Unaudited)



                                Three Months Ended     Three Months Ended

                                December 31, 2011       December 31, 2010

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

                               Operating              Operating  Net (Loss)

                                Income   Net Income    Income      Income

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



GAAP as reported              $   92,873 $   53,814  $   67,486 $   (40,505)

  Discontinued operations                    (8,485)                  8,838

  Adjustments:

    Stock-based compensation       7,165      7,165       8,556       8,556

    Amortization of other

     intangible assets               325        325         324         324

    Restructuring charges          3,352      3,352       2,819       2,819

    Contingent interest

     payment to holders of

     Convertible Debentures                                         109,113

    Unrealized loss on

     contingent interest

     derivative on

     Convertible Debentures                   1,625                   1,625

    Non-cash interest expense                 1,555                   2,294

  Tax adjustment                              4,593                 (38,412)

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

Non-GAAP as adjusted          $  103,715 $   63,944  $   79,185 $    54,652

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



Diluted shares                              160,087                 174,014



Per diluted share, non-GAAP

 as adjusted                             $     0.40             $      0.31

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





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

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



            December 31, September 30,   June 30,   March 31,   December 31,

                2011          2011         2011        2011         2010

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



Revenues   $     203,646 $     196,965 $   189,844 $   181,523 $     178,829

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





                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                 (Unaudited)



                                  Year Ended              Year Ended

                              December 31, 2011        December 31, 2010

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

                                                                Net Income

                                                               Attributable

                             Operating              Operating  to Verisign

                              Income   Net Income    Income    Stockholders

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



GAAP as reported            $  329,389 $  142,891  $  232,283 $     830,967

  Discontinued operations                  (4,335)                 (760,935)

  Adjustments:

    Stock-based

     compensation               37,571     37,571      34,017        34,017

    Amortization of other

     intangible assets           1,293      1,293       1,293         1,293

    Restructuring charges       15,512     15,512      16,861        16,861

    Contingent interest

     payment to holders of

     Convertible Debentures               100,020                   109,113

    Unrealized loss on

     contingent interest

     derivative on

     Convertible Debentures                 1,125                       500

    Non-cash interest

     expense                                6,540                     7,929

  Tax adjustment                          (51,663)                  (54,198)

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

Non-GAAP as adjusted        $  383,765 $  248,954  $  284,454 $     185,547

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



Diluted shares                            166,887                   178,965



Per diluted share, non-GAAP

 as adjusted                           $     1.49             $        1.04

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



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

                                                          Year Ended

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



                                                  December 31,  December 31,

                                                      2011          2010

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



Revenues                                         $     771,978 $     680,578

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

Source: VeriSign, Inc.

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