VeriSign, Inc.
Oct 25, 2012
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Verisign Reports 13 Percent Year-Over-Year Revenue Growth in Third Quarter 2012

RESTON, VA -- (Marketwire) -- 10/25/12 -- 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, 2012.

Third Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $224 million for the third quarter of 2012, up 13 percent from the same quarter in 2011. Verisign reported net income of $78 million and diluted earnings per shares (EPS) of $0.47 for the third quarter of 2012, compared to net income of $59 million and diluted EPS of $0.36 for the same quarter in 2011. The operating margin was 51.9 percent for the third quarter of 2012 compared to 45.2 percent for the same quarter in 2011.

Third Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $84 million and diluted EPS of $0.50 for the third quarter of 2012, compared to net income of $64 million and diluted EPS of $0.39 for the same quarter in 2011. The non-GAAP operating margin was 56.4 percent for the third quarter of 2012 compared to 50.1 percent for the same quarter in 2011. A table reconciling the GAAP to the non-GAAP results (that excludes items described below) is appended to this release.

"We continue to see benefits in our results from our restructuring, focus, and continued operational discipline," commented Jim Bidzos, executive chairman, president and chief executive officer.

Verisign's .com Registry Agreement renewal with Internet Corporation for Assigned Names and Numbers (ICANN) to serve as the authoritative registry operator for the .com registry was approved by Verisign's Board of Directors on June 16, 2012, and ICANN's Board of Directors on June 23, 2012. In accordance with the Cooperative Agreement between the Department of Commerce and Verisign, Verisign submitted the .com Registry Agreement to the Commerce Department for its review on June 26, 2012. As a result of communications beginning in October 2012 with the Commerce Department, we have concluded that the Commerce Department may not complete its review and approve the renewal of the .com Registry Agreement prior to its expiration on Nov. 30, 2012, and that the Commerce Department, together with the Department of Justice, is reviewing the .com Registry Agreement's pricing terms. Pursuant to the terms of the Cooperative Agreement, if the .com Registry Agreement is not approved by the Commerce Department prior to its expiration, the Commerce Department is required to agree to the extension of the .com Registry Agreement for six months, or such other reasonable period of time as the Commerce Department and Verisign may mutually agree.

"We remain committed to providing unparalleled network and registry services performance as we work with the Commerce Department to renew the .com Registry Agreement. Additionally, an area of emphasis for us is further enhancing our infrastructure to strengthen security and stability for both our customers and our own operations, in the face of new and ever-increasing cyber threats," said Bidzos.

Financial Highlights

Business 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 28 percent tax rate starting from the third quarter of 2012, and 30 percent for the other periods presented herein, both of which differ 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.

Today's Conference Call
Verisign will host a live conference call today at 4:30 p.m. (EDT) to review the third quarter 2012 results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (913) 981-5540 (international). A listen-only live webcast and accompanying slide presentation of the third quarter 2012 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: 4720678) beginning at 8:00 p.m. (EDT) on Oct. 25, 2012, and will run through Nov. 2, 2012, at 7:00 p.m. (EDT). 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 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 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 whether the .com Registry Agreement renewal will occur on or before November 30, 2012, if at all, and if the .com Registry Agreement is renewed, whether it will be renewed on the terms previously approved by ICANN and Verisign's Board of Directors; 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 and advertising practices, including those of third-party registrars; changes in search engine algorithms and advertising payment practices; 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, or litigation generally; 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; whether Verisign will be able to continue to expand its infrastructure to meet demand; the uncertainty of the expense and timing of requests for indemnification, if any, relating to completed divestitures; and the impact of the introduction of new gTLDs, any delays in their introduction and whether our gTLD applications or the applicants' gTLD applications for which we have contracted to provide back-end registry services will be successful. 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, 2011, 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)



                                               September 30,  December 31,

                                                    2012           2011

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

                    ASSETS

Current assets:

  Cash and cash equivalents                    $     270,455  $   1,313,349

  Marketable securities                            1,221,797         32,860

  Accounts receivable, net                            11,270         14,974

  Deferred tax assets                                     --         64,751

  Prepaid expenses and other current assets           26,967         21,847

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

    Total current assets                           1,530,489      1,447,781

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

Property and equipment, net                          329,358        327,136

Goodwill and other intangible assets, net             53,062         53,848

Long-term deferred tax assets                         55,193          2,758

Other long-term assets                                15,162         24,656

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

  Total long-term assets                             452,775        408,398

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

  Total assets                                 $   1,983,264  $   1,856,179

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

     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

  Accounts payable and accrued liabilities     $     106,137  $     156,385

  Convertible debentures, including contingent

   interest derivative                               603,113             --

  Deferred revenues                                  563,706        502,538

  Deferred tax liabilities                           344,404             --

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

    Total current liabilities                      1,617,360        658,923

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

Long-term deferred revenues                          244,939        226,033

Convertible debentures, including contingent

 interest derivative                                      --        590,086

Long-term debt                                       100,000        100,000

Long-term deferred tax liabilities                     3,322        325,527

Other long-term tax liabilities                       44,255         43,717

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

    Total long-term liabilities                      392,516      1,285,363

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

    Total liabilities                              2,009,876      1,944,286

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

Commitments and contingencies

Stockholders' deficit:

  Preferred stock--par value $.001 per share;

   Authorized shares: 5,000; Issued and

   outstanding shares: none                               --             --

  Common stock--par value $.001 per share;

   Authorized shares: 1,000,000; Issued

   shares: 318,560 at September 30, 2012 and

   316,781 at December 31, 2011; Outstanding

   shares: 155,541 at September 30, 2012 and

   159,422 at December 31, 2011                          319            317

  Additional paid-in capital                      19,979,858     20,135,237

  Accumulated deficit                            (20,006,186)   (20,220,577)

  Accumulated other comprehensive loss                  (603)        (3,084)

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

    Total stockholders' deficit                      (26,612)       (88,107)

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

    Total liabilities and stockholders'

     deficit                                   $   1,983,264  $   1,856,179

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







                               VERISIGN, INC.

  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                   (In thousands, except per share data)

                                (Unaudited)



                                  Three Months Ended    Nine Months Ended

                                     September 30,         September 30,

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

                                    2012       2011       2012       2011

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

Revenues                         $ 223,528  $ 196,965  $ 643,396  $ 568,332

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

Costs and expenses:

  Cost of revenues                  41,460     41,694    125,560    123,230

  Sales and marketing               22,928     25,090     77,056     69,660

  Research and development          15,409     13,488     45,635     40,156

  General and administrative        27,669     24,775     73,903     86,610

  Restructuring charges                 --      2,971       (730)    12,160

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

    Total costs and expenses       107,466    108,018    321,424    331,816

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

Operating income                   116,062     88,947    321,972    236,516

Interest expense                   (12,619)   (11,797)   (37,539)  (135,473)

Non-operating (loss) income, net    (1,742)     3,591     (3,032)    15,218

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

Income from continuing

 operations before income taxes    101,701     80,741    281,401    116,261

Income tax expense                 (24,882)   (22,126)   (70,005)   (23,034)

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

Income from continuing

 operations, net of tax             76,819     58,615    211,396     93,227

Income (loss) from discontinued

 operations, net of tax              1,091        301      2,995     (4,150)

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

Net income                          77,910     58,916    214,391     89,077

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

  Foreign currency translation

   adjustments                          --        (78)        --         (2)

  Change in unrealized gain on

   investments, net of tax           2,499         94      2,536        703

  Realized gain on investments,

   net of tax, included in net

   income                              (20)    (1,136)       (55)    (2,551)

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

Other comprehensive income

 (loss)                              2,479     (1,120)     2,481     (1,850)

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

Comprehensive income             $  80,389  $  57,796  $ 216,872  $  87,227

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



Basic income (loss) per share:

  Continuing operations          $    0.49  $    0.36  $    1.34  $    0.56

  Discontinued operations             0.01         --       0.02      (0.03)

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

  Net income                     $    0.50  $    0.36  $    1.36  $    0.53

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

Diluted income (loss) per share:

  Continuing operations          $    0.46  $    0.36  $    1.28  $    0.55

  Discontinued operations             0.01         --       0.02      (0.02)

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

  Net income                     $    0.47  $    0.36  $    1.30  $    0.53

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

Shares used to compute net

 income per share

  Basic                            156,261    163,046    157,729    167,492

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

  Diluted                          166,575    163,902    164,540    169,176

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








                               VERISIGN, INC.

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (In thousands)

                                (Unaudited)



                                                       Nine Months Ended

                                                         September 30,

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

                                                       2012         2011

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

Cash flows from operating activities:

  Net income                                       $   214,391  $    89,077

  Adjustments to reconcile net income to net cash

   provided by operating activities:

    Depreciation of property and equipment and

     amortization of other intangible assets            39,652       41,455

    Stock-based compensation                            26,391       36,107

    Excess tax benefit associated with stock-based

     compensation                                      (20,765)      (1,851)

    Other, net                                          15,650        6,804

    Changes in operating assets and liabilities

      Accounts receivable                                3,602          (38)

      Prepaid expenses and other assets                 17,087      (12,434)

      Accounts payable and accrued liabilities          (9,211)      (7,338)

      Deferred revenues                                 80,074       59,905

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

        Net cash provided by operating activities      366,871      211,687

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

Cash flows from investing activities:

  Proceeds from maturities and sales of marketable

   securities                                          393,677      543,503

  Purchases of marketable securities                (1,579,234)     (75,705)

  Purchases of property and equipment                  (39,868)     (63,444)

  Other investing activities                              (638)      (1,179)

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

        Net cash (used in) provided by investing

         activities                                 (1,226,063)     403,175

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

Cash flows from financing activities:

  Proceeds from issuance of common stock from

   option exercises and employee stock purchase

   plans                                                26,573       41,510

  Repurchases of common stock                         (231,391)    (548,803)

  Payment of dividends to stockholders                      --     (463,498)

  Excess tax benefit associated with stock-based

   compensation                                         20,765        1,851

  Other financing activities                               189       (1,117)

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

        Net cash used in financing activities         (183,864)    (970,057)

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

Effect of exchange rate changes on cash and cash

 equivalents                                               162       (1,645)

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

Net decrease in cash and cash equivalents           (1,042,894)    (356,840)

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

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

Cash and cash equivalents at end of period         $   270,455  $ 1,202,788

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

Supplemental cash flow disclosures:

  Cash paid for interest, net of capitalized

   interest                                        $    40,829  $   140,047

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

  Cash paid for income taxes, net of refunds

   received                                        $    19,975  $     5,299

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







                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                (Unaudited)



                                  Three Months Ended    Three Months Ended

                                  September 30, 2012    September 30, 2011

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

                                 Operating     Net     Operating     Net

                                   Income     Income     Income     Income

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

GAAP as reported                 $ 116,062  $  77,910  $  88,947  $  58,916

  Discontinued operations                      (1,091)                 (301)

  Adjustments:

    Stock-based compensation         9,807      9,807      6,370      6,370

    Amortization of other

     intangible assets                 140        140        323        323

    Restructuring charges               --         --      2,971      2,971

    Unrealized loss (gain) on

     contingent interest

     derivative on Convertible

     Debentures                                 3,167                  (250)

    Non-cash interest expense                   1,916                 1,642

  Tax adjustment                               (7,803)               (5,413)

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

Non-GAAP as adjusted             $ 126,009  $  84,046  $  98,611  $  64,258

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



Revenues                         $ 223,528             $ 196,965

Non-GAAP operating margin             56.4%                 50.1%

Diluted shares                                166,575               163,902

Per diluted share, non-GAAP as

 adjusted                                   $    0.50             $    0.39

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



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 28 percent tax rate starting from the third quarter of 2012 and 30 percent for all other periods presented herein, both of which differ from the GAAP tax rate. All non-GAAP figures for each period presented above have been conformed to exclude the foregoing items under GAAP.

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

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



                                                        Three Months Ended

                                                           September 30,

                                                          2012       2011

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

Cost of revenues                                       $    1,491 $    1,443

Sales and marketing                                         1,697      1,305

Research and development                                    1,622      1,094

General and administrative                                  4,997      2,528

Restructuring charges                                          --        723

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

Total stock-based compensation expense                 $    9,807 $    7,093

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







                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                (Unaudited)



                                   Nine Months Ended     Nine Months Ended

                                  September 30, 2012    September 30, 2011

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

                                 Operating     Net     Operating     Net

                                   Income     Income     Income     Income

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



GAAP as reported                 $ 321,972  $ 214,391  $ 236,516  $  89,077

  Discontinued operations                      (2,995)                4,150

  Adjustments:

    Stock-based compensation        26,391     26,391     30,406     30,406

    Amortization of other

     intangible assets                 788        788        968        968

    Restructuring charges             (730)      (730)    12,160     12,160

    Contingent interest payment

     to holders of Convertible

     Debentures                                    --               100,020

    Unrealized loss (gain) on

     contingent interest

     derivative on Convertible

     Debentures                                 7,127                  (500)

    Non-cash interest expense                   5,409                 4,985

  Tax adjustment                              (23,775)              (56,256)

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

Non-GAAP as adjusted             $ 348,421  $ 226,606  $ 280,050  $ 185,010

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



Revenues                         $ 643,396             $ 568,332

Non-GAAP operating margin             54.2%                 49.3%

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

Diluted shares                                164,540               169,176

Per diluted share, non-GAAP as

 adjusted                                   $    1.38             $    1.09

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



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 28 percent tax rate starting from the third quarter of 2012 and 30 percent for all other periods presented herein, both of which differ from the GAAP tax rate. All non-GAAP figures for each period presented above have been conformed to exclude the foregoing items under GAAP.

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

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



                                                         Nine Months Ended

                                                           September 30,

                                                          2012       2011

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

Cost of revenues                                       $    4,479 $    5,279

Sales and marketing                                         5,046      4,856

Research and development                                    4,191      3,965

General and administrative                                 12,675     16,306

Restructuring charges                                          --      5,701

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

Total stock-based compensation expense                 $   26,391 $   36,107

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



Source: VeriSign, Inc.

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