VeriSign, Inc.
Jan 24, 2013
PDF
Add to Briefcase

Verisign Reports 13 Percent Year-Over-Year Revenue Growth in 2012

RESTON, VA -- (Marketwire) -- 01/24/13 -- VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, announced financial results for the fourth quarter of 2012 and year ended Dec. 31, 2012.

Fourth Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $230 million for the fourth quarter of 2012, up 13 percent from the same quarter in 2011. Verisign reported net income of $106 million and diluted earnings per share (EPS) of $0.65 for the fourth quarter of 2012, compared to net income of $54 million and diluted EPS of $0.34 for the same quarter in 2011. The operating margin was 58.8 percent for the fourth quarter of 2012 compared to 45.6 percent for the same quarter in 2011. Results for the fourth quarter of 2012 included non-recurring pre-tax benefits of $13.6 million, split $5.8 million and $7.8 million between continuing operations and discontinued operations, respectively, primarily related to reimbursements of previously incurred litigation and defense costs, received upon settlement with the selling shareholders of a previously acquired business. Additionally, results for the fourth quarter of 2012 include pre-tax benefits of $5.5 million related to a change in the estimated bonus payout. Together these items increased the operating margin by 4.9 percent and diluted EPS by $0.07. Results for the fourth quarter of 2011 included a pre-tax, $4 million non-operating accrued expense, which was non-recurring in nature and which reduced diluted EPS by $0.02.

Fourth Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $96 million and diluted EPS of $0.59 for the fourth quarter of 2012, compared to net income of $64 million and diluted EPS of $0.40 for the same quarter in 2011. The non-GAAP operating margin was 62.0 percent for the fourth quarter of 2012 compared to 50.9 percent for the same quarter in 2011. Non-GAAP results for the fourth quarter of 2012 included non-recurring pre-tax benefits of $5.8 million recorded in continuing operations, primarily related to reimbursements of previously incurred litigation and defense costs, received upon settlement with the selling shareholders of a previously acquired business. Additionally, the non-GAAP results for the fourth quarter of 2012 include pre-tax benefits of $5.5 million related to a change in the estimated bonus payout. Together these items increased the operating margin by 4.9 percent and diluted EPS by $0.05. Results for the fourth quarter of 2011 included a pre-tax, $4 million non-operating accrued expense, which was non-recurring in nature and which reduced diluted EPS by $0.02. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"In 2012, Verisign marked 15 years of uninterrupted availability for .com and .net and we renewed the .com Registry Agreement for an additional six years. Our performance continues to demonstrate discipline and operational focus. In 2013, we will continue to seek quality growth, while protecting and managing our business," said Jim Bidzos, chairman and chief executive officer of Verisign.

2012 GAAP Financial Results
For the year ended Dec. 31, 2012, Verisign reported revenue of $874 million, up 13 percent from $772 million in 2011. Verisign reported net income of $320 million and diluted EPS of $1.95 in 2012, compared to net income of $143 million and diluted EPS of $0.86 in 2011. The operating margin for 2012 was 52.4 percent compared to 42.7 percent in 2011.

2012 Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $322 million and diluted EPS of $1.97 for 2012, compared to net income of $249 million and diluted EPS of $1.49 in 2011. The non-GAAP operating margin for 2012 was 56.2 percent compared to 49.7 percent in 2011. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

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 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 is appended to this release.

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 2012 results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (913) 312-0637 (international). A listen-only live web cast and accompanying slide presentation of the fourth quarter and full year 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: 1285042) beginning at 8:00 p.m. (EST) on Jan. 24, 2012, and will run through Feb. 1, 2012, at 7:00 p.m. (EST). An audio archive of the call will be available at https://investor.verisign.com/events.cfm. This news 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 Department of Commerce will approve any exercise by the Company of its right to increase the price per .com domain name, under certain circumstances, and whether the Company will be able to demonstrate to the Department of Commerce that market conditions warrant removal of the pricing restrictions on .com domain names; the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results due to such factors as restrictions on increasing prices under the 2012 .com Registry Agreement, 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.

©2013 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,

                                                    2012           2011

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

                    ASSETS

Current assets:

  Cash and cash equivalents                    $     130,736  $   1,313,349

  Marketable securities                            1,425,700         32,860

  Accounts receivable, net                            11,477         14,974

  Deferred tax assets                                 82,812         64,751

  Prepaid expenses and other current assets           30,795         21,847

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

    Total current assets                           1,681,520      1,447,781

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

Property and equipment, net                          333,861        327,136

Goodwill and other intangible assets, net             52,527         53,848

Long-term deferred tax assets                          7,299          2,758

Other long-term assets                                25,325         24,656

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

    Total long-term assets                           419,012        408,398

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

    Total assets                               $   2,100,532  $   1,856,179

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

     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

  Accounts payable and accrued liabilities     $     130,391  $     156,385

  Deferred revenues                                  564,627        502,538

    Total current liabilities                        695,018        658,923

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

Long-term deferred revenues                          247,955        226,033

Convertible debentures, including contingent

 interest derivative                                 597,614        590,086

Long-term debt                                       100,000        100,000

Long-term deferred tax liabilities                   424,970        325,527

Other long-term tax liabilities                       44,298         43,717

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

    Total long-term liabilities                    1,414,837      1,285,363

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

    Total liabilities                              2,109,855      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: 318,722 at December 31, 2012 and

   316,781 at December 31, 2011; Outstanding

   shares: 153,392 at December 31, 2012 and

   159,422 at December 31, 2011                          319            317

  Additional paid-in capital                      19,891,291     20,135,237

  Accumulated deficit                            (19,900,545)   (20,220,577)

  Accumulated other comprehensive loss                  (388)        (3,084)

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

    Total stockholders' deficit                       (9,323)       (88,107)

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

    Total liabilities and stockholders'

     deficit                                   $   2,100,532  $   1,856,179

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





                               VERISIGN, INC.

  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                   (In thousands, except per share data)

                                (Unaudited)



                                  Three Months Ended        Year Ended

                                     December 31,          December 31,

                                    2012       2011       2012       2011

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

Revenues                         $ 230,196  $ 203,646  $ 873,592  $ 771,978

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

Costs and expenses:

  Cost of revenues                  42,040     42,016    167,600    165,246

  Sales and marketing               20,753     27,772     97,809     97,432

  Research and development          16,059     13,121     61,694     53,277

  General and administrative        16,024     24,512     89,927    111,122

  Restructuring charges                (35)     3,352       (765)    15,512

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

    Total costs and expenses        94,841    110,773    416,265    442,589

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

Operating income                   135,355     92,873    457,327    329,389

Interest expense                   (12,657)   (11,859)   (50,196)  (147,332)

Non-operating income, net            8,596     (3,688)     5,564     11,530

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

Income from continuing

 operations before income taxes    131,294     77,326    412,695    193,587

Income tax expense                 (30,205)   (31,997)  (100,210)   (55,031)

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

Income from continuing

 operations, net of tax            101,089     45,329    312,485    138,556

Income from discontinued

 operations, net of tax              4,552      8,485      7,547      4,335

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

Net income                         105,641     53,814    320,032    142,891

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

  Foreign currency translation

   adjustments                          --        112         --        110

  Increase (decrease) in

   unrealized gain on

   investments, net of tax             221        (15)     2,757        688

  Realized (gain) loss on

   investments, net of tax,

   included in net income               (6)         3        (61)    (2,548)

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

Other comprehensive income

 (loss)                                215        100      2,696     (1,750)

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

Comprehensive income             $ 105,856  $  53,714  $ 322,728  $ 141,141

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



Basic income per share:

  Continuing operations          $    0.65  $    0.28  $    1.99  $    0.84

  Discontinued operations             0.03       0.06       0.05       0.03

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

  Net income                     $    0.68  $    0.34  $    2.04  $    0.87

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

Diluted income per share:

  Continuing operations          $    0.62  $    0.28  $    1.91  $    0.83

  Discontinued operations             0.03       0.06       0.04       0.03

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

  Net income                     $    0.65  $    0.34  $    1.95  $    0.86

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

Shares used to compute net

 income per share

  Basic                            154,642    159,226    156,953    165,408

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

  Diluted                          162,034    160,087    163,909    166,887

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





                               VERISIGN, INC.

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (In thousands)

                                (Unaudited)



                                                    Year Ended December 31,

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

                                                       2012         2011

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

Cash flows from operating activities:

  Net income                                       $   320,032  $   142,891

  Adjustments to reconcile net income to net cash

   provided by operating activities:

    Depreciation of property and equipment and

     amortization of other intangible assets            54,819       55,706

    Stock-based compensation                            33,362       43,272

    Excess tax benefit associated with stock-based

     compensation                                      (18,436)     (13,420)

    Other, net                                          10,981       12,965

    Changes in operating assets and liabilities

      Accounts receivable                                3,327         (251)

      Prepaid expenses and other assets                (31,946)      11,043

      Accounts payable and accrued liabilities          81,480       18,162

      Deferred revenues                                 84,011       65,533

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

        Net cash provided by operating activities      537,630      335,901

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

Cash flows from investing activities:

  Proceeds from maturities and sales of marketable

   securities                                        1,234,156      546,006

  Purchases of marketable securities                (2,622,898)     (78,975)

  Purchases of property and equipment                  (53,023)    (192,660)

  Other investing activities                              (588)      (1,129)

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

        Net cash (used in) provided by investing

         activities                                 (1,442,353)     273,242

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

Cash flows from financing activities:

  Proceeds from issuance of common stock from

   option exercises and employee stock purchase

   plans                                                29,303       49,983

  Repurchases of common stock                         (325,680)    (550,097)

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

  Excess tax benefit associated with stock-based

   compensation                                         18,436       13,420

  Proceeds received from borrowings                         --      100,000

  Repayment of borrowings                                   --       (1,067)

  Other financing activities                               189         (939)

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

        Net cash used in financing activities         (277,752)    (852,198)

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

Effect of exchange rate changes on cash and cash

 equivalents                                              (138)      (3,224)

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

Net decrease in cash and cash equivalents           (1,182,613)    (246,279)

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

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

Cash and cash equivalents at end of period         $   130,736  $ 1,313,349

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

Supplemental cash flow disclosures:

  Cash paid for interest, net of capitalized

   interest                                        $    41,276  $   140,193

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

  Cash paid for income taxes, net of refunds

   received                                        $    19,436  $     6,567

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





                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                (Unaudited)



                                    Three Months Ended   Three Months Ended

                                    December 31, 2012    December 31, 2011

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

                                   Operating     Net    Operating     Net

                                     Income    Income     Income    Income

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

GAAP as reported                   $ 135,355  $105,641  $  92,873  $ 53,814

  Discontinued operations                       (4,552)              (8,485)

  Adjustments:

    Stock-based compensation           6,971     6,971      7,165     7,165

    Amortization of other

     intangible assets                   533       533        325       325

    Restructuring charges                (35)      (35)     3,352     3,352

    Unrealized (gain)loss on

     contingent interest

     derivative on Convertible

     Debentures                                 (7,549)               1,625

    Non-cash interest expense                    1,961                1,555

  Tax adjustment                                (7,085)               4,593

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

Non-GAAP as adjusted               $ 142,824  $ 95,885  $ 103,715  $ 63,944

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



Revenues                           $ 230,196            $ 203,646

Non-GAAP operating margin               62.0%                50.9%

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

Diluted shares                                 162,034              160,087

Per diluted share, non-GAAP as

 adjusted                                     $   0.59             $   0.40

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



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.

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

                                                           December 31,

                                                         2012        2011

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

Cost of revenues                                     $     1,275 $     1,376

Sales and marketing                                        1,045       1,206

Research and development                                   1,832         961

General and administrative                                 2,819       3,622

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

Total stock-based compensation expense               $     6,971 $     7,165

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







                               VERISIGN, INC.

                  STATEMENTS OF OPERATIONS RECONCILIATION

                   (In thousands, except per share data)

                                (Unaudited)



                                        Year Ended           Year Ended

                                    December 31, 2012    December 31, 2011

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

                                   Operating     Net    Operating     Net

                                     Income    Income     Income    Income

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



GAAP as reported                   $ 457,327  $320,032  $ 329,389  $142,891

  Discontinued operations                       (7,547)              (4,335)

  Adjustments:

    Stock-based compensation          33,362    33,362     37,571    37,571

    Amortization of other

     intangible assets                 1,321     1,321      1,293     1,293

    Restructuring charges               (765)     (765)    15,512    15,512

    Contingent interest payment to

     holders of Convertible

     Debentures                                     --              100,020

    Unrealized (gain)loss on

     contingent interest

     derivative on Convertible

     Debentures                                   (422)               1,125

    Non-cash interest expense                    7,370                6,540

  Tax adjustment                               (30,860)             (51,663)

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

Non-GAAP as adjusted               $ 491,245  $322,491  $ 383,765  $248,954

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



Revenues                           $ 873,592            $ 771,978

Non-GAAP operating margin               56.2%                49.7%

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

Diluted shares                                 163,909              166,887

Per diluted share, non-GAAP as

 adjusted                                     $   1.97             $   1.49

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



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.

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:




                                                     Year Ended December 31,

                                                         2012        2011

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

Cost of revenues                                     $     5,754 $     6,655

Sales and marketing                                        6,091       6,062

Research and development                                   6,023       4,926

General and administrative                                15,494      19,928

Restructuring charges                                         --       5,701

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

Total stock-based compensation expense               $    33,362 $    43,272

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



Source: VeriSign, Inc.

News Provided by Acquire Media