Attached files

file filename
8-K - FORM 8-K - VERISIGN INC/CAd288249d8k.htm

Exhibit 99.1

LOGO

Verisign Reports 13% Year-Over-Year Revenue Growth in 2011

RESTON, VA – Jan. 26, 2012 – 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

 

   

Verisign ended the fourth quarter of 2011 with Cash, Cash Equivalents, Marketable Securities and Restricted Cash of $1.35 billion, an increase of $111 million from the prior quarter and a decrease of $714 million from the same quarter in 2010.

 

   

Cash flow from operations on a consolidated basis was $124 million for the fourth quarter and $336 million for the full year. Excess tax benefits of $13 million for the full year that are associated with stock-based compensation were classified as financing cash flows.

 

   

Deferred revenues ended the fourth quarter of 2011 totaling $729 million, an increase of $6 million from the prior quarter and $66 million from the same quarter in 2010.

 

   

Capital expenditures, on a consolidated basis, were $129 million in the fourth quarter and $193 million for the full year. Capital expenditures included $106 million during the fourth quarter and $118 million for the full year for the purchase of the Reston headquarters building.

 

   

On Nov. 22, 2011, Verisign entered into a new $200 million unsecured revolving credit facility and borrowed $100 million of this facility on Nov. 28, 2011 in part to finance the purchase of the Reston building.

Business and Corporate Highlights

 

   

Verisign Registry Services ended the quarter with approximately 113.8 million active domain names in the adjusted zone for .com and .net, representing an 8% increase year-over-year.

 

   

In the fourth quarter, Verisign added 7.9 million new domain name registrations, representing a 4% increase year-over-year.


   

During the fourth quarter, Verisign completed the move of its corporate headquarters to Reston, VA.

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

LOGO

###

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.

Contacts

Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643

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

©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,
2011
    December 31,
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 December 31,     Year Ended December 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
December 31, 2011
    Three Months Ended
December 31, 2010
 
     Operating
Income
     Net Income     Operating
Income
     Net (Loss)
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,
2011
     September 30,
2011
     June 30,
2011
     March 31,
2011
     December 31,
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  
     Operating
Income
     Net Income     Operating
Income
     Net Income
Attributable to
Verisign
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,
2011
     December 31,
2010
 

Revenues

   $ 771,978       $ 680,578