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Press Release |
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VeriSign Reports 13% Year-Over-Year Revenue Growth in First Quarter 2009
Company Exceeds Expectations With Non-GAAP Core Earnings per Share of $0.32
London – May 7, 2009 - VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services, today reported financial results for the first quarter ended March 31, 2009.
On a GAAP basis, VeriSign reported revenue of $255 million from continuing operations for the first quarter of 2009. On a GAAP basis, VeriSign reported net income attributable to VeriSign, Inc. and subsidiaries of $65 million and earnings per share attributable to VeriSign, Inc. and subsidiaries of $0.34 on a fully-diluted basis.
On a GAAP basis, VeriSign reported segment revenue for Internet Infrastructure and Identity Services (3IS), or the "core businesses" of Naming Services and Authentication Services, of $252 million, up 2% from Q4 2008 and up 13% year-over-year. This includes $3 million from iDefense that was previously classified as a discontinued operation. GAAP operating margin for the first quarter was 29.3%.
On a non-GAAP basis (which excludes items described below) for its core businesses, VeriSign reported net income attributable to VeriSign, Inc. and subsidiaries of $61 million for the first quarter of 2009 and fully-diluted earnings per share of $0.32. Non-GAAP operating margins for the first quarter were 36.9%. A table reconciling the GAAP to the non-GAAP results reported above is appended to this release.
"In the face of a tough economy, solid execution has delivered solid results," said Jim Bidzos, VeriSign's executive chairman and chief executive officer on an interim basis. "Our core businesses did well, and our divestiture efforts have shown great progress."
"During the past several quarters when the global economy has contracted, worldwide Internet usage has continued to rise," said Mark McLaughlin, president and chief operating officer of VeriSign. "VeriSign's services are important to the Internet economy. We remain confident in our ability to make continued progress in the business in the short term and grow in a disciplined manner over the long term."
"We are very pleased with the progress that we made in Q1, having delivered top and bottom line results that were in-line with or exceeded expectations while continuing to execute on our strategy to divest of non-core businesses," said Brian Robins, acting chief financial officer of VeriSign. "Furthermore, our balance sheet remains strong with nearly $950 million in cash and cash equivalents, and our deferred revenue for continuing operations grew 3% quarter-over-quarter."
Business and Corporate Highlights
- VeriSign's Naming business ended the quarter with approximately 92.4
million active domain names in the adjusted zone for .com and .net,
representing a 9% increase year-over-year.
- VeriSign SSL Services ended the quarter with 1.15 million SSL
Certificates in the installed base, an increase of 13% over the same
quarter last year.
- VeriSign's average daily query load increased to 38 billion in Q1, a
9% increase from the prior quarter.
- Under Project Titan, VeriSign continues to expand and optimize its
infrastructure. VeriSign reduced average daily peak loads by more than 10
percent through use of its enhanced security and monitoring, even in the
face of growing daily average DNS requests.
- In March, VeriSign announced a new agreement with eNom to promote and
distribute VeriSign branded SSL Certificates through its retail and
reseller channels.
- VeriSign recently announced the VeriSign Identity Protection (VIP)
Access for Mobile credential, which is now available for download onto more
than 100 popular mobile phone models. The application transforms leading
mobile phones into strong authentication credentials capable of generating
a unique one-time password (OTP) every time a consumer signs on to a Web
site protected by the VIP Authentication Service.
- Subsequent to the end of the quarter, VeriSign completed the sales of
the Communication Services, International Clearing, and Real-Time Publisher
(RTP) Services businesses. The proceeds from the sales of the non-core
businesses from November 2007 to date, including the sale of the remaining
interest in the Jamba joint venture, are approximately $540 million.
- From November 2007 to date, VeriSign has sold 10 non-core businesses
and is in the process of winding down one business in non-core continuing
operations. There are currently three additional non-core businesses in
discontinued operations remaining for sale, including Messaging and Managed
Security Services.
- The Enterprise and Security Services (ESS) bundle has been broken down
into iDefense, MSS and security consulting. For strategic reasons,
iDefense, which provides information security threat intelligence, was
retained and reclassified as core continuing operations as of March 31,
2009. VeriSign has entered into an exclusive letter of intent to sell MSS,
which represents 65% of Q1 2009 revenue of the ESS bundle. Entry into a
binding agreement remains subject to agreement on final terms and
conditions.
- VeriSign 2009 Analyst Day will be held on November 19 in New York
City. Additional details will be forthcoming at a later date.
Financial Highlights
- Pursuant to the terms of the arrangement agreement between VeriSign
and Certicom, VeriSign received a termination fee of approximately $3
million in the quarter that contributed approximately $0.01 to earnings per
share.
- Revenue from discontinued operations was $103 million while non-core
businesses reported $3 million of revenue as part of continuing operations
during the first quarter of 2009.
- VeriSign ended the first quarter of 2009 with Cash and Equivalents of
$944 million, inclusive of $2 million of restricted cash, an increase of
$153 million from the prior quarter.
- Cash flow from operations for the quarter was approximately $38
million.
- Capital expenditures, on a consolidated basis, were approximately $21
million for the first quarter of 2009.
- Deferred revenue on March 31, 2009 totaled $872 million for continuing
operations, an increase of $27 million from the prior quarter.
Non-GAAP Items
Non-GAAP results exclude the following items that are included under GAAP: discontinued operations, non-core businesses in continuing operations, stock-based compensation, amortization of other intangible assets, restructuring costs, and impairments of goodwill and other intangible assets. 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 net income is appended to this release.
Today's Conference Call
VeriSign will host a live teleconference call today at 2:00 p.m. (PDT) to review the first quarter results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (913) 312-1457 (international). A listen-only live web cast and accompanying slide presentation of the 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: 8466229) beginning at 5:00 p.m. (PDT) on May 7 and will run through May 13. 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 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 engage in communications and commerce with confidence. Additional
news and information about the company is available at http://www.verisign.com/
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 and Section 21E of the Securities Exchange Act of 1934. 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 the inability of VeriSign to successfully develop and market new products and services and customer acceptance of any new products or services, including VeriSign EV SSL solutions; the possibility that VeriSign's announced new services may not result in additional customers, profits or revenues; and increased competition and pricing pressures. 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, 2007 and quarterly reports on Form 10-Q. VeriSign undertakes no obligation to update any of the forward-looking statements after the date of this press release.
©2009 VeriSign, Inc. All rights reserved. VeriSign, the VeriSign logo, the Checkmark Circle 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| |
Three Months Ended |
| |
March 31 |
| |
2009 |
2008 |
| Net income (loss) |
$65,515 |
$(7,155) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Gain on divestiture of businesses, net of tax |
- |
$(1,221) |
| Unrealized gain on contingent interest derivative on convertible debentures |
$(1,174) |
$(1,838) |
| Depreciation of property and equipment |
$17,309 |
$31,852 |
| Amortization of other intangible assets |
$3,221 |
$11,957 |
| Estimated (gains) losses on assets held for sale |
$(4,477) |
$25,511 |
| Gain on receipt of acquisition termination fee |
$(3,279) |
- |
| Provision for doubtful accounts |
$329 |
$575 |
| Stock-based compensation |
$13,928 |
$26,795 |
| Loss on disposal of property and equipment and other |
$1,658 |
$836 |
| Loss from unconsolidated entities, net of tax |
- |
$1,761 |
| Changes in operating assets and liabilities: |
|
|
| Accounts receivable |
$8,464 |
$(1,025) |
| Prepaid expenses and other assets |
$(29,380) |
$14,535 |
| Accounts payable and accrued liabilities |
$(42,467) |
$(94,842) |
| Accrued restructuring costs |
$(17,001) |
$19,296 |
| Deferred revenues |
$25,792 |
$42,473 |
| Net cash provided by operating activities |
$38,438 |
$69,510 |
| Cash flows from investing activities: |
|
|
| Proceeds from maturities and sales of investments |
$94,016 |
$100 |
| Purchases of investments |
(750) |
- |
| Proceeds from sale of property and equipment |
- |
$1,286 |
| Purchases of property and equipment |
$(20,994) |
$(26,167) |
| Proceeds received from acquisition termination fee
|
$3,279 |
- |
| Proceeds received from divestiture of businesses, net cash contributed
|
$2,372 |
$14,160 |
| Other investing activities |
$206 |
$(268) |
| Net cash provided by (used in) investing activities |
$78,129 |
$(10,889) |
| Cash flows from financing activities: |
|
|
| Proceeds from issuance of common stock from option exercises and employee stock purchase plan |
$17,133 |
$45,916 |
| Repurchases of common stock |
$(1,361) |
$(1,146,510) |
| Proceeds from credit facility |
- |
$200,000 |
| Repayment of short-term debt related to credit facility |
- |
$(60,000) |
| Excess tax benefit associated with stock options |
$27,293 |
- |
| Net cash provided by (used in) financing activities |
$43,065 |
$(960,594) |
| Effect of exchange rate changes on cash and cash equivalents |
$(6,314) |
$8,276 |
| Net increase (decrease) in cash and cash equivalents |
$153,318 |
$(893,697) |
| Cash and cash equivalents at beginning of period |
$789,068 |
$1,376,722 |
| Cash and cash equivalents at end of period |
$942,386 |
$483,025 |
| Supplemental cash flow disclosures: |
|
|
| Cash paid for interest, net of capitalized interest |
$19,521 |
$17,922 |
| Dividend payable to noncontrolling interest in subsidiary |
$807 |
$730 |
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
|
| |
Three Months Ended |
| |
March 31, 2009 |
| Net Income (loss) attributable to VeriSign, Operating Inc. and Income Subsidiaries |
|
|
| GAAP as reported |
$74,714 |
$65,020 |
| Discontinued operations |
$(18,626) |
- |
| Non-core businesses in continuing operations (1) |
$(173) |
$(1,111) |
| Core operations |
$74,541 |
$45,283 |
| Adjustments to core operations (1): |
|
|
| Stock-based compensation |
$10,679 |
$10,679 |
| Amortization of other intangible assets |
$3,220 |
$3,220 |
| Restructuring costs |
$4,610 |
$4,610 |
| Tax adjustment (2) |
$(2,814) |
- |
| Non-GAAP as adjusted |
$93,050 |
$60,978 |
| Diluted shares |
$192,804 |
$192,804 |
| Per diluted share, core operations |
$0.23 |
|
| Per diluted share, non-GAAP as adjusted |
$0.32 |
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(1) As of March 31, 2009, the Company's business consists of the
following reportable segments: Internet Infrastructure and Identity
Services which consists of Naming Services, and Authentication Services
comprising of SSL Certificate Services and Identity and Authentication
Services; and Other Services which consists of the continuing operations
of non-core businesses and legacy products and services from divested
businesses.
(2) Non-GAAP tax is calculated as 30% of income from continuing operations,
excluding noncontrolling interest in subsidiary, which is presented net
of tax on the Statement of Operations.
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, non-core businesses in continuing operations,
stock-based compensation, amortization of other intangible assets,
restructuring costs and impairments of goodwill and other intangible
assets. Non-GAAP financial information is also adjusted for a 30% tax rate
which differs 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 core operations.
The presentation of this additional information is not meant to be
considered in isolation or 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 |
| March 31, 2009 |
December 31, 2008 |
September 30, 2008 |
June 30, 2008 |
March 31, 2008 |
| Revenues from core operations (1) |
| $252,212 |
$248,123 |
$241,322 |
$234,448 |
$223,846 |
Contact Information:
Media Relations: Victoria Henry, vhenry@verisign.com, + 44 (0) 7920 598 016
Weber Shandwick for VeriSign: Lydia Curtis, Lcurtis@webershandwick.com,
+44 (0)207 067 0513
Investor Relations: Nancy Fazioli, nfazioli@verisign.com , 650-426-5146
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