SOURCE: VeriSign, Inc.

VeriSign, Inc.

April 28, 2011 16:05 ET

Verisign Reports 12% Year-Over-Year Revenue Growth in First Quarter 2011

Company Declares $2.75 per Share Special Dividend

DULLES, VA--(Marketwire - Apr 28, 2011) - VeriSign, Inc. (NASDAQ: VRSN), the trusted provider of Internet infrastructure services for the networked world, today reported financial results for the first quarter ended March 31, 2011.

First Quarter GAAP Financial Results

VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $182 million for the first quarter of 2011, up 2% from the prior quarter and up 12% from the same quarter in 2010. Verisign reported net income attributable to Verisign stockholders of $41 million and earnings per share attributable to Verisign stockholders of $0.24 on a diluted basis for the first quarter of 2011, compared to net income attributable to Verisign stockholders of $51 million and earnings per share attributable to Verisign stockholders of $0.28 on a diluted basis in the same quarter in 2010. The operating margin was 36.1% for the first quarter of 2011 compared to 33.5% for the same quarter in 2010.

First Quarter Non-GAAP Financial Results

Verisign reported net income attributable to Verisign stockholders of $55 million and earnings per share attributable to Verisign stockholders of $0.32 on a diluted basis for the first quarter of 2011, compared to net income attributable to Verisign stockholders of $40 million and earnings per share attributable to Verisign stockholders of $0.22 on a diluted basis in the same quarter in 2010. The operating margin was 45.9% for the first quarter of 2011 compared to 39.0% 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.

"We are pleased to report another record quarter for Verisign in new domain name registrations and strong performance overall in the Naming Services business," said Mark McLaughlin, president and chief executive officer of Verisign. "Our commitment to the continued availability and reliability of the Internet is core to our strategy, and we plan to leverage our extensive expertise and leadership in DNS management to help our customers improve the effectiveness and integrity of Internet communications."

In addition, Verisign announced that its Board of Directors declared a special dividend of $2.75 per share of its common stock. The special dividend will be paid on May 18, 2011 to shareholders of record as of the close of business on May 9, 2011. The ex-dividend date will be May 5, 2011.

"Given the strength of our capital position following the restructuring of the business over the past several years, particularly as a result of the sale of the Authentication Services business last August, the Board voted at a regularly scheduled meeting to return approximately $463 million to the shareholders in the form of a special dividend," said Jim Bidzos, chairman of the board.

Verisign's Board of Directors has designated the special dividend as an extraordinary dividend for purposes of the indenture governing the company's 3.25% Junior Subordinated Convertible Debentures due 2037 (the "Convertible Debentures"). As a result, contingent interest of approximately $100 million will also be paid on May 18, 2011 to holders of record of the Convertible Debentures at the close of business on May 9, 2011. Verisign expects that the aggregate amount of payments to be made in connection with the special dividend and the contingent interest will be approximately $563 million.

"We are committed to delivering value to our shareholders through disciplined operations and investment in growth opportunities for the company," said Brian Robins, chief financial officer of Verisign. "During the first quarter, we utilized approximately $200 million to repurchase shares and we have share repurchase authorization of approximately $1.2 billion remaining under the current program."

Financial Highlights

   -- During the first quarter, Verisign repurchased approximately
      6 million shares for a cost of approximately $200 million.
   -- Verisign ended the first quarter with Cash, Cash Equivalents,
      Marketable Securities and Restricted Cash of $1.951 billion, a
      decrease of $113 million from the prior quarter and an increase of
      $399 million from the same quarter in 2010.
   -- Cash flow from operations was $90 million for the first quarter.
      Excess tax benefits of $4 million for the first quarter that are
      associated with stock-based compensation were classified as
      financing cash flows.
   -- Deferred revenues on March 31, 2011 totaled $699 million, an
      increase of $36 million from the prior quarter and $81 million from
      the same quarter in 2010.
   -- Capital expenditures were $16 million in the first quarter of 2011.

Business and Corporate Highlights

   -- Verisign Registry Services ended the quarter with approximately 108
      million active domain names in the adjusted zone for .com and .net,
      representing a 9% increase year-over-year.
   -- In the first quarter, Verisign processed a record 8.3 million new
      domain name registrations, representing an approximately 3% increase
      year-over-year.
   -- Verisign experienced an average daily query load of 57 billion
      during the first quarter, compared to 54 billion in the same quarter
      in 2010.
   -- On April 11, 2011, Verisign announced that the Internet Corporation
      for Assigned Names and Numbers ("ICANN") posted renewal terms for
      the .Net Registry Agreement which were negotiated between Verisign
      and ICANN and are substantially the same terms contained in the
      existing .Net Agreement.
   -- On March 31, 2011, Verisign deployed Domain Name System Security
      Extensions ("DNSSEC") in the .com domain to provide origin
      authentication of Domain Name System ("DNS") data, authenticated
      denial of existence, and data integrity.
   -- Verisign announced during the quarter that its Managed DNS Service
      now provides full support for DNSSEC compliance features and Geo
      Location capabilities, product enhancements which strengthen the
      security and performance of DNS transactions.
   -- Verisign ended the first quarter of 2011 with approximately 1,040
      employees, compared to 1,050 employees at the end of the prior
      quarter.

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 payment to holders of our 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 teleconference call today at 4:30 p.m. (EDT) to review the first quarter results. The call will be accessible by direct dial at (888) 676-VRSN (US) or (913) 312-1479 (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: 9939898) for one week after the conference call. 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 online with confidence. Additional news and information about the company is available at www.verisigninc.com.

VRSNF

Statements in this announcement other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These statements involve risks and uncertainties that could cause Verisign's actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results due to such factors as increasing competition, pricing pressure from competing services offered at prices below our prices and changes in marketing practices including those of third-party registrars; the sluggish economic recovery; 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 inability of Verisign to 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; and the uncertainty of whether Project Apollo will achieve its stated objectives. 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.

                              VERISIGN, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
             (In thousands, except share and per share data)
                               (Unaudited)

                                                   March 31,   December 31,
                                                      2011         2010
                                                  -----------  -----------
                      ASSETS
Current assets:
  Cash and cash equivalents                       $ 1,440,826  $ 1,559,628
  Marketable securities                               506,014      501,238
  Accounts receivable, net                             15,852       14,874
  Prepaid expenses and other current assets            97,406      102,217
                                                  -----------  -----------
    Total current assets                            2,060,098    2,177,957
                                                  -----------  -----------
Property and equipment, net                           193,145      190,319
Goodwill and other intangible assets, net              54,823       55,146
Other assets                                           22,537       20,584
                                                  -----------  -----------
    Total long-term assets                            270,505      266,049
                                                  -----------  -----------
    Total assets                                  $ 2,330,603  $ 2,444,006
                                                  ===========  ===========

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities        $   159,627  $   195,235
  Deferred revenues                                   485,462      457,478
                                                  -----------  -----------
    Total current liabilities                         645,089      652,713
                                                  -----------  -----------
Long-term deferred revenues                           213,484      205,560
Convertible debentures, including contingent
 interest derivative                                  583,852      581,626
Long-term deferred tax liabilities                    317,944      309,696
Other long-term liabilities                            24,906       17,981
                                                  -----------  -----------
    Total long-term liabilities                     1,140,186    1,114,863
                                                  -----------  -----------
    Total liabilities                               1,785,275    1,767,576
                                                  -----------  -----------
Commitments and contingencies

Stockholders' equity:
    Preferred stock--par value $.001 per share;
     Authorized shares: 5,000,000; Issued and
     outstanding shares: none                               -            -
    Common stock--par value $.001 per share;
     Authorized shares: 1,000,000,000; Issued
     and outstanding shares: 168,413,107,
     excluding 146,420,438 held in treasury, at
     March 31, 2011; and 172,736,281, excluding
     140,576,600 held in treasury, at December 31,
     2010                                                 315          313
    Additional paid-in capital                     20,869,501   21,040,919
    Accumulated deficit                           (20,322,697) (20,363,468)
    Accumulated other comprehensive loss               (1,791)      (1,334)
                                                  -----------  -----------
    Total stockholders' equity                        545,328      676,430
                                                  -----------  -----------
    Total liabilities and stockholders' equity    $ 2,330,603  $ 2,444,006
                                                  ===========  ===========





                              VERISIGN, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)
                                (Unaudited)

                                                       Three Months Ended
                                                            March 31,
                                                      --------------------
                                                        2011       2010
                                                      ---------  ---------
Revenues                                              $ 181,523  $ 161,582
                                                      ---------  ---------
Costs and expenses
  Cost of revenues                                       40,869     38,814
  Sales and marketing                                    22,391     21,310
  Research and development                               13,594     12,277
  General and administrative                             33,629     34,844
  Restructuring charges                                   5,530        234
                                                      ---------  ---------
    Total costs and expenses                            116,013    107,479
                                                      ---------  ---------
Operating income                                         65,510     54,103
Interest expense                                        (11,820)   (11,998)
Non-operating income, net                                 5,478      4,828
                                                      ---------  ---------
Income from continuing operations before income taxes    59,168     46,933
Income tax expense                                      (16,875)   (16,924)
                                                      ---------  ---------
Income from continuing operations, net of tax            42,293     30,009
(Loss) income from discontinued operations, net of
 tax                                                     (1,522)    22,431
                                                      ---------  ---------
Net income                                               40,771     52,440
Less: Net income from discontinued operations, net of
 tax, attributable to noncontrolling interest in
 subsidiary                                                   -     (1,084)
                                                      ---------  ---------
Net income attributable to Verisign stockholders      $  40,771  $  51,356
                                                      =========  =========


Basic income per share attributable to Verisign
 stockholders from:
  Continuing operations                               $    0.25  $    0.16
  Discontinued operations                                 (0.01)      0.12
                                                      ---------  ---------
  Net income                                          $    0.24  $    0.28
                                                      =========  =========

Diluted income per share attributable to Verisign
 stockholders from:
  Continuing operations                               $    0.25  $    0.16
  Discontinued operations                                 (0.01)      0.12
                                                      ---------  ---------
  Net income                                          $    0.24  $    0.28
                                                      =========  =========

Shares used to compute net income per share
 attributable to Verisign stockholders:
  Basic                                                 170,193    183,174
                                                      =========  =========
  Diluted                                               171,979    184,259
                                                      =========  =========


Amounts attributable to Verisign stockholders:
    Income from continuing operations, net of tax     $  42,293  $  30,009
    (Loss) income from discontinued operations, net
     of tax                                              (1,522)    21,347
                                                      ---------  ---------
Net income attributable to Verisign stockholders      $  40,771  $  51,356
                                                      =========  =========

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

    Cost of revenues                                  $   1,990  $     921
    Sales and marketing                                   1,854      1,120
    Research and development                              1,518      1,070
    General and administrative                            6,599      5,229
    Restructuring charges                                 2,989        112
                                                      ---------  ---------
Stock-based compensation for continuing operations       14,950      8,452
Discontinued operations                                       -      3,633
                                                      ---------  ---------
Total stock-based compensation expense                $  14,950  $  12,085
                                                      =========  =========





                              VERISIGN, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (Unaudited)

                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
Cash flows from operating activities:
  Net income                                      $    40,771  $    52,440
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation of property and equipment and
     amortization of other intangible assets           13,968       21,905
    Stock-based compensation                           14,950       12,085
    Excess tax benefit associated with
     stock-based compensation                          (3,615)      (8,097)
    Other, net                                          2,129        6,270
    Changes in operating assets and liabilities,
     excluding the effects of acquisitions and
     divestitures:
      Accounts receivable                                (985)       4,579
      Prepaid expenses and other assets                 3,975        9,689
      Accounts payable and accrued liabilities        (16,814)     (33,734)
      Deferred revenues                                35,908       35,983
                                                  -----------  -----------
       Net cash provided by operating activities       90,287      101,120
                                                  -----------  -----------
Cash flows from investing activities:
  Proceeds from maturities and sales of
   marketable securities and investments               11,238       95,909
  Proceeds received from divestiture of
   businesses, net of cash contributed                      -       15,583
  Purchases of marketable securities and
   investments                                        (18,008)    (549,087)
  Purchases of property and equipment                 (15,565)     (19,898)
  Other investing activities                           (1,181)           -
                                                  -----------  -----------
       Net cash used in investing activities          (23,516)    (457,493)
                                                  -----------  -----------

Cash flows from financing activities:
  Proceeds from issuance of common stock from
   option exercises and employee stock purchase
   plans                                               16,550       17,393
  Repurchases of common stock                        (207,428)     (53,753)
  Excess tax benefit associated with stock-based
   compensation                                         3,615        8,097
  Other financing activities                                -         (346)
                                                  -----------  -----------
       Net cash used in financing activities         (187,263)     (28,609)
                                                  -----------  -----------
Effect of exchange rate changes on cash and cash
 equivalents                                            1,690       (2,154)
                                                  -----------  -----------
Net decrease in cash and cash equivalents            (118,802)    (387,136)
Cash and cash equivalents at beginning of period    1,559,628    1,477,166
                                                  -----------  -----------
Cash and cash equivalents at end of period        $ 1,440,826  $ 1,090,030
                                                  ===========  ===========

Supplemental cash flow disclosures:
 Cash paid for interest, net of capitalized
  interest                                        $    20,062  $    19,811
                                                  ===========  ===========




                              VERISIGN, INC.
                 STATEMENTS OF OPERATIONS RECONCILIATION
                  (In thousands, except per share data)
                                (Unaudited)

                                Three Months Ended     Three Months Ended
                                  March 31, 2011         March 31, 2010
                              ---------------------- ---------------------
                                        Net Income             Net Income
                                        attributable           attributable
                              Operating to Verisign  Operating to Verisign
                               Income   stockholders  Income   stockholders
                              --------- -----------  --------- -----------

GAAP as reported              $  65,510 $    40,771  $  54,103 $    51,356
  Discontinued operations                     1,522                (21,347)
  Adjustments:
   Stock-based compensation      11,961      11,961      8,340       8,340
   Amortization of other
    intangible assets               323         323        324         324
   Restructuring charges          5,530       5,530        234         234
   Non-cash interest expense                  1,664                  1,841
  Tax adjustment                             (6,719)                  (377)
                              --------- -----------  --------- -----------
Non-GAAP as adjusted          $  83,324 $    55,052  $  63,001 $    40,371
                              ========= ===========  ========= ===========

Diluted shares                              171,979                184,259

Per diluted share, non-GAAP
 as adjusted                            $      0.32            $      0.22
                                        ===========            ===========

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, 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
                    -------------------------------------------------------
                    March 31, December 31, September 30, June 30, March 31,
                      2011        2010         2010       2010      2010
                    --------- ------------ ------------ --------- ---------
Revenues            $ 181,523 $    178,829 $    172,286 $ 167,881 $ 161,582
                    ========= ============ ============ ========= =========