Published:
VeriSign Reports First Quarter 2008 Results
VeriSign Reports First Quarter 2008 Results
Exceeds Guidance Driven By Growth in Core Businesses and Disciplined Expense Management
VeriSign, Inc. (NASDAQ: VRSN), the
leading provider of Internet infrastructure for the networked world, today
reported financial results for the first quarter ended March 31, 2008.
VeriSign reported revenue of $354 million for the first quarter of 2008.
On a GAAP basis, VeriSign reported a net loss of $19 million and a net loss
per share of $0.09. These GAAP results reflect a $25.5 million impairment
on certain assets held for sale as well as a restructuring charge of $26.5
million for both continuing and discontinued operations.
VeriSign also reported segment revenue for Internet Infrastructure and
Identity Services (3IS), or the "core businesses": Naming, SSL, and IAS.
The company reported revenue for the core businesses of $223 million, up 5%
from Q4 and up 23% year over year.
On a non-GAAP basis (which excludes the items described below) for our core
businesses, VeriSign reported net income of $44 million for the first
quarter of 2008 and earnings per share of $0.21 per fully-diluted share.
A table reconciling the GAAP to non-GAAP results reported above is appended
to this release.
"Our first quarter non-GAAP results represent strong growth in our core
businesses as well as better than expected performance from the businesses
to be divested," said Bill Roper, president and chief executive officer of
VeriSign. "We are pleased that our strategy is beginning to show momentum
and we will continue to invest in our core businesses."
"This is a strong start to our fiscal year as we continue to focus on key
operational priorities," said Brian Robins, acting chief financial officer
of VeriSign. "In addition to strong revenue growth this quarter in our core
businesses, non-GAAP operating margin for core services was 30.3% and we
repurchased approximately 14% of shares outstanding as of December 31, 2007
while maintaining a healthy balance sheet."
Business and Corporate Highlights
-- VeriSign Naming Services ended the quarter with approximately 84.4
million active domain names in the adjusted zone for .com and .net,
representing a 5% increase over Q4 2007 and 22% increase year over year.
-- During the quarter, VeriSign announced that as of October 1, 2008, the
registry fee for .com domain names will increase from $6.42 to $6.86 and
that the registry fee for .net domain names will increase from $3.85 to
$4.23 per year.
-- VeriSign continues the Project Titan initiative with the expansion of
existing sites as well as the launch of five new regional Internet sites --
two additional sites in the U.S., as well as sites in India, Hong Kong and
Italy.
-- VeriSign SSL Services ended the quarter with 1,024,000 SSL
certificates in the installed base, up 4% from 987,000 in Q4 2007 and an
increase of 16% from 886,000 certificates last year.
-- During the first quarter of 2008, VeriSign announced that more than
100 credit unions have gone live on EV SSL. Other EV SSL customer wins
include HSBC, FileYourTaxes.com and online editing house Scribendi.
-- VeriSign's IAS team launched the VIP Quick Start and VIP Test Drive
for Developers programs to further the adoption of consumer Identity and
Authentication Services.
-- As of March 31, 2008, the company has sold over 1.8 million
credentials for our VIP and one time password (OTP) programs.
-- Kathleen Cote, formerly CEO of Worldport Communications Company, was
appointed to the company's Board of Directors on February 20, 2008. Ms.
Cote serves on the Audit Committee.
-- Brian G. Robins, senior vice president, was appointed acting chief
financial officer on April 4, 2008.
Financial Highlights
-- Non-core businesses, including $41 million from discontinued
operations, delivered $172 million of revenue in the first quarter of 2008.
-- During the quarter, the company repurchased over 31 million shares of
common stock, retiring nearly 14% of the shares outstanding as of December
31, 2007.
-- VeriSign ended the first quarter with Cash, Cash Equivalents,
Restricted Cash and Short-term Investments of $532 million, a decrease of
$893 million from the prior quarter as a result of Q1 share repurchases.
-- Cash flow from operations for the quarter was $74 million.
-- Capital expenditures were approximately $26 million for the first
quarter.
-- Deferred revenue on March 31, 2008 totaled $761 million, an increase
of $23 million from the prior quarter.
Non-GAAP Items
Non-GAAP results exclude the following items which are included under GAAP:
loss from discontinued operations, loss from non-core businesses,
stock-based compensation, amortization of intangible assets, restructuring
costs, non-recurring costs, and gains and losses on investments and
derivatives. 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 pm (PST) to
review the quarter's results. The call will be accessible by direct dial
at (888) 676-VRSN (US) 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: 5868343) beginning at 5:00 pm (PDT) on May 8 and will run
through May 14. 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) operates intelligent infrastructure services
that enable and protect billions of interactions every day across the
world's voice, video and data networks. Additional news and information
about the company is available at www.verisign.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 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 increasing competition and pricing pressure from competing
services offered at prices below our prices and market acceptance of our
existing services, the inability of VeriSign to successfully develop and
market new services, and the uncertainty of whether new services as
provided by VeriSign will achieve market acceptance or result in any
revenues and the risk that the planned divestitures of certain businesses
may be delayed, may generate less proceeds than expected or may incur
unanticipated costs or otherwise negatively affect VeriSign's financial
condition, results of operations or cash flows, and the uncertainty of
whether Project Titan 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, 2007, 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 press release.
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
March 31, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 483,025 $ 1,376,722
Short-term investments 1,485 1,011
Accounts receivable, net 174,354 208,799
Prepaid expenses and other current assets 157,599 163,041
Assets held for sale 112,956 -
------------ ------------
Total current assets 929,419 1,749,573
------------ ------------
Property and equipment, net 606,669 621,917
Goodwill 1,020,874 1,082,420
Other intangible assets, net 68,296 121,792
Restricted cash 47,204 46,936
Other assets, net 281,261 290,647
Investment in unconsolidated entities 112,718 109,828
------------ ------------
Total long-term assets 2,137,022 2,273,540
------------ ------------
Total assets $ 3,066,441 $ 4,023,113
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 314,859 $ 388,562
Accrued restructuring costs 22,307 2,878
Short-term debt 140,000 -
Deferred revenues 566,564 552,070
Other liabilities 2,872 2,632
Liabilities related to assets held for sale 18,842 -
------------ ------------
Total current liabilities 1,065,444 946,142
------------ ------------
Long-term deferred revenues 194,750 186,719
Long-term accrued restructuring costs 1,340 1,473
Convertible debentures 1,263,451 1,265,296
Other long-term liabilities 38,941 41,133
------------ ------------
Total long-term liabilities 1,498,482 1,494,621
------------ ------------
Total liabilities 2,563,926 2,440,763
Commitments and contingencies
Minority interest in subsidiaries 62,218 54,485
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: 194,428,020
and 222,849,348 (excluding 104,851,276 and
73,720,953 shares held in treasury at
March 31, 2008 and December 31, 2007,
respectively) 299 297
Additional paid-in capital 21,474,113 22,559,045
Accumulated deficit (21,052,769) (21,033,452)
Accumulated other comprehensive income 18,654 1,975
------------ ------------
Total stockholders' equity 440,297 1,527,865
------------ ------------
Total liabilities and stockholders'
equity $ 3,066,441 $ 4,023,113
============ ============
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
------------ ------------
2008 2007
------------ ------------
Revenues $ 354,281 $ 328,483
Costs and expenses
Cost of revenues 124,234 116,418
Sales & marketing 59,238 77,215
Research & development 38,351 42,177
General & administrative 71,660 49,281
Restructuring, impairments & other charges,
(net) 21,538 25,594
Amortization of other intangible assets 8,698 27,416
------------ ------------
Total costs and expenses 323,719 338,101
------------ ------------
Operating (loss) income 30,562 (9,618)
Other (loss) income, net (1,858) 81,280
------------ ------------
Income from continuing operations before income
taxes, (loss) earnings from unconsolidated
entities and minority interest 28,704 71,662
Income tax expense (13,399) (9,246)
(Loss) earnings from unconsolidated entities,
net of tax (2,141) 448
Minority interest, net of tax (906) (569)
------------ ------------
Income from continuing operations 12,258 62,295
Discontinued operations, net of tax (30,845) (542)
------------ ------------
Net (loss) income $ (18,587) $ 61,753
============ ============
Basic income (loss) per share from:
Continuing operations $ 0.06 $ 0.25
Discontinued operations (0.15) -
------------ ------------
Net (loss) income $ (0.09) $ 0.25
============ ============
Diluted (loss) income per share from:
Continuing operations $ 0.06 $ 0.25
Discontinued operations (0.15) -
------------ ------------
Net (loss) income $ (0.09) $ 0.25
============ ============
Shares used in per share computation:
Basic 206,550 243,852
============ ============
Diluted 210,471 248,357
============ ============
VERISIGN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
------------ ------------
2008 2007
------------ ------------
Cash flows from operating activities:
Net (loss) income $ (18,587) $ 61,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on divestiture of businesses (816) (74,999)
Unrealized gain on contingent interest
derivative on convertible debentures (1,838) -
Depreciation of property and equipment 31,815 28,176
Amortization of other intangible assets 11,957 31,787
Impairment of assets held for sale 25,511 -
Provision for doubtful accounts 575 (1,156)
Stock-based compensation and other 22,550 16,725
Restructuring, impairments and other
charges, net 26,465 27,012
Impairment of equity investment 327 -
Gain on sale of property and equipment (728) -
Net gain on sale of investments (382) (829)
Loss (earnings) from unconsolidated
entities, net of tax 2,141 (448)
Minority interest, net of tax 906 569
Deferred income tax provision (4,045) 5,123
Changes in operating assets and liabilities:
Accounts receivable (1,025) (45,859)
Prepaid expenses and other current assets 20,594 75,746
Accounts payable and accrued liabilities (81,620) (127,657)
Deferred revenues 40,503 48,034
------------ ------------
Net cash provided by operating
activities 74,303 43,977
------------ ------------
Cash flows from investing activities:
Purchases of investments - (135,882)
Proceeds from sale of property and equipment 1,286 -
Proceeds from maturities and sales of
investments 100 191,912
Purchases of property and equipment (25,939) (15,125)
Proceeds received on divestiture of majority
ownership interest in Jamba, net of cash
contributed - 152,643
Proceeds from sale of discontinued
operations 14,160 -
Other assets (5,289) 1,138
------------ ------------
Net cash (used in) provided by
investing activities (15,682) 194,686
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock
purchase plans 46,195 -
Change in net assets of minority interest 62 7
Repurchases of common stock (1,146,510) -
Proceeds from credit facility, net of
issuance costs 200,000 -
Repayment of short-term debt (60,000) (199,000)
Dividend paid to minority interest (341) -
------------ ------------
Net cash (used in) financing activities (960,594) (198,993)
------------ ------------
Effect of exchange rate changes on cash and
cash equivalents 8,276 791
------------ ------------
Net (decrease) increase in cash and cash
equivalents (893,697) 40,461
Cash and cash equivalents at beginning of
period 1,376,722 501,784
------------ ------------
Cash and cash equivalents at end of period 483,025 542,245
Cash and cash equivalents of Jamba Service at
end of period - (19,221)
------------ ------------
Cash and cash equivalents of continuing
operations at end of period $ 483,025 $ 523,024
============ ============
Supplemental cash flow disclosures:
Cash paid for interest $ 20,146 $ 2,649
============ ============
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
Three Months Ended
March 31, 2008
Operating Net
Income Income
--------- ---------
GAAP as reported $ 30,562 $ (18,587)
Discontinued operations and non-core businesses (1) (833) 32,104
Adjustments to core businesses: (1)
Stock based compensation 13,533 13,533
Amortization of intangibles 2,491 2,491
Restructuring costs 14,124 14,124
Non recurring and other costs (2) 7,793 7,793
Gains or losses on investments and derivatives (1,997)
Tax adjustment (3) (5,768)
--------- ---------
Non-GAAP as adjusted $ 67,670 $ 43,693
========= =========
Dilutive shares 210,471 210,471
--------- ---------
Per diluted share $ 0.32 $ 0.21
========= =========
(1) As of March 31, 2008, the Company’s business consists of the following
reportable segments: Internet Infrastructure and Identity Services (“3IS”)
and Other Services which represents continuing operations of non-core
businesses and legacy products and services. The 3IS segment is also
referred to as "core businesses" which are Naming, SSL, and Authentication.
(2) Non recurring and other costs primarily consists of $8.1 million in
penalties related to late payment of payroll taxes on employee stock based
awards during fiscal 2004 through the first quarter of fiscal 2008.
(3) Non-GAAP tax is calculated as 30% of income from continuing operations,
excluding minority interest, 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: loss from
discontinued operations, loss from non-core businesses, stock-based
compensation, amortization of intangible assets, restructuring costs,
non-recurring costs, and gains and losses on investments and derivatives.
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
December 31, September 30, June 30, March 31,
2007 2007 2007 2007
Revenue from core business $ 212,408 $ 202,916 $ 193,261 $ 180,902
========== ========== ========= =========
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