VeriSign, Inc. (VRSN), the company that has the contract to run the .com and .net registries, reported financial results for the second quarter ended June 30, 2012 after the market closed.
VeriSign, Inc. reported revenue of $214 million for the second quarter of 2012, up 13% from the same quarter in 2011.
“Verisign reported net income of $68 million and diluted earnings per share (EPS) of $0.42 for the second quarter of 2012, compared to a net loss of $(11) million and diluted net loss per share of $(0.06) in the same quarter in 2011.”
“The operating margin was 50.0 percent for the second quarter of 2012 compared to 43.2 percent for the same quarter in 2011.”
Compare that to Amazon (AMZN) which also reported earnings today which had a profit of $7 Million on sales of almost $13 Billion or a profit margin of about 2%.
Of course Amazon doesn’t have the right to hike prices 7% a year for every 4 out of 6 years for eternity either.
Verisign ended the Quarter with $1.44 Billion in the bank
“Verisign reported, on a non-GAAP basis, net income of $74 million and diluted EPS of $0.45 for the second quarter of 2012, compared to net income of $65 million and diluted EPS of $0.38 for the same quarter in 2011. The non-GAAP operating margin was 54.0 percent for the second quarter of 2012 compared to 51.7 percent for the same quarter in 2011. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.”
“The second quarter results demonstrate our continued strong operating performance and financial discipline,” commented Jim Bidzos, executive chairman, president and chief executive officer of Verisign. “Our share repurchases in the quarter, of $76 million, underscore our commitment to creating and delivering shareholder value.”
- Verisign ended the second quarter with Cash, Cash Equivalents, Marketable Securities and Restricted Cash of $1.44 billion, an increase of $92 million from year end 2011.
- Cash flow from operations was $135 million for the second quarter compared with $13 million for the same quarter in 2011, which was reduced by a $100 million payment of contingent interest to holders of convertible debentures in the second quarter of 2011.
- Deferred revenues ended the second quarter of 2012 totaling $804 million, an increase of $75 million from year end 2011.
- Capital expenditures were $13 million in the second quarter of 2012.
- During the second quarter, Verisign repurchased approximately 1.9 million shares of its common stock for a cost of $76 million. At June 30, 2012, approximately $687 million remained available and authorized under the current share repurchase program.
- For purposes of calculating diluted EPS, the second quarter diluted share count included 5.6 million shares related to the convertible debentures, compared with 1.2 million shares in the same quarter in 2011 for the non-GAAP diluted EPS calculation. These represent dilutive shares and not shares that have been issued.
Verisign Registry Services added 1.81 million net new names and ended the second quarter with approximately 118.5 million active domain names in the zone for .com and .net, representing a 7.8 percent increase year-over-year.
In the second quarter, Verisign processed a second quarter record 8.4 million new domain name registrations, representing an increase of 4.2 percent year-over-year.”
VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
June 30, December 31,
2012 2011
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 315,621 $ 1,313,349
Marketable securities 1,122,397 32,860
Accounts receivable, net 12,653 14,974
Deferred tax assets and other current assets 79,940 86,598
------------- -------------
Total current assets 1,530,611 1,447,781
------------- -------------
Property and equipment, net 329,328 327,136
Goodwill and other intangible assets, net 53,202 53,848
Other assets 28,883 27,414
------------- -------------
Total long-term assets 411,413 408,398
------------- -------------
Total assets $ 1,942,024 $ 1,856,179
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 112,508 $ 156,385
Deferred revenues 560,127 502,538
------------- -------------
Total current liabilities 672,635 658,923
------------- -------------
Long-term deferred revenues 243,622 226,033
Convertible debentures, including contingent
interest derivative 597,935 590,086
Long-term debt 100,000 100,000
Long-term deferred tax liabilities 341,733 325,527
Other long-term liabilities 45,294 43,717
------------- -------------
Total long-term liabilities 1,328,584 1,285,363
------------- -------------
Total liabilities 2,001,219 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: 317,982 at June 30, 2012 and
316,781 at December 31, 2011; Outstanding
shares: 156,667 at June 30, 2012 and
159,422 at December 31, 2011 318 317
Additional paid-in capital 20,027,665 20,135,237
Accumulated deficit (20,084,096) (20,220,577)
Accumulated other comprehensive loss (3,082) (3,084)
------------- -------------
Total stockholders' deficit (59,195) (88,107)
------------- -------------
Total liabilities and stockholders'
deficit $ 1,942,024 $ 1,856,179
============= =============
VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
--------- --------- --------- ---------
Revenues $ 214,142 $ 189,844 $ 419,868 $ 371,367
--------- --------- --------- ---------
Costs and expenses:
Cost of revenues 42,844 40,667 84,100 81,536
Sales and marketing 26,313 22,179 54,128 44,570
Research and development 15,461 13,074 30,226 26,668
General and administrative 22,726 28,206 46,234 61,835
Restructuring charges (182) 3,659 (730) 9,189
--------- --------- --------- ---------
Total costs and expenses 107,162 107,785 213,958 223,798
--------- --------- --------- ---------
Operating income 106,980 82,059 205,910 147,569
Interest expense (12,580) (111,856) (24,920) (123,676)
Non-operating (loss) income, net (2,097) 6,149 (1,290) 11,627
--------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes 92,303 (23,648) 179,700 35,520
Income tax (expense) benefit (23,831) 15,967 (45,123) (908)
--------- --------- --------- ---------
Income (loss) from continuing
operations, net of tax 68,472 (7,681) 134,577 34,612
(Loss) income from discontinued
operations, net of tax - (2,929) 1,904 (4,451)
--------- --------- --------- ---------
Net income (loss) 68,472 (10,610) 136,481 30,161
--------- --------- --------- ---------
Foreign currency translation
adjustments - 48 - 76
Change in unrealized gain on
investments, net of tax 42 1,077 37 609
Realized gain on investments,
net of tax, included in net
income (loss) (30) (1,398) (35) (1,415)
--------- --------- --------- ---------
Other comprehensive income
(loss) 12 (273) 2 (730)
--------- --------- --------- ---------
Comprehensive income (loss) $ 68,484 $ (10,883) $ 136,483 $ 29,431
========= ========= ========= =========
Basic income (loss) per share:
Continuing operations $ 0.43 $ (0.05) $ 0.85 $ 0.20
Discontinued operations - (0.01) 0.01 (0.02)
--------- --------- --------- ---------
Net income (loss) $ 0.43 $ (0.06) $ 0.86 $ 0.18
========= ========= ========= =========
Diluted income (loss) per share:
Continuing operations $ 0.42 $ (0.05) $ 0.82 $ 0.20
Discontinued operations - (0.01) 0.01 (0.02)
--------- --------- --------- ---------
Net income (loss) $ 0.42 $ (0.06) $ 0.83 $ 0.18
========= ========= ========= =========
Shares used to compute net
income per share
Basic 157,599 167,471 158,471 169,751
========= ========= ========= =========
Diluted 164,178 167,471 163,530 171,850
========= ========= ========= =========
VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
2012 2011
------------- -------------
Cash flows from operating activities:
Net income $ 136,481 $ 30,161
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property and equipment and
amortization of other intangible assets 26,273 27,642
Stock-based compensation 16,584 29,014
Excess tax benefit associated with stock-
based compensation (11,638) (854)
Other, net 10,947 1,627
Changes in operating assets and
liabilities
Accounts receivable 2,213 354
Deferred tax assets and other assets 5,855 (12,786)
Accounts payable and accrued liabilities (16,644) (22,736)
Deferred revenues 75,178 50,814
------------- -------------
Net cash provided by operating
activities 245,249 103,236
------------- -------------
Cash flows from investing activities:
Proceeds from maturities and sales of
marketable securities 8,101 369,586
Purchases of marketable securities (1,097,669) (44,038)
Purchases of property and equipment (26,242) (29,481)
Other investing activities (520) (1,181)
------------- -------------
Net cash (used in) provided by
investing activities (1,116,330) 294,886
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock
purchase plans 15,348 32,445
Repurchases of common stock (152,725) (310,671)
Payment of dividends to stockholders - (463,498)
Excess tax benefit associated with stock-
based compensation 11,638 854
Other financing activities 189 -
------------- -------------
Net cash used in financing activities (125,550) (740,870)
------------- -------------
Effect of exchange rate changes on cash and
cash equivalents (1,097) 3,285
------------- -------------
Net decrease in cash and cash equivalents (997,728) (339,463)
Cash and cash equivalents at beginning of
period 1,313,349 1,559,628
------------- -------------
Cash and cash equivalents at end of period $ 315,621 $ 1,220,165
============= =============
Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized
interest $ 20,476 $ 120,082
============= =============
Cash paid for income taxes, net of refunds
received $ 21,193 $ 4,737
============= =============
VERISIGN, INC.
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
June 30, 2012 June 30, 2011
---------------------- ----------------------
Operating Operating Net (Loss)
Income Net Income Income Income
---------- ---------- ---------- ----------
GAAP as reported $ 106,980 $ 68,472 $ 82,059 $ (10,610)
Discontinued operations - 2,929
Adjustments:
Stock-based compensation 8,454 8,454 12,075 12,075
Amortization of other
intangible assets 325 325 322 322
Restructuring charges (182) (182) 3,659 3,659
Contingent interest
payment to holders of
Convertible Debentures - 100,020
Unrealized loss (gain)
on contingent interest
derivative on
Convertible Debentures 3,147 (700)
Non-cash interest
expense 1,871 1,679
Tax adjustment (7,944) (43,989)
---------- ---------- ---------- ----------
Non-GAAP as adjusted $ 115,577 $ 74,143 $ 98,115 $ 65,385
========== ========== ========== ==========
Revenues $ 214,142 $ 189,844
Non-GAAP operating margin 54.0% 51.7%
========== ==========
Diluted shares 164,178 169,882
Per diluted share, non-GAAP
as adjusted $ 0.45 $ 0.38
========== ==========
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.
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 June 30,
2012 2011
------------- -------------
Cost of revenues $ 1,451 $ 1,846
Sales and marketing 1,833 1,697
Research and development 1,327 1,353
General and administrative 3,843 7,179
Restructuring charges - 1,989
------------- -------------
Total stock-based compensation expense $ 8,454 $ 14,064
============= =============
VERISIGN, INC.
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Six Months Ended Six Months Ended
June 30, 2012 June 30, 2011
---------------------- ----------------------
Operating Operating
Income Net Income Income Net Income
---------- ---------- ---------- ----------
GAAP as reported $ 205,910 $ 136,481 $ 147,569 $ 30,161
Discontinued operations (1,904) 4,451
Adjustments:
Stock-based compensation 16,584 16,584 24,036 24,036
Amortization of other
intangible assets 648 648 645 645
Restructuring charges (730) (730) 9,189 9,189
Contingent interest
payment to holders of
Convertible Debentures - 100,020
Unrealized loss (gain)
on contingent interest
derivative on
Convertible Debentures 3,960 (250)
Non-cash interest
expense 3,491 3,343
Tax adjustment (15,972) (50,843)
---------- ---------- ---------- ----------
Non-GAAP as adjusted $ 222,412 $ 142,558 $ 181,439 $ 120,752
========== ========== ========== ==========
Revenues $ 419,868 $ 371,367
Non-GAAP operating margin 53.0% 48.9%
========== ==========
Diluted shares 163,530 171,850
Per diluted share, non-GAAP
as adjusted $ 0.87 $ 0.70
========== ==========
The second internet bubble has just begun?