000-23593 | 94-3221585 | |
(Commission File Number) | (IRS Employer Identification No.) |
12061 Bluemont Way, Reston, VA | 20190 | |
(Address of Principal Executive Offices) | (Zip Code) |
c | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
c | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
c | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
c | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Item 9.01. | Financial Statements and Exhibits. |
Exhibit Number | Description | |
99.1 | Text of press release of VeriSign, Inc. issued on October 23, 2014. |
VERISIGN, INC. | ||||
Date: October 23, 2014 | By: | /s/ George E. Kilguss, III | ||
George E. Kilguss, III | ||||
Senior Vice President and Chief Financial Officer |
Exhibit No. | Description | |
Exhibit 99.1 | Text of press release of VeriSign, Inc. issued on October 23, 2014. |
• | Verisign ended the third quarter with cash, cash equivalents and marketable securities of $1.5 billion, a decrease of $249 million as compared with year-end 2013. |
• | Cash flow from operations was $168 million for the third quarter compared with $134 million for the same quarter in 2013. |
• | Deferred revenues on Sept. 30, 2014, totaled $893 million, an increase of $37 million from year-end 2013. |
• | Capital expenditures were $11.3 million in the third quarter of 2014. |
• | During the third quarter, Verisign repurchased 4.2 million shares of its common stock for $226 million. At Sept. 30, 2014, $833 million remained authorized and available under Verisign’s share buyback program, which has no expiration. |
• | For purposes of calculating diluted EPS, the third quarter diluted share count included 13.2 million shares related to subordinated convertible debentures, compared with 10.5 million shares in the same quarter in 2013. These represent diluted shares and not shares that have been issued. |
• | Verisign Registry Services added 1.15 million net new names during the third quarter, ending with 130.0 million active domain names in the zone for .com and .net, which represents a 3.3 percent increase over the zone at the end of the third quarter in 2013. |
• | In the third quarter, Verisign processed 8.7 million new domain name registrations for .com and .net as compared to 8.3 million for the same period in 2013. |
• | The final .com and .net renewal rate for the second quarter of 2014 was 71.8 percent compared with 72.7 percent for the same quarter in 2013. Renewal rates are not fully measurable until 45 days after the end of the quarter. |
September 30, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 233,949 | $ | 339,223 | |||
Marketable securities | 1,240,769 | 1,384,062 | |||||
Accounts receivable, net | 16,081 | 13,631 | |||||
Income taxes receivable and other current assets | 32,188 | 66,283 | |||||
Total current assets | 1,522,987 | 1,803,199 | |||||
Property and equipment, net | 318,808 | 339,653 | |||||
Goodwill | 52,527 | 52,527 | |||||
Long-term deferred tax assets | 286,429 | 437,643 | |||||
Other long-term assets | 26,671 | 27,745 | |||||
Total long-term assets | 684,435 | 857,568 | |||||
Total assets | $ | 2,207,422 | $ | 2,660,767 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 133,542 | $ | 149,276 | |||
Deferred revenues | 625,007 | 595,221 | |||||
Subordinated convertible debentures, including contingent interest derivative | 627,068 | 624,056 | |||||
Deferred tax liabilities | 463,649 | 660,633 | |||||
Total current liabilities | 1,849,266 | 2,029,186 | |||||
Long-term deferred revenues | 268,066 | 260,615 | |||||
Senior notes | 750,000 | 750,000 | |||||
Other long-term tax liabilities | 88,844 | 44,524 | |||||
Total long-term liabilities | 1,106,910 | 1,055,139 | |||||
Total liabilities | 2,956,176 | 3,084,325 | |||||
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: 321,608 at September 30, 2014 and 320,358 at December 31, 2013; Outstanding shares: 122,026 at September 30, 2014 and 133,724 at December 31, 2013 | 322 | 320 | |||||
Additional paid-in capital | 18,320,280 | 18,935,302 | |||||
Accumulated deficit | (19,066,307 | ) | (19,356,095 | ) | |||
Accumulated other comprehensive loss | (3,049 | ) | (3,085 | ) | |||
Total stockholders’ deficit | (748,754 | ) | (423,558 | ) | |||
Total liabilities and stockholders’ deficit | $ | 2,207,422 | $ | 2,660,767 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | $ | 255,022 | $ | 243,678 | $ | 754,200 | $ | 719,457 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenues | 46,933 | 46,554 | 140,948 | 140,438 | |||||||||||
Sales and marketing | 24,304 | 22,900 | 68,244 | 64,273 | |||||||||||
Research and development | 16,320 | 17,456 | 50,453 | 52,531 | |||||||||||
General and administrative | 27,965 | 24,055 | 72,349 | 64,157 | |||||||||||
Total costs and expenses | 115,522 | 110,965 | 331,994 | 321,399 | |||||||||||
Operating income | 139,500 | 132,713 | 422,206 | 398,058 | |||||||||||
Interest expense | (21,533 | ) | (21,119 | ) | (64,408 | ) | (53,524 | ) | |||||||
Non-operating (loss) income, net | (6,473 | ) | (4,592 | ) | 5,037 | (4,208 | ) | ||||||||
Income before income taxes | 111,494 | 107,002 | 362,835 | 340,326 | |||||||||||
Income tax expense | (16,305 | ) | (26,104 | ) | (73,047 | ) | (88,025 | ) | |||||||
Net income | 95,189 | 80,898 | 289,788 | 252,301 | |||||||||||
Unrealized gain (loss) on investments, net of tax | 59 | 85 | 34 | (341 | ) | ||||||||||
Realized (gain) loss on investments, net of tax, included in net income | (1 | ) | 1 | 2 | (2,478 | ) | |||||||||
Other comprehensive income (loss) | 58 | 86 | 36 | (2,819 | ) | ||||||||||
Comprehensive income | $ | 95,247 | $ | 80,984 | $ | 289,824 | $ | 249,482 | |||||||
Income per share: | |||||||||||||||
Basic | $ | 0.77 | $ | 0.57 | $ | 2.25 | $ | 1.71 | |||||||
Diluted | $ | 0.69 | $ | 0.53 | $ | 2.03 | $ | 1.60 | |||||||
Shares used to compute net income per share | |||||||||||||||
Basic | 124,109 | 141,701 | 128,924 | 147,567 | |||||||||||
Diluted | 138,112 | 152,951 | 142,584 | 157,606 |
Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 289,788 | $ | 252,301 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation of property and equipment | 47,924 | 45,415 | |||||
Stock-based compensation | 34,281 | 27,006 | |||||
Excess tax benefit associated with stock-based compensation | (8,566 | ) | (30,095 | ) | |||
Deferred income taxes | (1,331 | ) | 29,000 | ||||
Unrealized (gain) loss on contingent interest derivative on Subordinated Convertible Debentures | (3,953 | ) | 9,723 | ||||
Other, net | 8,837 | 7,854 | |||||
Changes in operating assets and liabilities | |||||||
Accounts receivable | (2,550 | ) | (3,525 | ) | |||
Income taxes receivable and other assets | 31,349 | 1,679 | |||||
Accounts payable and accrued liabilities | (2,540 | ) | 47,185 | ||||
Deferred revenues | 37,237 | 45,414 | |||||
Net cash provided by operating activities | 430,476 | 431,957 | |||||
Cash flows from investing activities: | |||||||
Proceeds from maturities and sales of marketable securities | 2,425,259 | 2,253,776 | |||||
Purchases of marketable securities | (2,281,523 | ) | (2,516,714 | ) | |||
Purchases of property and equipment | (30,058 | ) | (50,201 | ) | |||
Other investing activities | 351 | (3,946 | ) | ||||
Net cash provided by (used in) investing activities | 114,029 | (317,085 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from issuance of common stock from option exercises and employee stock purchase plans | 15,816 | 16,661 | |||||
Repurchases of common stock | (673,540 | ) | (810,067 | ) | |||
Repayment of borrowings | — | (100,000 | ) | ||||
Proceeds from Senior Notes, net of issuance costs | — | 738,297 | |||||
Excess tax benefit associated with stock-based compensation | 8,566 | 30,095 | |||||
Net cash used in financing activities | (649,158 | ) | (125,014 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (621 | ) | (3,003 | ) | |||
Net decrease in cash and cash equivalents | (105,274 | ) | (13,145 | ) | |||
Cash and cash equivalents at beginning of period | 339,223 | 130,736 | |||||
Cash and cash equivalents at end of period | $ | 233,949 | $ | 117,591 | |||
Supplemental cash flow disclosures: | |||||||
Cash paid for interest, net of capitalized interest | $ | 57,767 | $ | 40,435 | |||
Cash paid for income taxes, net of refunds received | $ | 34,937 | $ | 17,055 |
Three Months Ended September 30, | |||||||||||||||
2014 | 2013 | ||||||||||||||
Operating Income | Net Income | Operating Income | Net Income | ||||||||||||
GAAP as reported | $ | 139,500 | $ | 95,189 | $ | 132,713 | $ | 80,898 | |||||||
Adjustments: | |||||||||||||||
Stock-based compensation | 14,916 | 14,916 | 10,577 | 10,577 | |||||||||||
Unrealized loss on contingent interest derivative on the subordinated convertible debentures | 6,562 | 5,286 | |||||||||||||
Non-cash interest expense | 2,588 | 2,171 | |||||||||||||
Contingent interest payable on subordinated convertible debentures | (1,306 | ) | — | ||||||||||||
Tax adjustment | (21,285 | ) | (8,907 | ) | |||||||||||
Non-GAAP | $ | 154,416 | $ | 96,664 | $ | 143,290 | $ | 90,025 | |||||||
Revenues | $ | 255,022 | $ | 243,678 | |||||||||||
Non-GAAP operating margin | 60.6 | % | 58.8 | % | |||||||||||
Diluted shares | 138,112 | 152,951 | |||||||||||||
Per diluted share, non-GAAP | $ | 0.70 | $ | 0.59 |
Three Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Cost of revenues | $ | 1,618 | $ | 1,524 | |||
Sales and marketing | 2,234 | 1,442 | |||||
Research and development | 1,678 | 1,674 | |||||
General and administrative | 9,386 | 5,937 | |||||
Total stock-based compensation expense | $ | 14,916 | $ | 10,577 |
Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | ||||||||||||||
Operating Income | Net Income | Operating Income | Net Income | ||||||||||||
GAAP as reported | $ | 422,206 | $ | 289,788 | $ | 398,058 | $ | 252,301 | |||||||
Adjustments: | |||||||||||||||
Stock-based compensation | 34,281 | 34,281 | 27,006 | 27,006 | |||||||||||
Unrealized (gain) loss on contingent interest derivative on the subordinated convertible debentures | (3,953 | ) | 9,723 | ||||||||||||
Non-cash interest expense | 7,581 | 6,316 | |||||||||||||
Contingent interest payable on subordinated convertible debentures | (1,306 | ) | — | ||||||||||||
Tax adjustment | (38,796 | ) | (19,319 | ) | |||||||||||
Non-GAAP | $ | 456,487 | $ | 287,595 | $ | 425,064 | $ | 276,027 | |||||||
Revenues | $ | 754,200 | $ | 719,457 | |||||||||||
Non-GAAP operating margin | 60.5 | % | 59.1 | % | |||||||||||
Diluted shares | 142,584 | 157,606 | |||||||||||||
Per diluted share, non-GAAP | $ | 2.02 | $ | 1.75 |
Nine Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Cost of revenues | $ | 4,748 | $ | 4,639 | |||
Sales and marketing | 5,902 | 4,656 | |||||
Research and development | 5,189 | 5,314 | |||||
General and administrative | 18,442 | 12,397 | |||||
Total stock-based compensation expense | $ | 34,281 | $ | 27,006 |
Three Months Ended September 30, | |||||||
2014 | 2013 | ||||||
Net Income | $ | 95,189 | $ | 80,898 | |||
Interest expense | 21,533 | 21,119 | |||||
Income tax expense | 16,305 | 26,104 | |||||
Depreciation and amortization | 15,809 | 14,889 | |||||
Stock-based compensation | 14,916 | 10,577 | |||||
Unrealized loss on contingent interest derivative on the subordinated convertible debentures | 6,562 | 5,286 | |||||
Unrealized loss on hedging agreements | 128 | 222 | |||||
Adjusted EBITDA | $ | 170,442 | $ | 159,095 |
Four Quarters Ended September 30, 2014 | |||
Net Income | $ | 581,937 | |
Interest expense | 85,646 | ||
Income tax benefit | (102,657 | ) | |
Depreciation and amortization | 63,163 | ||
Stock-based compensation | 43,925 | ||
Unrealized loss on contingent interest derivative on the subordinated convertible debentures | 4,125 | ||
Unrealized loss on hedging agreements | 116 | ||
Adjusted EBITDA | $ | 676,255 |
• | Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; |
• | non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating its ongoing operating performance for a particular period; and |
• | other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |