EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

 

VeriSign Reports Third Quarter 2004 Results

 

MOUNTAIN VIEW, CA – October 20, 2004 – VeriSign, Inc. (Nasdaq: VRSN), the leading provider of intelligent infrastructure services for the Internet and telecommunications networks, today reported its results for the third quarter ended September 30, 2004.

 

VeriSign reported revenue of $325 million for the third quarter of 2004. On a GAAP basis, VeriSign reported net income of $40 million for the third quarter and earnings per share of $0.16 per fully-diluted share.

 

On a non-GAAP, after tax basis, using a 30% effective tax rate on non-GAAP pre-tax income of $69 million, earnings per share for the third quarter was $0.19 per fully-diluted share. These non-GAAP results exclude the following items, which are included under GAAP: amortization and write-down of goodwill and intangible assets related to acquisitions, the net gain or loss on the sale of investments or the impairment of investments, restructuring and other charges, and stock-based compensation charges related to acquisitions. A table reconciling the non-GAAP to GAAP numbers reported above is appended to this release.

 

“Continued sequential growth in our core Internet and Telecommunications divisions combined with significant overachievement in our new mobile content business had a positive impact on our third quarter performance,” said Stratton Sclavos, Chairman and Chief Executive Officer of VeriSign. “We believe our year long focus on growing our Intelligent Infrastructure services through market share gains, new product introductions and deeper international penetration is delivering results and setting the foundation for continued growth in Q4 and beyond.”

 

“We experienced extraordinary revenue growth of over 27% sequentially in our third quarter leading to record operating income of $64 million and strong operating cash flow of $84 million,” said Dana Evan, Chief Financial Officer of VeriSign. “The benefits of our business model, based on recurring revenues from subscription and transaction services, are leading to increased financial leverage and operating results.”

 

During the third quarter, the VeriSign Security Services (VSS) business unit launched a new offering in the strong authentication market. VeriSign Unified Authentication consists of a comprehensive software and services platform coupled with a new generation of multi-purpose authentication tokens that the company believes will deliver more flexibility, better integration and lower cost of ownership than competing products.

 

Also, the VeriSign Naming and Directory Services (VNDS) business unit introduced the VeriSign EPC Starter ServiceSM, which enables trading partners in a supply chain to begin using the EPCglobal Network to conduct pilot projects using RFID-driven event information. The VNDS unit also introduced an application developer program that creates a test environment for companies looking to integrate the EPCglobal Network into their RFID-enabled supply chain management solutions.

In addition to the continued European expansion of its Jamba! business in the third quarter, the VeriSign Communications Services (VCS) unit also announced the IP Connect family of services. IP Connect services are targeted at traditional telecommunications carriers, cable operators, next generation service providers and enterprises wanting to leverage VeriSign’s directory and connectivity services to provide for efficient and interoperable routing of voice calls over an IP network.

 

Additional Financial Information

 

  • VeriSign ended the quarter with Cash, Cash Equivalents, Restricted Cash and Short-term Investments of $661 million, an increase of $32 million from the prior quarter.

 

  • During the quarter, VeriSign repurchased approximately 2.1 million shares of its common stock for approximately $35 million under its existing repurchase program.

 

  • Net days sales outstanding (Net DSO), which takes into account the change in deferred revenue, was 43 days.

 

  • Deferred revenue on the balance sheet was $406 million as of September 30, 2004, up $14 million or 3.5% over last quarter.

 

  • Cash flow from operations was $84 million for the third quarter.

 

  • Capital expenditures for the third quarter of 2004 were approximately $22 million, up from $20 million in the second quarter of 2004.

 

Internet Services Group

 

  • The Internet Services Group – which includes VeriSign’s Security, Payments, and Naming & Directory services – delivered $143.1 million of revenue in the third quarter of 2004.

 

  • VeriSign’s Web site certificate business issued approximately 107,000 new and renewed certificates in Q3 ending the quarter with a base of more than 447,000 certificates, up from 430,000 at the end of Q2.

 

  • VeriSign’s Payments business ended the third quarter with approximately 118,000 merchants under management, an increase of approximately 6,000 merchants over the second quarter of 2004. Further, the business processed approximately 107 million individual transactions with an aggregate value of $8.6 billion during the quarter.

 

  • VeriSign’s Naming & Directory Services business ended the third quarter with 36.1 million active domain names in .com and .net, a net increase of approximately 2.1 million names or 6% from Q2.

 

Communications Services Group

 

  • VeriSign’s Communications Services (VCS) Group – which provides intelligent connectivity, database, billing & network monitoring services, and content mediation to telecommunications carriers – delivered core revenue of $108.7 million in the third quarter of 2004, with Jamba! contributing an additional $73.5 million in revenue, bringing total VCS revenue for Q3 to $182.2 million.

 

  • VeriSign’s Communications Services Group ended Q3 with a base of approximately 6.4 million wireless billing customer subscribers up from a Q2 base of 6.3 million.

 

  • The VCS business supported 12.7 billion database queries in the quarter up from 12.2 billion queries for Q2.

Today’s Conference Call

 

VeriSign will be hosting a teleconference call today at 2:00 pm (PT) to review the third quarter results. The call will be accessible by direct dial at (888) 569-5033. A listen-only live webcast of the earnings call will also be available on the company’s website at www.verisign.com under the Investor Relations tab and at www.streetevents.com. A replay of the teleconference will be available by calling (888) 203-1112 (passcode: 842883) beginning at 5:00 pm (PT) today and will run through October 27th. This press release and the financial information discussed on today’s conference call are available on the company’s website at www.verisign.com under the Investor Relations tab.

 

About VeriSign

 

VeriSign, Inc. (Nasdaq: VRSN) delivers intelligent infrastructure services that make the Internet and telecommunications networks more reliable and secure. Every day VeriSign helps thousands of businesses and millions of consumers conduct commerce and communications with confidence. Additional news and information about the company is available at 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 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 VeriSign and Jamba! businesses as well as other businesses will not be integrated successfully and unanticipated costs of such integration. 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, 2003 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.

VERISIGN, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

     September 30,
2004
     December 31,
2003
  
     (unaudited)        
Assets                 

Current assets:

                 

Cash and cash equivalents

    $ 231,447     $ 393,787  

Short-term investments

      374,260       329,899  

Accounts receivable, net

      183,418       100,120  

Prepaid expenses and other current assets

      57,666       45,935  

Deferred tax assets

      10,973       10,666  
    
 

Total current assets

      857,764       880,407  
    
 

Property and equipment, net

      499,222       520,219  

Goodwill

      725,410       401,371  

Other intangible assets, net

      267,027       216,665  

Restricted cash

      54,847       18,371  

Long-term investments

      6,833       21,749  

Other assets, net

      46,406       41,435  
    
 

Total long-term assets

      1,599,745       1,219,810  
    
 

Total assets

    $ 2,457,509     $ 2,100,217  
    
 
Liabilities and Stockholders’ Equity                 

Current Liabilities:

                 

Accounts payable and accrued liabilities

    $ 333,094     $ 290,587  

Accrued merger costs

      1,822       805  

Accrued restructuring costs

      12,540       18,331  

Deferred revenue

      299,867       245,483  
    
 

Total current liabilities

      647,323       555,206  
    
 

Long-term deferred revenue

      105,894       93,311  

Long-term restructuring costs

      18,549       30,240  

Other long-term liabilities

      7,365       8,978  

Deferred tax liability

      23,942       —    
    
 

Total long-term liabilities

      155,750       132,529  
    
 

Total liabilities

      803,073       687,735  
    
 

Minority interest in subsidiaries

      33,037       28,829  

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: 253,928,618 and 241,979,274 (excluding 3,773,817 and 1,690,000 shares held in treasury at September 30, 2004 and December 31, 2003)

      254       242  

Additional paid-in capital

      23,299,742       23,128,095  

Unearned compensation

      (2,686 )     (2,628 )

Accumulated deficit

      (21,668,641 )     (21,740,054 )

Accumulated other comprehensive loss

      (7,270 )     (2,002 )
    
 

Total stockholders’ equity

      1,621,399       1,383,653  
    
 

Total liabilities and stockholders’ equity

    $ 2,457,509     $ 2,100,217  
    
 

VERISIGN, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

 

    

Three Months Ended

September 30,

    

Nine Months Ended

September 30,

  
     2004
     2003
     2004
     2003
  

Revenues

    $ 325,311     $ 268,123     $ 810,469     $ 803,180  
    
 
 
 

Costs and expenses:

                                 

Cost of revenues

      121,945       114,413       315,662       345,831  

Sales and marketing

      73,216       50,048       160,233       153,125  

Research and development

      17,697       13,820       49,657       40,850  

General and administrative

      49,488       41,036       123,322       130,156  

Restructuring and other charges

      7,739       —         19,620       31,416  

Amortization and impairment of goodwill and other intangible assets

      22,790       77,721       56,123       309,762  
    
 
 
 

Total costs and expenses

      292,875       297,038       724,617       1,011,140  
    
 
 
 

Operating income (loss)

      32,436       (28,915 )     85,852       (207,960 )

Other income (expense), net

      1,334       1,526       3,903       (10,544 )

Minority interest in net (income) loss in subsidiary

      (748 )     (458 )     (1,876 )     34  
    
 
 
 

Income (loss) before income taxes

      33,022       (27,847 )     87,879       (218,470 )

Income tax (benefit) expense

      (7,376 )     3,456       16,466       9,119  
    
 
 
 

Net income (loss)

    $ 40,398     $ (31,303 )   $ 71,413     $ (227,589 )
    
 
 
 

Net income (loss) per share:

                                 

Basic

    $ 0.16     $ (0.13 )   $ 0.29     $ (0.95 )
    
 
 
 

Diluted

    $ 0.16     $ (0.13 )   $ 0.28     $ (0.95 )
    
 
 
 

Shares used in per share computation:

                                 

Basic

      254,146       240,370       249,306       239,167  
    
 
 
 

Diluted

      257,722       240,370       252,996       239,167  
    
 
 
 

VERISIGN, INC. AND SUBSIDIARIES

 

STATEMENT OF OPERATIONS RECONCILIATION

(unaudited)

 

     Three Months Ended
September 30,
  
     2004
    2003
  

Statement of Operations Reconciliation

                

(in thousands)

                

Net income (loss) on a GAAP basis

    $ 40,398    $ (31,303 )

Amortization and impairment of intangible assets

      22,790      77,721  

Stock-based compensation expense resulting from acquisitions

      749      803  

Restructuring and other charges

      7,739      —    

Net gain/loss and/or impairment on investments

      4,599      —    
    
  

Net income on a non-GAAP basis

    $ 76,275    $ 47,221  
    
  

Statement of Operations Reconciliation per Share

                

(in thousands, except per share data)

                

Diluted net income (loss) per share on a GAAP basis

    $ 0.16    $ (0.13 )

Amortization and impairment of intangible assets

      0.09      0.32  

Stock-based compensation expense resulting from acquisitions

      0.00      0.00  

Restructuring and other charges

      0.03      —    

Net gain/loss and/or impairment on investments

      0.02      —    
    
  

Diluted net income per share on a non-GAAP basis

    $ 0.30    $ 0.19  
    
  

Shares used in calculation of net income —GAAP

      254,146      240,370  

Shares used in calculation of net income —non-GAAP

      257,722      243,790  

 

For the quarter ended September 30, 2004 and 2003, the diluted net income per share on a non-GAAP basis equaled $0.19 and $0.15, respectively, using a 30% effective tax rate. This rate is commonly utilized by independent financial analysts who cover our stock in calculating our earnings per share on a non-GAAP basis.

 

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 releases, 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: amortization and write-down of goodwill and intangible assets related to acquisitions, the net gain or loss on the sale of investments or the impairment of investments, restructuring and other charges, and stock-based compensation charges related to acquisitions.

 

Management believes that this non-GAAP financial data supplements our GAAP financial by providing investors with additional information which allows them to have a clearer picture of the company’s core recurring 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.

VERISIGN, INC. AND SUBSIDIARIES

 

STATEMENT OF OPERATIONS RECONCILIATION

(unaudited)

 

    

Nine Months Ended

September 30,

  
     2004
    2003
  

Statement of Operations Reconciliation

                

(in thousands)

                

Net income (loss) on a GAAP basis

    $ 71,413    $ (227,589 )

Amortization and impairment of intangible assets

      56,123      309,762  

Stock-based compensation expense resulting from acquisitions

      1,677      6,632  

Restructuring and other charges

      19,620      31,416  

Net gain/loss and/or impairment on investments

      8,243      16,541  
    
  

Net income on a non-GAAP basis

    $ 157,076    $ 136,762  
    
  

Statement of Operations Reconciliation per Share

                

(in thousands, except per share data)

                

Diluted net income (loss) per share on a GAAP basis

    $ 0.28    $ (0.95 )

Amortization and impairment of intangible assets

      0.22      1.28  

Stock-based compensation expense resulting from acquisitions

      0.01      0.03  

Restructuring and other charges

      0.08      0.14  

Net gain/loss and/or impairment on investments

      0.03      0.07  
    
  

Diluted net income per share on a non-GAAP basis

    $ 0.62    $ 0.57  
    
  

Shares used in calculation of net income —GAAP

      249,306      239,167  

Shares used in calculation of net income —non-GAAP

      252,996      241,585  

 

For the nine months ended September 30, 2004 and 2003, the diluted net income per share on a non-GAAP basis equaled $0.48 and $0.42, respectively, using a 30% effective tax rate. This rate is commonly utilized by independent financial analysts who cover our stock in calculating our earnings per share on a non-GAAP basis.

 

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 releases, 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: amortization and write-down of goodwill and intangible assets related to acquisitions, the net gain or loss on the sale of investments or the impairment of investments, restructuring and other charges, and stock-based compensation charges related to acquisitions.

 

Management believes that this non-GAAP financial data supplements our GAAP financial by providing investors with additional information which allows them to have a clearer picture of the company’s core recurring 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.

VERISIGN, INC. AND SUBSIDIARIES

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

     Nine Months Ended
September 30,
  
     2004
     2003
  

Cash flow from operating activities:

                 

Net income (loss)

    $ 71,413     $ (227,589 )

Adjustments to reconcile net loss to net cash provided by operating activities:

                 

Depreciation and amortization of property and equipment

      65,182       88,204  

Amortization and impairment of other intangible assets and goodwill

      56,124       309,762  

Provision for doubtful accounts

      2,194       6,166  

Non-cash restructuring and other charges

      17,963       9,260  

Net loss on sale and impairment of investments

      8,266       16,541  

Minority interest in net income (loss) of consolidated subsidiary

      1,877       —    

Tax benefit associated with stock options

      872       3,321  

Amortization of unearned compensation

      2,402       6,764  

Changes in operating assets and liabilities:

                 

Accounts receivable

      (50,794 )     28,298  

Prepaid expenses and other current assets

      3,224       497  

Accounts payable and accrued liabilities

      (9,950 )     10,726  

Deferred revenue

      61,609       22,731  
    
 

Net cash provided by operating activities

      230,382       274,681  
    
 

Cash flow from investing activities:

                 

Purchases of investments

      (269,325 )     (298,671 )

Proceeds from maturities and sales of investments

      191,707       181,947  

Purchases of property and equipment

      (57,005 )     (67,497 )

Cash paid for business combinations, net of cash acquired

      (246,356 )     —    

Merger related costs

      (7,324 )     (4,925 )

Other assets

      (2,844 )     (1,911 )
    
 

Net cash used in investing activities

      (391,147 )     (191,057 )
    
 

Cash flow from financing activities:

                 

Proceeds from issuance of common stock from option exercises and employee stock purchase plan

      39,530       22,268  

Repurchase of common stock

      (34,935 )     —    

Sale of consolidated subsidiary stock

      824       —    

Repayment of debt

      (3,825 )     (5,505 )
    
 

Net cash provided by financing activities

      1,594       16,763  
    
 

Effect of exchange rate changes

      (3,169 )     (1,851 )
    
 

Net increase (decrease) in cash and cash equivalents

      (162,340 )     98,536  

Cash and cash equivalents at beginning of period

      393,787       282,288  
    
 

Cash and cash equivalents at end of period

    $ 231,447     $ 380,824