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 8.01. | Other Events. |
Item 9.01. | Financial Statements and Exhibits. |
Exhibit Number | Description | |
99.1 |
VERISIGN, INC. | ||||
Date: February 7, 2019 | By: | /s/ Thomas C. Indelicarto | ||
Thomas C. Indelicarto | ||||
Executive Vice President, General Counsel and Secretary |
Exhibit No. | Description | |
Exhibit 99.1 |
• | Verisign ended 2018 with cash, cash equivalents, and marketable securities of $1.27 billion, a decrease of $1.15 billion from year-end 2017. |
• | Cash flow from operations was $219 million for the fourth quarter of 2018 and $698 million for the full year 2018 compared with $199 million for the same quarter in 2017 and $703 million for the full year 2017. |
• | Deferred revenues on Dec. 31, 2018, totaled $1.02 billion, an increase of $19 million from year-end 2017. |
• | During the fourth quarter, Verisign repurchased 1.2 million shares of its common stock for $175 million. During the full year 2018, Verisign repurchased 4.4 million shares of its common stock for $600 million. |
• | Effective Feb. 7, 2019 the Board of Directors approved an additional authorization for share repurchases of approximately $603 million of common stock, which brings the total amount to $1.0 billion authorized and available under Verisign’s share repurchase program, which has no expiration. |
• | On Oct. 26, 2018, Verisign and the U.S. Department of Commerce (“DOC”) entered into Amendment 35 to the Cooperative Agreement, which, among other items, permits Verisign, without further approval of the DOC, to agree with the Internet Corporation for Assigned Names and Numbers (“ICANN”) to change the .com Registry Agreement to increase wholesale prices for .com domain names up to 7 percent in each of the last four years of each six-year period of the .com Registry Agreement. |
• | Verisign ended the fourth quarter with 153.0 million .com and .net domain name registrations in the domain name base, a 4.5 percent increase from the end of the fourth quarter of 2017, and a net increase of 1.29 million registrations during the fourth quarter of 2018. |
• | In the fourth quarter, Verisign processed 9.5 million new domain name registrations for .com and .net, as compared to 9.0 million for the same quarter in 2017. |
• | The final .com and .net renewal rate for the third quarter of 2018 was 74.8 percent compared with 74.4 percent for the same quarter in 2017. Renewal rates are not fully measurable until 45 days after the end of the quarter. |
December 31, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 357,415 | $ | 465,851 | |||
Marketable securities | 912,254 | 1,948,900 | |||||
Other current assets | 47,365 | 31,402 | |||||
Total current assets | 1,317,034 | 2,446,153 | |||||
Property and equipment, net | 253,905 | 263,513 | |||||
Goodwill | 52,527 | 52,527 | |||||
Deferred tax assets | 104,992 | 15,392 | |||||
Deposits to acquire intangible assets | 145,000 | 145,000 | |||||
Other long-term assets | 41,046 | 18,603 | |||||
Total long-term assets | 597,470 | 495,035 | |||||
Total assets | $ | 1,914,504 | $ | 2,941,188 | |||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 215,208 | $ | 219,603 | |||
Deferred revenues | 732,382 | 713,309 | |||||
Subordinated convertible debentures, including contingent interest derivative | — | 627,616 | |||||
Total current liabilities | 947,590 | 1,560,528 | |||||
Long-term deferred revenues | 285,720 | 286,097 | |||||
Senior notes | 1,785,047 | 1,782,529 | |||||
Deferred tax liabilities | 134 | 444,108 | |||||
Other long-term tax liabilities | 281,487 | 128,197 | |||||
Total long-term liabilities | 2,352,388 | 2,640,931 | |||||
Total liabilities | 3,299,978 | 4,201,459 | |||||
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: 352,325 at December 31, 2018 and 325,218 at December 31, 2017; Outstanding shares: 120,037 at December 31, 2018 and 97,591 at December 31, 2017 | 352 | 325 | |||||
Additional paid-in capital | 15,706,774 | 16,437,135 | |||||
Accumulated deficit | (17,089,789 | ) | (17,694,790 | ) | |||
Accumulated other comprehensive loss | (2,811 | ) | (2,941 | ) | |||
Total stockholders’ deficit | (1,385,474 | ) | (1,260,271 | ) | |||
Total liabilities and stockholders’ deficit | $ | 1,914,504 | $ | 2,941,188 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | $ | 307,452 | $ | 295,501 | $ | 1,214,969 | $ | 1,165,095 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenues | 48,368 | 47,680 | 192,134 | 193,326 | |||||||||||
Sales and marketing | 17,179 | 25,488 | 64,891 | 81,951 | |||||||||||
Research and development | 15,042 | 12,773 | 57,884 | 52,342 | |||||||||||
General and administrative | 32,897 | 33,128 | 132,668 | 129,754 | |||||||||||
Total costs and expenses | 113,486 | 119,069 | 447,577 | 457,373 | |||||||||||
Operating income | 193,966 | 176,432 | 767,392 | 707,722 | |||||||||||
Interest expense | (22,634 | ) | (40,467 | ) | (114,845 | ) | (136,336 | ) | |||||||
Non-operating income, net | 62,570 | 6,082 | 76,969 | 27,626 | |||||||||||
Income before income taxes | 233,902 | 142,047 | 729,516 | 599,012 | |||||||||||
Income tax expense | (51,707 | ) | (39,210 | ) | (147,027 | ) | (141,764 | ) | |||||||
Net income | 182,195 | 102,837 | 582,489 | 457,248 | |||||||||||
Other comprehensive income | 192 | 213 | 130 | 512 | |||||||||||
Comprehensive income | $ | 182,387 | $ | 103,050 | $ | 582,619 | $ | 457,760 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.51 | $ | 1.05 | $ | 5.13 | $ | 4.56 | |||||||
Diluted | $ | 1.50 | $ | 0.83 | $ | 4.75 | $ | 3.68 | |||||||
Shares used to compute earnings per share | |||||||||||||||
Basic | 120,591 | 98,215 | 113,452 | 100,325 | |||||||||||
Diluted | 121,329 | 124,257 | 122,661 | 124,180 |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 582,489 | $ | 457,248 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation of property and equipment | 48,367 | 49,878 | |||||
Stock-based compensation | 52,504 | 52,907 | |||||
Gain on sale of business | (54,840 | ) | (10,421 | ) | |||
Loss on debt extinguishment | 6,554 | — | |||||
Payment of contingent interest | — | (15,232 | ) | ||||
Amortization of debt discount and issuance costs | 7,137 | 14,678 | |||||
Amortization of discount on investments in debt securities | (18,259 | ) | (14,860 | ) | |||
Other, net | 955 | 826 | |||||
Changes in operating assets and liabilities | |||||||
Prepaid expenses and other assets | 1,041 | 13,775 | |||||
Accounts payable and accrued liabilities | (2,130 | ) | 15,483 | ||||
Deferred revenues | 19,825 | 25,348 | |||||
Net deferred income taxes and other long-term tax liabilities | 54,124 | 113,131 | |||||
Net cash provided by operating activities | 697,767 | 702,761 | |||||
Cash flows from investing activities: | |||||||
Proceeds from maturities and sales of marketable securities | 4,031,809 | 4,562,161 | |||||
Purchases of marketable securities | (2,976,752 | ) | (4,929,834 | ) | |||
Proceeds from sale of business | 52,240 | 11,748 | |||||
Purchases of property and equipment | (37,007 | ) | (49,499 | ) | |||
Other investing activities | (160 | ) | — | ||||
Net cash provided by (used in) investing activities | 1,070,130 | (405,424 | ) | ||||
Cash flows from financing activities: | |||||||
Repayment of principal on subordinated convertible debentures | (1,250,009 | ) | — | ||||
Proceeds from employee stock purchase plan | 12,836 | 12,915 | |||||
Repurchases of common stock | (638,152 | ) | (621,173 | ) | |||
Proceeds from senior notes, net of issuance costs | — | 543,185 | |||||
Net cash used in financing activities | (1,875,325 | ) | (65,073 | ) | |||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (958 | ) | 1,294 | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (108,386 | ) | 233,558 | ||||
Cash, cash equivalents, and restricted cash at beginning of period | 475,139 | 241,581 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 366,753 | $ | 475,139 | |||
Supplemental cash flow disclosures: | |||||||
Cash paid for interest | $ | 117,956 | $ | 117,234 | |||
Cash paid for income taxes, net of refunds received | $ | 84,906 | $ | 28,294 |
Three Months Ended December 31, | |||||||||||||||
2018 | 2017 | ||||||||||||||
Operating Income | Net Income | Operating Income | Net Income | ||||||||||||
GAAP as reported | $ | 193,966 | $ | 182,195 | $ | 176,432 | $ | 102,837 | |||||||
Adjustments: | |||||||||||||||
Stock-based compensation | 11,098 | 11,098 | 12,864 | 12,864 | |||||||||||
Non-cash interest expense | — | 3,851 | |||||||||||||
Tax adjustment | (2,193 | ) | (480 | ) | |||||||||||
Non-GAAP | $ | 205,064 | $ | 191,100 | $ | 189,296 | $ | 119,072 | |||||||
Revenues | $ | 307,452 | $ | 295,501 | |||||||||||
Non-GAAP operating margin | 66.7 | % | 64.1 | % | |||||||||||
Diluted shares | 121,329 | 124,257 | |||||||||||||
Diluted EPS, non-GAAP | $ | 1.58 | $ | 0.96 |
Year Ended December 31, | |||||||||||||||
2018 | 2017 | ||||||||||||||
Operating Income | Net Income | Operating Income | Net Income | ||||||||||||
GAAP as reported | $ | 767,392 | $ | 582,489 | $ | 707,722 | $ | 457,248 | |||||||
Adjustments: | |||||||||||||||
Stock-based compensation | 52,504 | 52,504 | 52,907 | 52,907 | |||||||||||
Unrealized loss on contingent interest derivative on the subordinated convertible debentures | — | 893 | |||||||||||||
Non-cash interest expense | 5,719 | 14,678 | |||||||||||||
Contingent interest payable on subordinated convertible debentures | — | (9,445 | ) | ||||||||||||
Loss on debt extinguishment | 6,554 | — | |||||||||||||
Tax adjustment | (27,717 | ) | (24,352 | ) | |||||||||||
Non-GAAP | $ | 819,896 | $ | 619,549 | $ | 760,629 | $ | 491,929 | |||||||
Revenues | $ | 1,214,969 | $ | 1,165,095 | |||||||||||
Non-GAAP operating margin | 67.5 | % | 65.3 | % | |||||||||||
Diluted shares | 122,661 | 124,180 | |||||||||||||
Diluted EPS, non-GAAP | $ | 5.05 | $ | 3.96 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||
2018 | 2017 | 2018 | |||||||||
Net Income | $ | 182,195 | $ | 102,837 | $ | 582,489 | |||||
Interest expense | 22,634 | 40,467 | 114,845 | ||||||||
Income tax expense | 51,707 | 39,210 | 147,027 | ||||||||
Depreciation and amortization | 11,917 | 12,213 | 48,367 | ||||||||
Stock-based compensation | 11,098 | 12,864 | 52,504 | ||||||||
Unrealized (gain) loss on hedging agreements | (30 | ) | 43 | (100 | ) | ||||||
Gain on sale of business | (54,840 | ) | — | (54,840 | ) | ||||||
Loss on debt extinguishment | — | — | 6,554 | ||||||||
Non-GAAP Adjusted EBITDA | $ | 224,681 | $ | 207,634 | $ | 896,846 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of revenues | $ | 1,652 | $ | 1,719 | $ | 6,835 | $ | 7,030 | |||||||
Sales and marketing | 579 | 1,433 | 4,972 | 5,688 | |||||||||||
Research and development | 1,696 | 1,560 | 6,728 | 6,113 | |||||||||||
General and administrative | 7,171 | 8,152 | 33,969 | 34,076 | |||||||||||
Total stock-based compensation expense | $ | 11,098 | $ | 12,864 | $ | 52,504 | $ | 52,907 |