EX-99.1 2 q22019earningsrelease.htm EXHIBIT 99.1 Exhibit



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Verisign Reports Second Quarter 2019 Results

RESTON, VA - July 25, 2019 - VeriSign, Inc. (NASDAQ: VRSN), a global provider of domain name registry services and internet infrastructure, today reported financial results for the second quarter of 2019.

Second Quarter GAAP Financial Results
VeriSign, Inc. and its subsidiaries (“Verisign”) reported revenue of $306 million for the second quarter of 2019, up 1.3 percent from the same quarter in 2018. Verisign reported net income of $148 million and diluted earnings per share (diluted “EPS”) of $1.24 for the second quarter of 2019, compared to net income of $128 million and diluted EPS of $1.04 for the same quarter in 2018. The operating margin was 65.9 percent for the second quarter of 2019 compared to 63.8 percent for the same quarter in 2018.

Second Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $159 million and diluted EPS of $1.33 for the second quarter of 2019, compared to net income of $145 million and diluted EPS of $1.18 for the same quarter in 2018. The non-GAAP operating margin was 70.1 percent for the second quarter of 2019 compared to 68.2 percent for the same quarter in 2018. A table reconciling the GAAP to the non-GAAP results (which excludes the items described under “Non-GAAP Financial Measures and Adjusted EBITDA” below) is appended to this news release.

“Our results demonstrate another solid quarter of focused execution,” said Jim Bidzos, Executive Chairman, President and Chief Executive Officer.
Financial Highlights

•
Verisign ended the second quarter of 2019 with cash, cash equivalents and marketable securities of $1.22 billion, a decrease of $45 million from the end of 2018.
•
Cash flow from operating activities was $165 million for the second quarter of 2019, compared to $202 million for the same quarter in 2018.
•
Deferred revenues as of June 30, 2019 totaled $1.05 billion, an increase of $32 million from the end of 2018.
•
During the second quarter of 2019, Verisign repurchased 0.9 million shares of its common stock for an aggregate cost of $175 million. As of June 30, 2019, there was $716 million remaining for future share repurchases under the share repurchase program which has no expiration date.

Business Highlights

•
Verisign ended the second quarter of 2019 with 156.1 million .com and .net domain name registrations in the domain name base, a 4.3 percent increase from the end of the second quarter of 2018, and a net increase of 1.34 million during the second quarter of 2019.
•
During the second quarter of 2019, Verisign processed 10.3 million new domain name registrations for .com and .net, compared to 9.6 million for the same quarter in 2018.
•
The final .com and .net renewal rate for the first quarter of 2019 was 75.0 percent compared with 75.3 percent for the same quarter in 2018. Renewal rates are not fully measurable until 45 days after the end of the quarter.






Non-GAAP Financial Measures and Adjusted EBITDA
Verisign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with this information, management typically discloses and discusses certain non-GAAP financial measures in quarterly earnings news releases, on investor conference calls and during investor conferences and related events. These non-GAAP financial measures do not include the following items that are included in the comparable GAAP financial measures: stock-based compensation, non-cash interest expense through June 30, 2018, and loss on debt extinguishment. Non-GAAP net income is adjusted for an income tax rate of 22 percent which differs from the GAAP income tax rate.
On a quarterly basis, Verisign also provides Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure and is calculated in accordance with the terms of the indentures governing Verisign’s senior notes. Adjusted EBITDA refers to net income before interest, taxes, depreciation and amortization, stock-based compensation, unrealized gain / loss on hedging agreements, and gain on the sale of a business.
Management believes that these non-GAAP financial measures supplement the GAAP financial measures by providing investors with additional information that allows them to have a clearer picture of Verisign’s operations and financial performance and the comparability of Verisign’s operating results from period to period. The presentation of these non-GAAP financial measures is not meant to be considered in isolation nor as a substitute for financial measures prepared in accordance with GAAP.

The tables appended to this release include a reconciliation of the non-GAAP financial measures to the comparable financial measures reported in accordance with GAAP for the given periods.

Today’s Conference Call
Verisign will host a live conference call today at 4:30 p.m. (EDT) to review the second quarter 2019 results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (786) 789-4776 (international), conference ID: Verisign. A listen-only live web cast of the conference call and accompanying slide presentation will also be available at https://investor.Verisign.com. An audio archive of the call will be available at https://investor.Verisign.com/events.cfm. This news release and the financial information discussed on today’s conference call are available at https://investor.Verisign.com.

About Verisign
Verisign, a global provider of domain name registry services and internet infrastructure, enables internet navigation for many of the world’s most recognized domain names. Verisign enables the security, stability and resiliency of key internet infrastructure and services, including providing root zone maintainer services, operating two of the 13 global internet root servers, and providing registration services and authoritative resolution for the .com and .net top-level domains, which support the majority of global e-commerce. To learn more about what it means to be Powered by Verisign, please visit 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 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These statements involve risks and uncertainties that could cause our actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, risks arising from the agreements governing our Registry Services business; new or existing governmental laws and regulations in the U.S. or other applicable foreign jurisdictions; system interruptions, security breaches, attacks on the internet by hackers, viruses, or intentional acts of vandalism; the uncertainty of the impact of changes to the multi-stakeholder model of internet governance; risks arising from our operation of two root zone servers and our performance of the Root Zone Maintainer functions; changes in internet practices and behavior and the adoption of substitute technologies; the success or failure of the evolution of our markets; the highly competitive business environment in which we operate; whether we can maintain strong relationships with registrars and their resellers to maintain their marketing focus on our products and services; the possibility of system interruptions or failures; challenging global economic conditions; economic, legal and political risk associated with our international operations; our ability to protect and enforce our rights to our intellectual property and ensure that we do not infringe on others’ intellectual property; the outcome of legal or other challenges resulting from our activities or the activities of registrars or registrants, or litigation generally; the impact of our new strategic initiatives, including our IDN gTLDs; whether we can retain and motivate our senior management and key employees; and the impact of unfavorable tax rules and regulations. More information about potential factors that could affect our business and financial results is included in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended Dec. 31, 2018, 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 announcement.






Contacts
Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643
Media Relations: Deana Alvy, dalvy@verisign.com, 703-948-3800

©2019 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN logo, and other trademarks, service marks, and designs are registered or unregistered trademarks of VeriSign, Inc. and its subsidiaries in the United States and in foreign countries. All other trademarks are property of their respective owners.






VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
751,580

 
$
357,415

Marketable securities
473,362

 
912,254

Other current assets
70,440

 
47,365

Total current assets
1,295,382

 
1,317,034

Property and equipment, net
250,820

 
253,905

Goodwill
52,527

 
52,527

Deferred tax assets
109,917

 
104,992

Deposits to acquire intangible assets
145,000

 
145,000

Other long-term assets
36,252

 
41,046

Total long-term assets
594,516

 
597,470

Total assets
$
1,889,898

 
$
1,914,504

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
171,215

 
$
215,208

Deferred revenues
763,466

 
732,382

Total current liabilities
934,681

 
947,590

Long-term deferred revenues
286,143

 
285,720

Senior notes
1,786,306

 
1,785,047

Long-term tax and other liabilities
307,935

 
281,621

Total long-term liabilities
2,380,384

 
2,352,388

Total liabilities
3,315,065

 
3,299,978

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: 352,952 at June 30, 2019 and 352,325 at December 31, 2018; Outstanding shares: 118,548 at June 30, 2019 and 120,037 at December 31, 2018
353

 
352

Additional paid-in capital
15,356,935

 
15,706,774

Accumulated deficit
(16,779,728
)
 
(17,089,789
)
Accumulated other comprehensive loss
(2,727
)
 
(2,811
)
Total stockholders’ deficit
(1,425,167
)
 
(1,385,474
)
Total liabilities and stockholders’ deficit
$
1,889,898

 
$
1,914,504











VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)

  
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues
$
306,289

 
$
302,452

 
$
612,697

 
$
601,740

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
44,066

 
47,365

 
89,570

 
95,517

Sales and marketing
12,399

 
16,569

 
22,918

 
33,844

Research and development
14,953

 
13,755

 
31,085

 
29,130

General and administrative
33,178

 
31,753

 
67,179

 
64,820

Total costs and expenses
104,596

 
109,442

 
210,752

 
223,311

Operating income
201,693

 
193,010

 
401,945

 
378,429

Interest expense
(22,635
)
 
(28,792
)
 
(45,266
)
 
(69,580
)
Non-operating income, net
11,436

 
660

 
23,639

 
8,464

Income before income taxes
190,494

 
164,878

 
380,318

 
317,313

Income tax expense
(42,960
)
 
(36,527
)
 
(70,257
)
 
(54,699
)
Net income
147,534

 
128,351

 
310,061

 
262,614

Other comprehensive income
35

 
17

 
84

 
260

Comprehensive income
$
147,569

 
$
128,368

 
$
310,145

 
$
262,874

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.24

 
$
1.13

 
$
2.60

 
$
2.49

Diluted
$
1.24

 
$
1.04

 
$
2.59

 
$
2.13

Shares used to compute earnings per share
 
 
 
 
 
 
 
Basic
118,965

 
113,936

 
119,359

 
105,639

Diluted
119,361

 
123,200

 
119,837

 
123,399






VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
310,061

 
$
262,614

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of property and equipment
22,884

 
24,195

Stock-based compensation
25,617

 
26,276

Amortization of discount on investments in debt securities
(5,679
)
 
(7,686
)
Other, net
894

 
13,452

Changes in operating assets and liabilities:
 
 
 
Other assets
(10,254
)
 
(7,605
)
Accounts payable and accrued liabilities
(39,351
)
 
(20,892
)
Deferred revenues
31,857

 
27,296

Net deferred income taxes and other long-term tax liabilities
16,146

 
(25,844
)
Net cash provided by operating activities
352,175

 
291,806

Cash flows from investing activities:
 
 
 
Proceeds from maturities and sales of marketable securities
1,466,303

 
2,634,376

Purchases of marketable securities
(1,021,741
)
 
(1,592,403
)
Purchases of property and equipment
(20,189
)
 
(18,669
)
Other investing activities
(6,311
)
 
(160
)
Net cash provided by investing activities
418,062

 
1,023,144

Cash flows from financing activities:
 
 
 
Repayment of principal on subordinated convertible debentures
—

 
(1,250,009
)
Proceeds from employee stock purchase plan
8,253

 
7,811

Repurchases of common stock
(384,532
)
 
(281,597
)
Net cash used in financing activities
(376,279
)
 
(1,523,795
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
243

 
(590
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
394,201

 
(209,435
)
Cash, cash equivalents, and restricted cash at beginning of period
366,753

 
475,139

Cash, cash equivalents, and restricted cash at end of period
$
760,954

 
$
265,704

Supplemental cash flow disclosures:
 
 
 
Cash paid for interest
$
43,708

 
$
73,971

Cash paid for income taxes, net of refunds received
$
62,214

 
$
85,597







VERISIGN, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND ADJUSTED EBITDA
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended June 30,
 
2019
 
2018
 
Operating Income
 
Net Income
 
Operating Income
 
Net Income
GAAP as reported
$
201,693

 
$
147,534

 
$
193,010

 
$
128,351

Adjustments:
 
 
 
 
 
 
 
Stock-based compensation
13,155

 
13,155

 
13,298

 
13,298

Non-cash interest expense
 
 
—

 
 
 
1,801

Loss on debt extinguishment
 
 
—

 
 
 
6,554

Tax adjustment
 
 
(1,843
)
 
 
 
(4,510
)
Non-GAAP
$
214,848

 
$
158,846

 
$
206,308

 
$
145,494

 
 
 
 
 
 
 
 
Revenues
$
306,289

 
 
 
$
302,452

 
 
Non-GAAP operating margin
70.1
%
 
 
 
68.2
%
 
 
Diluted shares
 
 
119,361

 
 
 
123,200

Diluted EPS, non-GAAP
 
 
$
1.33

 
 
 
$
1.18



The following table presents the classification of stock-based compensation:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
     Cost of revenues
$
1,741

 
$
1,818

 
$
3,339

 
$
3,428

     Sales and marketing
1,019

 
1,494

 
2,002

 
2,942

     Research and development
1,642

 
1,688

 
3,231

 
3,409

     General and administrative
8,753

 
8,298

 
17,045

 
16,497

Total stock-based compensation expense
$
13,155

 
$
13,298

 
$
25,617

 
$
26,276



The following table reconciles GAAP net income to non-GAAP Adjusted EBITDA:
 
Four Quarters Ended
June 30, 2019
Net Income
$
629,936

Interest expense
90,532

Income tax expense
162,585

Depreciation and amortization
47,057

Stock-based compensation
51,845

Unrealized loss on hedging agreements
307

Gain on sale of business
(55,593
)
Non-GAAP Adjusted EBITDA
$
926,669