Verisign Reports Third Quarter 2020 Results

·10 min read

VeriSign, Inc. (NASDAQ: VRSN), a global provider of domain name registry services and internet infrastructure, today reported financial results for the third quarter of 2020.

VeriSign, Inc. and its subsidiaries ("Verisign") reported revenue of $318 million for the third quarter of 2020, up 3.1 percent from the same quarter in 2019. Verisign reported net income of $171 million and diluted earnings per share (diluted "EPS") of $1.49 for the third quarter of 2020, compared to net income of $154 million and diluted EPS of $1.30 for the same quarter in 2019. The operating margin was 65.0 percent for the third quarter of 2020 compared to 66.7 percent for the same quarter in 2019.

Net income for the third quarter of 2020 included the recognition of $24 million of previously unrecognized income tax benefits. This resulted from remeasurement of Verisign’s accrual for uncertain tax positions based on IRS written confirmation indicating no examination adjustment would be proposed related to certain matters reviewed as part of its audit of federal income tax returns for 2010 through 2014. Notwithstanding this written confirmation, Verisign’s U.S. federal income tax returns for those years remain under examination by the IRS. This income tax benefit increased diluted EPS by $0.21.

"Our third quarter results reflect our ongoing discipline in execution of our mission. We are acutely aware of the extent to which people rely on our critical internet infrastructure as the COVID-19 pandemic continues, and we remain focused on our mission to help keep the world connected online, reliably and securely," said Jim Bidzos, Executive Chairman and Chief Executive Officer.

Financial Highlights

  • Verisign ended the third quarter of 2020 with cash, cash equivalents and marketable securities of $1.15 billion, a decrease of $68 million from the end of 2019.

  • Cash flows from operating activities were $140 million for the third quarter of 2020, compared to $208 million for the same quarter in 2019.

  • Deferred revenues as of Sept. 30, 2020 totaled $1.06 billion, an increase of $28 million from the end of 2019.

  • During the third quarter of 2020, Verisign repurchased 0.8 million shares of its common stock for an aggregate cost of $170 million. As of Sept. 30, 2020, there was $506 million remaining for future share repurchases under the share repurchase program which has no expiration date.

Business Highlights

  • Verisign ended the third quarter of 2020 with 163.7 million .com and .net domain name registrations in the domain name base, a 4.0 percent increase from the end of the third quarter of 2019, and a net increase of 1.65 million during the third quarter of 2020.

  • During the third quarter of 2020, Verisign processed 10.9 million new domain name registrations for .com and .net, compared to 9.9 million for the same quarter in 2019.

  • The final .com and .net renewal rate for the second quarter of 2020 was 72.8 percent compared to 74.2 percent for the same quarter in 2019. Renewal rates are not fully measurable until 45 days after the end of the quarter.

Today’s Conference Call

Verisign will host a live conference call today at 4:30 p.m. (EDT) to review the third quarter 2020 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 effects of the COVID-19 pandemic; risks arising from the agreements governing our 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, 2019, 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.

©2020 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)

September 30,
2020

December 31,
2019

ASSETS

Current assets:

Cash and cash equivalents

$

145,701

$

508,196

Marketable securities

1,004,658

709,863

Other current assets

55,767

60,530

Total current assets

1,206,126

1,278,589

Property and equipment, net

248,587

250,283

Goodwill

52,527

52,527

Deferred tax assets

76,903

87,798

Deposits to acquire intangible assets

145,000

145,000

Other long-term assets

35,163

39,812

Total long-term assets

558,180

575,420

Total assets

$

1,764,306

$

1,854,009

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable and accrued liabilities

$

198,342

$

209,988

Deferred revenues

779,666

755,178

Total current liabilities

978,008

965,166

Long-term deferred revenues

281,887

278,702

Senior notes

1,789,453

1,787,565

Long-term tax and other liabilities

101,206

312,676

Total long-term liabilities

2,172,546

2,378,943

Total liabilities

3,150,554

3,344,109

Commitments and contingencies

Stockholders’ deficit:

Preferred stock—par value $.001 per share; Authorized shares: 5,000; Issued and outstanding shares: none

Common stock and additional paid-in capital—par value $.001 per share; Authorized shares: 1,000,000; Issued shares: 353,730 at September 30, 2020 and 353,157 at December 31, 2019; Outstanding shares: 114,262 at September 30, 2020 and 116,715 at December 31, 2019

14,436,409

14,990,011

Accumulated deficit

(15,819,916

)

(16,477,490

)

Accumulated other comprehensive loss

(2,741

)

(2,621

)

Total stockholders’ deficit

(1,386,248

)

(1,490,100

)

Total liabilities and stockholders’ deficit

$

1,764,306

$

1,854,009

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues

$

317,879

$

308,421

$

944,768

$

921,118

Costs and expenses:

Cost of revenues

45,024

44,443

134,205

134,013

Sales and marketing

8,389

9,857

23,883

32,775

Research and development

19,708

14,619

55,268

45,704

General and administrative

38,109

33,886

111,719

101,065

Total costs and expenses

111,230

102,805

325,075

313,557

Operating income

206,649

205,616

619,693

607,561

Interest expense

(22,537

)

(22,633

)

(67,607

)

(67,899

)

Non-operating income, net

775

10,498

15,262

34,137

Income before income taxes

184,887

193,481

567,348

573,799

Income tax (expense) benefit

(13,908

)

(39,568

)

90,226

(109,825

)

Net income

170,979

153,913

657,574

463,974

Other comprehensive (loss) income

(383

)

308

(120

)

392

Comprehensive income

$

170,596

$

154,221

$

657,454

$

464,366

Earnings per share:

Basic

$

1.49

$

1.30

$

5.70

$

3.90

Diluted

$

1.49

$

1.30

$

5.68

$

3.89

Shares used to compute earnings per share

Basic

114,655

118,194

115,456

118,966

Diluted

114,831

118,569

115,699

119,410

VERISIGN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended
September 30,

2020

2019

Cash flows from operating activities:

Net income

$

657,574

$

463,974

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

Depreciation of property and equipment

34,463

34,327

Stock-based compensation

36,106

38,237

Amortization of discount on investments in debt securities

(5,844

)

(10,271

)

Other, net

(2,638

)

2,126

Changes in operating assets and liabilities:

Other assets

(11,107

)

(12,123

)

Accounts payable and accrued liabilities

(5,912

)

(7,110

)

Deferred revenues

27,673

24,563

Net deferred income taxes and other long-term tax liabilities

(195,353

)

26,571

Net cash provided by operating activities

534,962

560,294

Cash flows from investing activities:

Proceeds from maturities and sales of marketable securities

1,804,541

1,523,862

Purchases of marketable securities

(2,093,437

)

(1,721,661

)

Purchases of property and equipment

(36,933

)

(31,498

)

Proceeds received (payments made) related to sale of business

20,009

(8,530

)

Net cash used in investing activities

(305,820

)

(237,827

)

Cash flows from financing activities:

Repurchases of common stock

(603,705

)

(583,485

)

Proceeds from employee stock purchase plan

12,577

13,152

Net cash used in financing activities

(591,128

)

(570,333

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(506

)

(208

)

Net decrease in cash, cash equivalents, and restricted cash

(362,492

)

(248,074

)

Cash, cash equivalents, and restricted cash at beginning of period

517,601

366,753

Cash, cash equivalents, and restricted cash at end of period

$

155,109

$

118,679

Supplemental cash flow disclosures:

Cash paid for interest

$

56,860

$

57,074

Cash paid for income taxes, net of refunds received

$

105,258

$

75,197

View source version on businesswire.com: https://www.businesswire.com/news/home/20201022005950/en/

Contacts

Investor Relations: David Atchley, datchley@verisign.com, 703-948-4643

Media Relations: James Barbour, jbarbour@verisign.com, 703-948-3800