VeriSign Reports Third Quarter 2005 Results
MOUNTAIN VIEW, CA – October 19, 2005 – 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, 2005.
VeriSign reported revenue of $415 million for the third quarter of 2005, a 28 percent increase compared
to the same period of 2004. On a GAAP basis, VeriSign reported net income of $45 million for the third
quarter 2005 and earnings per share of $0.17 per diluted share. This compares with net income of $40
million and earnings per share of $.16 per diluted share for the same period of 2004.
On a non-GAAP basis, using a 30% effective tax rate on non-GAAP pre-tax income of $102 million,
earnings per share for the third quarter was $0.27 per diluted share, as compared to non-GAAP pre-tax
income of $69 million and earnings per diluted share of $0.19 for the same period in 2004. These non-
GAAP results exclude the following items, which are included under GAAP: amortization of intangible
assets, acquired in-process research and development, stock-based compensation charges, litigation
settlements, restructuring and other reversals/charges, and the net gain or loss on the sale of investments or
the impairment of investments. A table reconciling the non-GAAP to GAAP numbers reported above is
appended to this release.
“Our third quarter results were mixed with strong demand across our Internet and core Communications
Services, offset by a shortfall in revenues from the Mobile Content business,” said Stratton Sclavos,
Chairman and Chief Executive Officer of VeriSign. “Although the short-term trends have proven difficult
to forecast, we continue to be excited about the long term opportunity in Mobile Content and believe that
we are strongly positioned as the leading global platform for these services.”
“The solid performance in the Internet and core Communications businesses, coupled with discipline
in managing our expenses, allowed us to overcome the reduced content revenue and achieve record
operating income for the quarter,” said Dana Evan, Chief Financial Officer of VeriSign. “Strong
operating cash flow of $126 million in Q3 helped to fund our repurchase of 9 million shares of
common stock during the quarter for an aggregate value of $215 million while we still exited the
period with cash balances of approximately $800 million.”
Within VeriSign’s Internet Services Group (ISG), the VeriSign Security Services (VSS) business
announced a strategic alliance with eBay that calls for the two companies to collaborate on payment
services and security initiatives for e-commerce. Under the terms of the agreement, PayPal, an eBay
subsidiary, will acquire VeriSign’s payment gateway business for $370 million, and the companies have
signed a multi-year security technology agreement that calls for eBay to invest in the deployment of
VeriSign technologies that protect online identities and transactions. The security technology agreement
includes the purchase of up to one million two-factor authentication tokens. VeriSign Japan (VSJ), a
majority owned subsidiary of VeriSign Inc., announced the acquisition of SiteRock as part of the
continued expansion of its Managed Security Services offerings. The acquisition was completed in
October for approximately $51 million in cash.
The VeriSign Naming and Directory Services (VNDS) business continued to see its active domain
names under management achieve record levels as new registrations and renewal rates remained strong.
As part of VeriSign’s strategy to strengthen its support for real-time web services, VNDS announced
two acquisitions. First, VNDS announced the acquisition of Weblogs.com and its ping server service to
provide more stable and reliable communications on behalf of the Internet’s blogosphere. VNDS plans
to use the ping service to increase the reliability and intelligence of the content distribution network of
recently announced acquisition, Moreover Technologies, a wholesale aggregator of real-time content for
news and business information.
The VeriSign Communications Services (VCS) business continued to strengthen its portfolio of products
and customer relationships. The Communications and Commerce lines of business within VCS
announced several customer trials of the VeriSign Wireless IP Connect Services that provides a single,
cellular-Wi-Fi interconnection point that resolves interoperability issues across disparate networks. In
the third quarter, the VCS Content business expanded the availability of Jamster! content services to
Sprint and Cincinnati Bell customers in the United States.
Additional Financial Information
• VeriSign ended the third quarter with Cash, Cash Equivalents, Restricted Cash and Short-term
Investments of $799 million.
• Cash flow from operations was $126 million for the third quarter of 2005.
• Deferred revenue on the balance sheet was $493 million as of September 30, 2005, up $16
million or 3% over Q2.
• Net days sales outstanding (Net DSO), which takes into account the change in deferred revenue
balance, was 51 days for Q3 down modestly from 52 days in Q2.
• Capital expenditures for the third quarter of 2005 were approximately $27 million, relatively
consistent with the $29 million in the second quarter of 2005.
• Non-GAAP operating income was $97 million, up approximately 5% from $92 million in the
second quarter of 2005 and up over 50% year over year.
Internet Services Group
• The Internet Services Group (ISG) – which includes VeriSign’s Security, Payments, and Naming
& Directory services – delivered $177 million of revenue in the third quarter of 2005. The
results for the third quarter included sequential growth in both VeriSign’s Security Services
(VSS) and VeriSign’s Naming & Directory Services (VNDS) businesses.
• VeriSign’s Web site certificate business issued approximately 122,000 new and renewed
certificates in Q3, ending the quarter with a base of more than 479,000 certificates, up from
471,000 at the end of the second quarter of 2005.
• VeriSign’s Naming & Directory Services business ended the third quarter with 46.7 million
active domain names in .com and .net, a net increase of approximately 2.5 million names over
Q2.
Communications Services Group
• VeriSign’s Communications Services (VCS) Group – which provides intelligent
communications, commerce and content services to telecommunications carriers and next
generation service providers – delivered revenues of $238 million in the third quarter of 2005,
down 14% from the second quarter of 2005. The Communications and Commerce group
generated revenues of $107 million, up 5% sequentially, while the Content group generated
revenues of $131 million, a 25% decrease over Q2 and an increase of 78% year over year.
• VeriSign’s Communications Services Group ended Q3 with a base of approximately 7.2 million
wireless billing customer subscribers, an increase of approximately 13% year over year.
• The VCS business supported 14.4 billion database queries in Q3 2005, up 13% year over year.
Today’s Conference Call
VeriSign will be hosting a teleconference call today at 2:00 pm (PST) to review the third quarter results.
The call will be accessible by direct dial at (800) 946-0782 (US) or (719) 457-2657 (international). A
listen-only live webcast of the Q3 earnings conference call will also be available at www.verisign.com
and www.streetevents.com. A replay of this call will be available at (888) 203-1112 (passcode:
8840049) or (719) 457-0820 (international) beginning at 5:00 pm (PST) on October 19th and will run
through October 26th. 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 site.
About VeriSign
VeriSign, Inc. (Nasdaq: VRSN), operates intelligent infrastructure services that enable and protect
billions of interactions every day across the world’s voice and data networks. Additional news and
information about the company is available at www.verisign.com.
Contacts
Media Relations:
Brian O’Shaughnessy
boshaughnessy@verisign.com
650-426-5270
Investor Relations:
Tom McCallum
tmccallum@verisign.com
650-426-3744
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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 acquired 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, 2004 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.
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