MOUNTAIN VIEW, Calif., July 20 -- VeriSign, Inc. (NASDAQ:VRSN) , the leading provider of intelligent infrastructure services for the Internet and telecommunications networks, today reported its results for the second quarter ended June 30, 2005.
VeriSign reported revenue of $445 million for the second quarter of 2005, a 74 percent increase compared to the same period of 2004. On a GAAP basis, VeriSign reported net income of $41 million for the second quarter 2005 and earnings per share of $0.15 per fully-diluted share. This compares with net income of $22 million and earnings per share of $.09 per fully-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 $105 million, earnings per share for the second quarter was $0.27 per fully-diluted share, as compared to non-GAAP pre-tax income of $55 million and earnings per fully-diluted share of $0.15 for the same period in 2004. These non-GAAP results exclude the following items, which are included under GAAP: amortization of intangible assets related to acquisitions, in-process research and development, the net gain or loss on the sale of investments, restructuring and other recoveries/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.
"Our second quarter results were driven by continued demand for our Intelligent Infrastructure services across the world`s voice and data networks," said Stratton Sclavos, Chairman and Chief Executive Officer of VeriSign. "As the global foundation for the delivery of communications, commerce and content continues to migrate from physical to digital, we are confident that our customers will look to utilize our services to enable and protect their interactions."
"Strong top and bottom-line growth during Q2 drove healthy cash flow and strengthened our balance sheet," said Dana Evan, Chief Financial Officer of VeriSign. "The record revenue and operating income generated $136 million in operating cash flow and led to a balance of more than $930 million in cash and cash equivalents at the end of the quarter."
Within VeriSign`s Internet Services Group (ISG), the VeriSign Security Services (VSS) business achieved a number of milestones during the quarter. Highlights included the announcement of a multi-year Managed Security Services (MSS) contract with ScottishPower, a channel partner relationship with Global Crossing and the recent acquisition of iDEFENSE which will provide real-time intelligence to VeriSign`s MSS customers. VSS also announced the launch of several new products including a three-year SSL certificate and enhancements to the VeriSign E-mail Security Solution which includes a Message Archiving Service that helps enterprises meet regulatory compliance and business continuity needs.
The VeriSign Naming and Directory Services (VNDS) business saw its active domain names under management reach a record level as new registrations and renewal rates remained strong. The company was also notified by the Internet Corporation for Assigned Names and Numbers (ICANN) that VeriSign has been awarded the contract to continue operating the .net domain registry. In addition, VNDS announced the acquisition of R4 Global Solutions to provide consulting and implementation services in support of the company`s Intelligent Supply Chain offering for enterprises that deploy RFID technology.
The VeriSign Communications Services (VCS) business saw continued growth across its Communications, Commerce and Content businesses in the second quarter. As part of VeriSign`s mobile content strategy, VeriSign completed the acquisition of LightSurf and announced the powering of inter-carrier multi- media messaging across Canada and with carriers in the US including T-Mobile and Virgin Mobile. Through an asset acquisition, VCS also added Lightbridge`s PrepayIN platform to the Communications & Commerce group`s billing services.
Additional Financial Information
-- VeriSign ended the quarter with Cash, Cash Equivalents, Restricted Cash
and Short-term Investments of $933 million, an increase of $61 million
from the prior quarter.
-- Cash flow from operations was $136 million for the second quarter of
2005.
-- During the quarter, VeriSign repurchased approximately 1.6 million
shares of its common stock for approximately $43 million under its
existing repurchase program.
-- Deferred revenue on the balance sheet was $477 million as of June 30,
2005, up $27 million or 6% over last quarter.
-- Net days sales outstanding (Net DSO), which takes into account the
change in deferred revenue balance, was 52 days which was up from 49
days in Q1.
-- Capital expenditures for the second quarter of 2005 were approximately
$29 million, up from $17 million in the first quarter of 2005.
-- Non-GAAP operating income was $92 million, up from $83 million in the
first quarter of 2005.
-- The U.S. dollar`s move against certain foreign currencies during the
period negatively impacted reported revenues by approximately $7
million, or 1.6%.
Internet Services Group
-- The Internet Services Group (ISG) -- which includes VeriSign`s
Security, Payments, and Naming & Directory services -- delivered $168
million of revenue in the second quarter of 2005. The results for the
second 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 124,000
new and renewed certificates in Q2, ending the quarter with a base of
more than 471,000 certificates, up from 462,000 at the end of first
quarter of 2005.
-- VeriSign`s Payments business ended the second quarter with
approximately 144,000 merchants under management, an increase of
approximately 8,000 merchants over the first quarter of 2005. Further,
the business processed approximately 127 million individual
transactions with an aggregate value of $11.4 billion during the
quarter.
-- VeriSign`s Naming & Directory Services business ended the second
quarter with over 44 million active domain names in .com and .net, a
net increase of approximately 2.8 million names or 7% from the first
quarter of 2005.
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 $277 million in the second quarter of 2005, up
14% from the first quarter of 2005. The Communications and Commerce
group generated revenues of $102 million, up 5% sequentially, while the
Content group generated revenues of $175 million.
-- VeriSign`s Communications Services Group ended Q2 with a base of
approximately 7.2 million wireless billing customer subscribers up
modestly from a Q1 base of 7.1 million.
-- The VCS business supported 14.4 billion database queries in Q2 2005, up
13% from Q1 2005.
Today`s Conference Call
VeriSign will be hosting a teleconference call today at 2:00 pm (PT) to review the second quarter results. The call will be accessible by direct dial at (800) 946-0712 (US) or (719) 457-2641 (international). A listen-only live web cast of the Q2 earnings conference call will also be available at www.verisign.com or www.streetevents.com. A replay of this call will be available at (888) 203-1112 (passcode: 6588408) or (719) 457-0820 (international) beginning at 5:00 pm (PT) on July 20th and will run through July 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 site.
About VeriSign
VeriSign, Inc., operates intelligent infrastructure services that enable businesses and individuals to find, connect, secure, and transact across today`s complex global networks. 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, 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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