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VeriSign, Inc.
Q4 and 2010 Earnings Conference Call
January 27, 2011
Safe Harbor Disclosure
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 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, pricing pressure from competing services offered at prices below our prices and
changes in marketing practices including those of third-party registrars; the sluggish
economic recovery; challenges to ongoing privatization of Internet administration; the
outcome of legal or other challenges resulting from our activities or the activities of registrars
or registrants; new or existing governmental laws and regulations; changes in customer
behavior, Internet platforms and web-browsing patterns; the inability of Verisign to
successfully develop and market new services; the uncertainty of whether our new services
will achieve market acceptance or result in any revenues; system interruptions; security
breaches; attacks on the Internet by hackers, viruses, or intentional acts of vandalism; the
uncertainty of the expense and duration of transition services and requests for indemnification
relating to completed divestitures; and the uncertainty of whether Project Apollo will achieve
its stated objectives. 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, 2009, 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.
2
Agenda
• Introduction & Highlights
• Business Review
• Financial Performance / Guidance
• Closing / Q&A
3
Registry Services Highlights
Domain Name Base at 105.2 million names – up 9% y/y (1)
millions
120
100
80
60
40
20
0
05
05
05
05
06
06
06
06
07
07
07
07
08
08
08
08
09
09
09
09
10
10
10
10
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
.com/.net Domain Name Base
(1) The Domain Name Base is a count of domain names in the .com and .net base, adjusted for domain name
registrations cancelled during the grace period.
4
Registry Services Highlights
7.6 Million New Name Registrations
Renewal Rate
Millions
New Name Registrations
10 100.0%
+ Q3’10 renewal rate 72.8%
▪ Renewal rate determined 45
days after end of quarter 8 90.0%
▪ Q4’10 renewal rate expected
(1)(2)
to be 72.5% to 73%
6 80.0%
+ Domain Name Base for Q1’11
expected to add between 2.3M to 4 70.0%
(2)
2.6M net names
2 60.0%
0 50.0%
05
05
06
06
07
07
08
08
09
09
10
10
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
.com/.net New Name Registrations Renewal Rate
(1) Renewal rates are not fully measurable until 45 days after the end of the quarter.
(2) This guidance is based on historical seasonality and current market trends.
5
2010 Financial Highlights
• Revenue of $681M, up 10% y/y
• Non-GAAP Operating Income of $284M(1)
• Non-GAAP Operating Margin expands 850 bps y/y(1)
• Free Cash Flow of $267M(2)
• Includes payout of $109M of contingent interest
• Excess tax benefit of $132M
• Cap Ex of $81M
• Strong Balance Sheet
• Cash balance of $2.1B(3)
• Deferred Revenue of $663M
(1) Please refer to “Summary of Non-GAAP Measures” for important information.
(2) Free cash flow is defined as cash flow from operations adjusted to include excess tax benefits from stock-based
compensation, less capital expenditures. For Q4’10, excess tax benefits from stock-based compensation was a reversal
of $(35)M. Please see Free Cash Flow Calculation in slide appendix for more detail.
(3) Includes marketable securities.
6
Q4 2010 Financial Performance
$M
Revenue & Profitability
+ Revenue of $179M 200 50%
▪ Up 4% q/q, up 13% y/y
+ Deferred Revenue of $663M, up $9M q/q 175
40%
(1)
+ Non-GAAP operating margin of 44.3% 150
30%
(1)
+ Non-GAAP earnings per share of $0.31 125
+ Operating Cash Flow of $47M 20%
100
(2)
+ Free Cash Flow of $(1)M 10%
75
50 0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Core Revenue Non-GAAP Operating Margin
(1) Please refer to “Summary of Non-GAAP Measures” for important
information.
(2) Free cash flow is defined as cash flow from operations adjusted to include
excess tax benefits from stock-based compensation, less capital
expenditures. For Q4’10, excess tax benefits from stock-based
compensation was a reversal of $(35)M. Please see Free Cash Flow
Calculation in slide appendix for more detail.
7
Financial Guidance (1)
• 2011 Revenue
• $750-$780 Million, 10-14% growth
(2)
• 2011 Non-GAAP Gross Margin
• Approximately 78%
(3)
• Q4’11 Exit Non-GAAP Operating Margin
• 46-48%
(4)
• 2011 Non-GAAP Other Loss, Net
• $25 million
(1) This guidance is based on our expectations of continued growth and increased operating efficiencies in our business in addition to our financial
projections for interest income and expense. Guidance for all non-GAAP figures excludes the same items as we excluded in our Q4 and full
year 2010 non-GAAP reconciliation, which excluded the following items: discontinued operations, stock-based compensation, amortization of
other intangibles assets, impairments of goodwill and other intangible assets, restructuring costs, contingent interest payment to holders of our
Convertible Debentures, and non-cash interest expense.
(2) The most directly comparable GAAP measure to non-GAAP gross margin is GAAP gross margin. Non-GAAP gross margin is defined as
revenues minus cost of revenues adjusted for stock-based compensation.
(3) The most directly comparable GAAP measure to non-GAAP operating margin is GAAP operating margin. The figure for non-GAAP operating
margin excludes stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, if any,
and restructuring costs, each of which is included in GAAP operating margin.
(4) The most directly comparable GAAP measure to non-GAAP Other Loss, Net is GAAP Other Loss, Net. The figure for non-GAAP Other Loss, Net
excludes contingent interest payment to holders of our Convertible Debentures, and non-cash interest expense, which is included in GAAP
Other Loss, Net.
8
Q&A
9
Summary of Non-GAAP Measures
As of December 31, 2010, the Company’s business consists of Naming
Services, which includes Registry Services and Network Intelligence and
Availability (“NIA”) Services.
Non-GAAP measures exclude the following items:
– Discontinued operations
– Stock-based compensation
– Amortization of other intangible assets
– Impairments of goodwill and other intangible assets
– Restructuring costs
– Contingent interest payment to holders of Convertible Debentures
– Non-cash interest expense
Financial forecasts and guidance are forward looking statements and actual results may vary for a number
of reasons including those mentioned in our most recent 10-K, 10-Q and 8-K filings with the SEC.
10
Non-GAAP Reconciliation
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited) Three Months Ended Three Months Ended
December 31, 2010 December 31, 2009
Net Income Net Income
attributable to attributable to
Veris ign Operating Veris ign
Operating Income s tockholders Income s tockholders
GAAP as reported $ 67,486 $ (40,505) $ 47,469 $ 92,048
0 8,838 (60,680)
Dis continued operations ………………………………………….…………………………………………………………………………………………………………………………………………………………………………………………………
Adjus tments :
8,556
Stock-bas ed compensation ………………………………………….……………………………………………. 8,556 6,877 6,877
324
Amortization of other intangible as sets ………………………………………….……………………………………… 324 319 319
2,819
Restructuring cos ts ………………………………………….………………………………………………………………. 2,819 1,599 1,599
- 109,113
Contingent interes t payment to holders of Convertible Debentures ………………………………………….………………………………………………………………. -
Non-cas h interes t expens e ………………………………………….………………………………… 0 2,294 1,718
0 (37,926)
Tax adjustment………………………………………….……………………………………………………………………………………………… (9,059)
Non-GAAP as adjusted $ 79,185 $ 53,513 $ 56,264 $ 32,822
Diluted shares 174,014 193,425 190,617
Per diluted share, non-GAAP as adjusted $ 0.37 $ 0.31 $ 0.27 $ 0.17
VeriSign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with this
information, we typically disclose and discuss certain non-GAAP financial information in our quarterly earnings release, on investor conference calls and during
investor conferences and related events. This non-GAAP financial information does not include the following types of financial measures that are included in GAAP:
discontinued operations, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring costs,
contingent interest payment to holders of our Convertible Debentures, and non-cash interest expense. Non-GAAP financial information is also adjusted for a 30% tax
rate which differs from the GAAP tax rate. All non-GAAP figures for each period presented above have been conformed to exclude the foregoing items under
GAAP. Prior disclosures of non-GAAP figures do not exclude the same items and as such should not be used for comparison purposes.
Management believes that this non-GAAP financial data supplements our GAAP financial data by providing investors with additional information that allows them to
have a clearer picture of the Company's operations. The presentation of this additional information is not meant to be considered in isolation nor as a substitute for
results prepared in accordance with GAAP. We believe that the non-GAAP information enhances the investors’ overall understanding of our financial performance
and the comparability of the company’s operating results from period to period. Above, we have provided a reconciliation of the non-GAAP financial information that
we provide each quarter with the comparable financial information reported in accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
Three Months Ended
December 31, September 30, June 30, March 31, December 31,
2010 2010 2010 2010 2009
11 $
Revenues …………………………………………………………….. 178,829 $ 172,286 $ 167,881 $ 161,582 $ 158,741
Non-GAAP Reconciliation
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Year Ended Year Ended
December 31, 2010 December 31, 2009
Net Income Net Income
attributable to attributable to
Operating Verisign Operating Verisign
Income s tockholders Income s tockholders
GAAP as reported $ 232,283 $ 830,967 $ 159,958 $ 245,553
0 (760,935) $ (153,936)
Discontinued operations ………………………………………….…………………………………………………………………………………………………………………………………………………………………………………………
Adjustments :
34,017
Stock-based compensation ………………………………………….……………………………………………. 34,017 28,956 28,956
1,293
Amortization of other intangible ass ets ………………………………………….……………………………………… 1,293 1,195 1,195
-
Impairment of other intangible as set………………………………………….………………………………………. - 9,684 9,684
16,861 16,861
Restructuring costs ………………………………………….………………………………………………………………. 5,357 5,357
- 109,113 -
Contingent interes t payment to holders of Convertible Debentures ………………………………………….………………………………………………………………. -
Non-cash interes t ex 0
pense ………………………………………….………………………………… 7,929 6,726
0
Tax adjus tment………………………………………….…………………………………………………………………….(54,049) (20,006)
Non-GAAP as adjusted $ 284,454 $ 185,196 $ 205,150 $ 123,529
Diluted shares 183,480 178,965 193,116 192,575
Per diluted s hare, non-GAAP as adjusted $ 0.72 $ 1.03 $ 0.50 $ 0.64
VeriSign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with
this information, we typically disclose and discuss certain non-GAAP financial information in our quarterly earnings release, on investor conference calls and during
investor conferences and related events. This non-GAAP financial information does not include the following types of financial measures that are included in
GAAP: discontinued operations, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets,
restructuring costs, contingent interest payment to holders of our Convertible Debentures and non-cash interest expense. Non-GAAP financial information is also
adjusted for a 30% tax rate which differs from the GAAP tax rate. All non-GAAP figures for each period presented above have been conformed to exclude the
foregoing items under GAAP. Prior disclosures of non-GAAP figures do not exclude the same items and as such should not be used for comparison purposes.
Management believes that this non-GAAP financial data supplements our GAAP financial data by providing investors with additional information that allows them
to have a clearer picture of the Company's operations. The presentation of this additional information is not meant to be considered in isolation nor as a substitute
for results prepared in accordance with GAAP. We believe that the non-GAAP information enhances the investors’ overall understanding of our financial
performance and the comparability of the company’s operating results from period to period. Above, we have provided a reconciliation of the non-GAAP
financial information that we provide each quarter with the comparable financial information reported in accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
Year Ended
December 31, December 31,
2010 2009
$ 680,578 $
Revenues.……………………………………………………………………………………….. 615,947
12
Non-GAAP Reconciliation
VERISIGN, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30, 2010
Net Income
attributable to
Verisign
Operating Income stockholders
GAAP as reported $ 59,871 $ 784,903
(739,799)
Discontinued operations………………………………………….……………………………………………………………………………………………………………………………………………………………………………………………
Adjustments:
7,799
Stock-based compensation ………………………………………….……………………………………………. 7,799
324
Amortization of other intangible assets ………………………………………….……………………………………… 324
6,269
Restructuring costs ………………………………………….………………………………………………………………. 6,269
Non-cash interest expense ………………………………………….………………………………… 1,983
(13,357)
Tax adjustment………………………………………….………………………………………………………………………………………………
Non-GAAP as adjusted $ 74,263 $ 48,122
Diluted shares 175,034
Per diluted share, non-GAAP as adjusted $ 0.27
VeriSign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with this
information, we typically disclose and discuss certain non-GAAP financial information in our quarterly earnings release, on investor conference calls and during investor
conferences and related events. This non-GAAP financial information does not include the following types of financial measures that are included in GAAP: discontinued
operations, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring costs, and non-cash interest
expense. Non-GAAP financial information is also adjusted for a 30% tax rate which differs from the GAAP tax rate. All non-GAAP figures for each period presented above
have been conformed to exclude the foregoing items under GAAP. Prior disclosures of non-GAAP figures do not exclude the same items and as such should not be used for
comparison purposes.
Management believes that this non-GAAP financial data supplements our GAAP financial data by providing investors with additional information that allows them to have a
clearer picture of the Company's operations. The presentation of this additional information is not meant to be considered in isolation nor as a substitute for results prepared in
accordance with GAAP. We believe that the non-GAAP information enhances the investors’ overall understanding of our financial performance and the comparability of the
company’s operating results from period to period. Above, we have provided a reconciliation of the non-GAAP financial information that we provide each quarter with the
comparable financial information reported in accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
Three months ended
September 30, June 30, March 31, December 31, September 30,
2010 2010 2010 2010 2009
Revenues ……………………………………………………………..$ 172,286 $ 167,881 $ 161,582 $ 158,741 $ 155,481
13
Free Cash Flow Calculation
Reconciliation of Operating Cash Flow to Free Cash Flow (1)
Free Cash Flow ($M) Q409 FY09 Q110 Q210 Q310 Q410 FY10
Cash Flow from Operating Activities 173.1 395.2 101.1 149.2 (81.8) 46.7 215.2
Excess Tax Benefits from Stock-Based Awards (74.7) 25.9 8.1 4.4 154.7 (35.3) 131.9
Total 98.4 421.1 109.1 153.6 72.9 11.4 347.1
Acquisition of Property and Equipment, Net (50.8) (116.9) (19.9) (22.9) (25.8) (11.9) (80.5)
Total Free Cash Flow 47.6 304.2 89.3 130.7 47.1 (0.5) 266.6
(1) Free Cash Flow is a non-GAAP financial measure defined as cash flow from operating activities (adjusted to
include excess tax benefits from stock-based compensation), less net capital expenditures. The excess tax
benefits from stock-based compensation, as reported on the statements of cash flows in cash flows from
financing activities, represent the reduction in income taxes otherwise payable during the period, attributable
to the actual gross tax benefits in excess of the expected tax benefits for options exercised/awards released
in current and prior periods.
14
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