Q4 2010 Earnings Presentation FI by ps94506

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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




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     Registry Services Highlights

      Domain Name Base at 105.2 million names – up 9% y/y (1)
          millions

    120


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                                                         .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%



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                                                                                                            .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.



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     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.

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    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.




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