Verisign Reports 9% year-over-year revenue growth in Q3,2013

Verisign,the global leader in domain names,released the financial results for the third quarter ended September 30,2013 .

The report reveals a revenue of $244 million ,up nine percent from the same quarter a year ago.The net income for the Q3 is $81 million ,compared to the net income of $78 million in the same quarter in 2012 .

You can read the press release after the jump :

“VeriSign, Inc., and subsidiaries (“Verisign”) reported revenue of $244 million for the third quarter of 2013, up 9 percent from the same quarter in 2012. Verisign reported net income of $81 million and diluted earnings per share (EPS) of $0.53 for the third quarter of 2013, compared to net income of $78 million and diluted EPS of $0.47 in the same quarter in 2012. The operating margin was 54.5 percent for the third quarter of 2013 compared to 51.9 percent for the same quarter in 2012.

Third Quarter Non-GAAP Financial Results

Verisign reported, on a non-GAAP basis, net income of $90 million and diluted EPS of $0.59 for the third quarter of 2013, compared to net income of $84 million and diluted EPS of $0.50 for the same quarter in 2012. The non-GAAP operating margin was 58.8 percent for the third quarter of 2013 compared to 56.4 percent for the same quarter in 2012. A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

“Our team continued to execute well and delivered sound operational and financial results. Also, during the third quarter we repurchased 6.8 million shares for $331 million,” commented Jim Bidzos, executive chairman, president and chief executive officer.

As a result of Verisign’s ongoing evaluation of its tax structure, Verisign expects to liquidate for tax purposes one of its domestic subsidiaries during the fourth quarter of 2013, which it expects will allow it to claim a worthless stock deduction on its 2013 federal income tax return. If claimed, based on preliminary estimates, Verisign expects to record an income tax benefit during the fourth quarter of 2013, ranging from approximately $300 million to $400 million, related to the worthless stock deduction, net of valuation allowances and uncertain tax positions recorded as required under GAAP. The worthless stock deduction may be subject to audit and adjustment by the IRS, which could result in reversal of all, part or none of the income tax benefit, or could result in a benefit higher than the net amount Verisign initially records. Verisign cannot guarantee that the liquidation of this subsidiary will occur as described, or at all, or what the ultimate outcome, use or amount of benefit Verisign receives, if any, will be. The financial statement carrying value of this subsidiary is not material.

While Verisign expects its domestic operations to generate sufficient taxable income to fully use the tax benefits of the ordinary loss from the worthless stock deduction, Verisign is analyzing and evaluating various scenarios for realizing the benefits. Although Verisign’s current intent remains to indefinitely reinvest outside of the U.S. those funds held by foreign subsidiaries that have not been previously taxed in the U.S. and accordingly Verisign has not provided deferred U.S. taxes for such funds, Verisign anticipates reevaluating its overall business structure and financing of foreign operations as a part of this analysis. If the conclusion of this analysis results in a change to Verisign’s current strategy related to foreign operations, Verisign may be required to accrue for an additional U.S. tax obligation, although it cannot predict what such amount, if any, may be. Based upon the audited statutory financial statements of Verisign’s foreign subsidiaries as of December 31, 2012, on a combined basis Verisign’s foreign subsidiaries have up to approximately $600 million of distributable capital under applicable foreign statutes. Verisign does not know what the ultimate outcome, if any, will be resulting from this analysis and evaluation for realizing the benefits.

Financial Highlights

Verisign ended the third quarter with Cash, Cash Equivalents and Marketable Securities of $1.8 billion, an increase of $250 million from year-end 2012.

Cash flow from operations was $134 million for the third quarter compared with $122 million for the same quarter in 2012.

Deferred revenues on Sept. 30, 2013, totaled $858 million, an increase of $45 million from year-end 2012.

Capital expenditures were $13 million in the third quarter of 2013.

During the third quarter, Verisign repurchased 6.8 million shares of its common stock for $331 million. At Sept. 30, 2013, $697 million remained available and authorized under the current share repurchase program.

For purposes of calculating diluted EPS, the third quarter diluted share count included 10.5 million shares related to the subordinated convertible debentures, compared with 9.2 million shares in the same quarter in 2012. These represent diluted shares and not shares that have been issued. 

Business Highlights

Verisign Registry Services added 1.55 million net new names during the third quarter, ending with 125.9 million active domain names in the zone for .com and .net, which represents a 5 percent increase over the zone at the end of the third quarter in 2012.

In the third quarter, Verisign processed 8.3 million new domain name registrations as compared to 7.8 million in the same quarter in 2012.

The final .com and .net renewal rate for the second quarter of 2013 was 72.7 percent compared with 72.9 percent for the same quarter in 2012. Renewal rates are not fully measurable until 45 days after the end of the quarter. 

Non-GAAP Items

Non-GAAP financial results exclude the following items that are included under GAAP: Discontinued operations, stock-based compensation, amortization of other intangible assets, impairments of goodwill and other intangible assets, restructuring charges, contingent interest payments to holders of the subordinated convertible debentures, unrealized gain/loss on contingent interest derivative on subordinated convertible debentures, and non-cash interest expense. Non-GAAP financial information is also adjusted for a 28 percent tax rate starting from the third quarter of 2012, and 30 percent for the other periods presented herein, both of which differ from the GAAP tax rate. A table reconciling the GAAP to non-GAAP operating income and net income is appended to this release. “