01—Abstract
Summary
Summary of the 10-K filed March 3, 2009. Cited figures are marked; the original filing is the authoritative source.
VeriSign, Inc. (NASDAQ: VRSN) reported 2008 revenues from continuing operations of $961.7 milliona, up 13% from $847.5 million in 2007, with income from continuing operations of $92.6 million compared with a loss of $147.7 million in 2007.
The net loss widened to $374.7 millionb, or $1.87 per diluted share, driven by $467.3 million of losses from discontinued operations, mainly estimated losses on assets held for sale of $406.7 million net of tax, as the company executes its divestiture of non-core businesses. The Internet Infrastructure and Identity Services (3IS) segment grew 20% to $936.3 million, led by Naming Services (about 90.4 million .com and .net names, up 12%) and SSL Certificate Services (installed base of about 1.1 million, up 13%). Stockholders' equity fell to $50.8 million from $1.50 billion at year-end 2007, reflecting $1.33 billion of share repurchases in 2008 and the net loss.
Cash, cash equivalents and restricted cash totaled $790.9 millionc at December 31, 2008, against $1.25 billion of 3.25% convertible debentures due 2037 (carrying value $1.26 billion). The company has $950.0 million remaining under its repurchase programs, and it had no outstanding borrowings under its $500.0 million credit facility. Management reports that the economic downturn is slowing growth expectations for 2009, particularly for on-line advertising-related domain names, and it has signed a binding agreement on March 2, 2009 to sell its Communications Services business for $230.0 million.
The filing also highlights ongoing management changes, with D. James Bidzos serving as interim CEO and Brian G.
Robins as acting CFO, along with a goodwill impairment of $77.6 milliond for VeriSign Japan and a $79.1 million loss on the sale of part of the Mountain View headquarters. The company also restated quarterly figures for historical revenue timing and unrecorded payroll tax penalties, and it notes that FSP APB 14-1 will significantly change convertible debt accounting from 2009.
02—Key points
Key Highlights
- Revenues from continuing operations rose 13% to $961.7 million in 2008, with the 3IS segment up 20% to $936.3 million.
- Income from continuing operations was $92.6 million, reversing a $147.7 million loss in 2007.
- Net loss was $374.7 million ($1.87 per diluted share), driven by $467.3 million of losses from discontinued operations, including $406.7 million of estimated losses on assets held for sale.
- Stockholders' equity declined to $50.8 million from $1.50 billion after $1.33 billion of 2008 share repurchases.
- Cash, cash equivalents and restricted cash were $790.9 million at December 31, 2008, against $1.25 billion of 3.25% convertible debentures due 2037.
- Active .com and .net domain names reached 90.4 million (up 12%), and the SSL certificate installed base reached about 1.1 million (up 13%).
- A binding agreement to sell the Communications Services business to Transaction Network Services for $230.0 million was signed on March 2, 2009.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2008, Verisign lost $0.67.
- Revenue$558.9M100.0%
- Cost of revenue−$160.8M28.8%
- Gross profit$398.1M71.2%
- Operating costs−$424.1M75.9%
- Operating income−$26.0M4.7%
- Interest, other & tax−$348.2M62.3%
- Net income−$374.3M67.0%
04—Financials
Financial Highlights
Figures from 10-KFY2008filed March 3, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $558.90M$850.51M | −34.3% |
| Cost of Revenue | $160.84M$240.12M | −33.0% |
| Gross Profit | $398.05M$610.39M | −34.8% |
| R&D Expenses | $61.75M$94.43M | −34.6% |
| Operating Expenses | $584.91M$1.08B | −45.9% |
| Operating Income | -$26.01M-$231.52M | +88.8% |
| Interest Expense | $44.39M— | — |
| Net Income | -$374.25M-$150.35M | −148.9% |
| EPS (Basic) | $-1.90$-0.63 | −201.6% |
| EPS (Diluted) | $-1.87$-0.63 | −196.8% |
| Shares Outstanding (Basic) | 197.20M237.71M | −17.0% |
| Shares Outstanding (Diluted) | 200.60M237.71M | −15.6% |
05—Questions
Frequently Asked Questions
Why did the net loss widen despite higher income from continuing operations?
Income from continuing operations was $92.6 million, but discontinued operations produced a loss of $467.3 million. That loss includes estimated losses of $406.7 million, net of tax, on assets held for sale tied to the divestiture of non-core businesses, which pushed the consolidated net loss to $374.7 million.
How much cash does VeriSign have, and what debt does it carry?
At December 31, 2008, the company had $790.9 million of cash, cash equivalents and restricted cash. It had $1.25 billion principal of 3.25% convertible debentures due 2037, with a carrying value of $1.26 billion, and no outstanding borrowings under its $500.0 million credit facility.
What is the status of the divestiture plan?
The company classified several non-core businesses as held for sale and completed sales of others in 2008, including the EMEA Mobile Media, Post-pay, Communications Consulting, DBMS, CDN and SC&A businesses. The Communications Services business is under a binding agreement to sell for $230.0 million, subject to Hart-Scott-Rodino review and a close expected within 60 days. The filing warns that buyer financing constraints and market conditions could delay further divestitures.
How much stock has the company repurchased, and how much authority remains?
In 2008 the company repurchased 38.6 million shares for about $1.3 billion. As of March 2, 2009, approximately $950.0 million remained available under its 2008 and 2006 stock repurchase programs.
What are the main near-term risks flagged by management?
Management expects slower domain name registration growth, especially from on-line advertising customers, and weaker SSL certificate growth in 2009 as the economy slows. It also cites the ongoing transition of ICANN and DOC oversight, a .com registry agreement running through November 30, 2012, and an interim CEO and acting CFO while permanent replacements are sought.
06—Continue