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VeriSign Reports Fourth Quarter and Full Year 2005 Results

  • 27 January, 2006 09:23

<p>VeriSign, Inc. (Nasdaq: VRSN), the leading provider of intelligent infrastructure services for the Internet and telecommunications networks, today reported its results for the fourth quarter and year ended 31 December 2005.</p>
<p>Q4 2005 Financial Results</p>
<p>VeriSign reported total revenue of US$401 million for the fourth quarter of 2005. These results include approximately US$8 million of revenue related to the payment gateway business that was sold on 18 November 2005 and which is reported under discontinued operations on the income statements.</p>
<p>On a GAAP basis, VeriSign reported net income of US$271 million for the fourth quarter of 2005 and earnings per share of US$1.06 per fully-diluted share. These results include a one-time net gain of US$252 million from the sale of the payment gateway business in Q4.</p>
<p>On a non-GAAP basis, using a 30% effective tax rate on non-GAAP pre-tax income of US$94 million, earnings per share for the fourth quarter was US$0.26 per diluted share. These non-GAAP results exclude the following items which are included under GAAP: amortisation of intangible assets, acquired in-process research and development, stock-based compensation charges, litigation settlements, restructuring and other charges, the net gain on the sale of the payment gateway business, the net gain on the sale of investments and income tax expense. These non-GAAP results include approximately US$3 million of net income from discontinued operations related to the payment gateway business that was sold on 18 November 2005. A table reconciling the non-GAAP to GAAP net income reported above is appended to this release.</p>
<p>“Our fourth quarter results capped a solid year marked by strategic execution and strong revenue growth,” said Stratton Sclavos, Chairman and Chief Executive Officer of VeriSign. “Looking at 2006, we believe VeriSign is well-positioned to execute on our mission of enabling and protecting the world’s voice and data interactions as the tectonic shifts in communications and commerce continue.”</p>
<p>2005 Financial Results</p>
<p>For the year ended 31 December 2005, VeriSign reported total revenue of US$1.66 billion, a 42% increase over 2004. These revenues include US$52 million related to the payment gateway business through 18 November 2005. A table reconciling the discontinued operations revenue is appended to this release.</p>
<p>On a GAAP basis, VeriSign reported net income of US$406 million for 2005 with earnings per share for the year of US$1.54 per diluted share. On a non-GAAP basis, using a 30% effective tax rate on non-GAAP pre-tax income of US$396 million, earnings per share for 2005 was US$1.05 per diluted share. These non-GAAP results exclude the following items, which are included under GAAP: amortisation of intangible assets, acquired in-process research and development, stock-based compensation charges, litigation settlements, restructuring and other charges, the net gain on the sale of the payment gateway business, the net gain on the sale of investments and income tax expense. These non-GAAP results include net income from the payment gateway business for the year through 18 November 2005. A table reconciling the non-GAAP to GAAP net income reported above is appended to this release.</p>
<p>“2005 marked a significant year in terms of strong results, improved financial metrics, and continued investment in the future for VeriSign,” said Dana Evan, Chief Financial Officer of VeriSign. “Although the mobile content business continues to be challenging, we are pleased with the company’s performance for Q4 and 2005 particularly in terms of operating cash flow which reached a record US$141 million in Q4 and US$480 million for the full year.”</p>
<p>During the fourth quarter, VeriSign completed the sale of its payment gateway business to PayPal, an eBay company, for US$370 million in cash. VeriSign will also provide eBay and PayPal with a suite of security services that includes the deployment of two-factor authentication, a security system that gives customers a one-time password or digital certificate to help protect against online identity theft. Under the three-year security technology agreement, eBay will purchase up to one million two-factor authentication tokens.</p>
<p>The VeriSign Naming and Directory Services (VNDS) business has changed its name to VeriSign Information Services (VIS) to highlight and address its movement into new business areas. The new name more accurately characterises the expanded focus of the business to provide relevant, real-time information that enables intelligent network interactions. In 2005, the acquisitions of R4 Global Systems and Retail Solutions International, Inc. (RSI) broadened the business into supply chain services and the acquisitions of Moreover and Weblogs launched VeriSign into real-time publisher services.</p>
<p>Also during the Q4, VeriSign Communications Services (VCS) announced the launch of a new Jamster brand campaign in the United States and the United Kingdom (U.K.), that represents the first of several important steps in a global Jamba / Jamster brand roll-out strategy designed to improve the customer experience. The new campaign launched with a new Jamster logo, simplified subscription plans, improved advertising, and a redesigned Jamster Web site that promotes easier navigation for consumers. Taking the lead in providing parents with control over family usage by giving them the ability to block content downloads to specific phone numbers, VeriSign also launched the Jamster Guardian service in the U.S. and U.K. Roll-out of these programs to other countries is scheduled for this year.</p>
<p>On 24 January 2006, VeriSign completed its acquisition of Seattle-based CallVision, a leading provider of online call analysis applications for US$30 million net of acquired cash. The acquisition will enable VeriSign’s VCS business to deliver converged electronic bill presentment, payment and customer self-care applications to mobile operators, Tier 1 carriers, broadband companies and consumer-branded MVNOs worldwide. In addition, on 25 January 2006, VeriSign completed its acquisition of Soltrus Inc., a reseller of VeriSign services based in Toronto, Canada, for approximately US$11 million in cash. Neither of these transactions is expected to have a material impact to 2006 financial results.</p>
<p>Additional Financial Information</p>
<p>* VeriSign ended the fourth quarter with Cash, Cash Equivalents, Restricted Cash and Short-term Investments of $906 million, an increase of US$107 million from the prior quarter and up $118 million year over year.</p>
<p>* During Q4, VeriSign repurchased approximately 12.7 million shares of its common stock for a net purchase price of $291 million. For 2005, the company repurchased a total of 22.8 million shares for approximately US$550 million in cash.</p>
<p>* Cash flow from continuing operations was US$141 million for the fourth quarter of 2005. For the full year 2005, cash flow from continuing operations was US$480 million.</p>
<p>* Deferred revenue on the balance sheet was $496 million as of December 31, 2005. The US$14 million sequential growth in deferred revenue includes discontinued operations. For 2005, deferred revenue grew by US$92 million or 23% year over year.</p>
<p>* Net days sales outstanding (Net DSO), which takes into account the change in deferred revenue balance, was 51 days for Q4 which is consistent with Q3.</p>
<p>* Capital expenditures for the fourth quarter of 2005 were approximately US$67 million, bringing 2005 capital expenditures to approximately US$141 million.</p>
<p>* Non-GAAP operating income for Q4 was US$91 million, down from US$97 million in the third quarter of 2005 but up over 21% year over year.</p>
<p>Internet Services Group</p>
<p>* The Internet Services Group (ISG) – which includes VeriSign Security Services (VSS) and VeriSign Information Services (VIS) – delivered $182 million of revenue in the fourth quarter of 2005. The results for the fourth quarter included sequential growth in both the VSS and VIS businesses and also included approximately US$8 million from the payment gateway business which was sold on 18 November 2005.</p>
<p>* The VeriSign Web site certificate business issued approximately 139,000 new and renewed certificates in Q4, ending the quarter with a base of more than 489,000 certificates, up from 479,000 at the end of the third quarter of 2005. Year over year the base is up over 7%.</p>
<p>* The VeriSign Information Services business ended the fourth quarter with approximately 50 million active domain names in .com and .net, a net increase of approximately 3.3 million names over Q3. Year over year, active domain names were up 30%.</p>
<p>Communications Services Group</p>
<p>* 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 $219 million in the fourth quarter of 2005, down 8% from the third quarter of 2005. The Communications and Commerce group generated revenues of $105 million, down 1% sequentially, while the Content group generated revenues of $114 million, a 13% decrease over Q3 and an increase of 21% year over year.</p>
<p>* VeriSign’s Communications Services Group ended Q4 with a base of approximately 7.8 million wireless billing customer subscribers, an increase of approximately 20% year over year.</p>
<p>* The VCS business supported 15.9 billion database queries in Q4 2005, up 24% year over year.</p>
<p>For condensed consolidated balance sheets, go to the full version of the press release: http://www.verisign.com/static/036574.pdf</p>
<p>About VeriSign</p>
<p>VeriSign, Inc. (Nasdaq: VRSN), operates intelligent infrastructure services that enable and protect billions of interactions every day across the world’s voice and data networks. Additional news and information about the company is available at www.verisign.com.au</p>
<p>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 acquired 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.</p>

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