What changed in this filing

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Item 1. Financial Statements

2021-04-22 compared with 2020-10-22 · 47 added, 92 removed, 241 unchanged (37% of the section changed)

3 unchanged sentences

(In thousands, except par value)

September 30,

2021 December 31,

29 unchanged sentences

Issued shares:

353,730 at September 30, 2020 and 353,157 at December 31, 2019;

354,025 at March 31, 2021 and 353,789 at December 31, 2020;

Outstanding shares:

114,262 at September 30, 2020 and 116,715 at December 31, 2019

112,766 at March 31, 2021 and 113,470 at December 31, 2020

14,111,235 14,275,160

7 unchanged sentences

(In thousands, except per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Revenues $ 323,621 $ 312,524

11 unchanged sentences

Net income 150,354 334,116

Other comprehensive (loss) income ( 383 ) 308 ( 120 ) 392

Other comprehensive income 9 2,263

Comprehensive income $ 150,363 $ 336,379

9 unchanged sentences

(In thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Total stockholders’ deficit, beginning of period $ ( 1,390,198 ) $ ( 1,490,100 )

11 unchanged sentences

Beginning balance ( 2,756 ) ( 2,621 )

Other comprehensive (loss) income ( 383 ) 308 ( 120 ) 392

Other comprehensive income 9 2,263

Balance, end of period ( 2,747 ) ( 358 )

4 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Stock-based compensation 12,974 11,441

Amortization of discount on investments in debt securities ( 5,844 ) ( 10,271 )

Other, net 1,155 ( 1,311 )

9 unchanged sentences

Purchases of property and equipment ( 6,721 ) ( 11,013 )

Proceeds received (payments made) related to sale of business 20,009 ( 8,530 )

Net cash used in investing activities ( 305,820 ) ( 237,827 )

Proceeds received related to sale of business — 14,856

Net cash (used in) provided by investing activities ( 175,204 ) 79,084

Cash flows from financing activities:

19 unchanged sentences

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes contained in Verisign’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) filed with the SEC on February 19, 2021.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to current period presentation.

Such reclassifications have no effect on net income as previously reported.

Financial Instruments

1 unchanged sentence

The following table summarizes the Company’s cash, cash equivalents, and marketable securities and the fair value categorization of the financial instruments measured at fair value on a recurring basis:

September 30, December 31,

March 31, December 31,

(In thousands)

10 unchanged sentences

$ 1,190,583 $ 1,176,314

The fair value of the debt securities held as of September 30, 2020 was $ 1.00 billion, including less than $ 0.1 million of gross and net unrealized gains.

All of the debt securities held as of September 30, 2020 are scheduled to mature in less than one year.

The fair value of the debt securities held as of March 31, 2021, included less than $ 0.1 million of gross and net unrealized gains.

All of the debt securities held as of March 31, 2021 are scheduled to mature in less than one year.

Fair Value Measurements

6 unchanged sentences

The Company’s other financial instruments include cash, accounts receivable, restricted cash, and accounts payable.

As of September 30, 2020, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2023, 2025, and 2027 were $ 757.9 million, $ 554.9 million, and $ 585.9 million, respectively, as of September 30, 2020.

As of March 31, 2021, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2023, 2025, and 2027 were $ 753.1 million, $ 563.8 million, and $ 584.3 million, respectively, as of March 31, 2021.

The fair values of these debt instruments are based on available market information from public data sources and are classified as Level 2.

2 unchanged sentences

Other current assets consist of the following:

September 30, December 31,

March 31, December 31,

(In thousands)

Prepaid expenses $ 22,032 $ 19,818

Prepaid registry fees $ 23,532 $ 22,654

Prepaid expenses 22,996 17,920

Accounts receivable, net 5,135 4,642

Contingent consideration receivable — 14,721

Taxes receivable 1,180 3,572

Other 1,531 2,245

Total other current assets $ 54,374 $ 51,033

During the nine months ended September 30, 2020, the Company received $ 20.4 million of contingent consideration related to its divested security services business.

The excess of the proceeds received over the balance of the receivable was recognized as a gain and included in Non-operating income, net.

Other Long-Term Assets

Other long-term assets consist of the following:

September 30, December 31,

March 31, December 31,

(In thousands)

Operating lease right-of-use asset $ 10,979 $ 11,277

Long-term prepaid expenses 10,368 7,105

Restricted cash 9,407 9,407

3 unchanged sentences

Total other long-term assets $ 41,108 $ 37,958

The current and long-term prepaid registry fees in the tables above relate to the fees the Company pays to ICANN for each annual increment of .

The current and long-term prepaid registry fees in the tables above relate to the fees the Company pays to Internet Corporation for Assigned Names and Numbers (“ICANN”) for each annual increment of .

com domain name registrations and renewals which are deferred and amortized over the domain name registration term.

The amount of prepaid registry fees as of September 30, 2020 reflects amortization of $ 9.1 million and $ 27.0 million during the three and nine months ended September 30, 2020 which was recorded in Cost of Revenues.

Other tax receivables as of December 31, 2019 included indirect benefits related to the previously unrecognized tax benefits that were remeasured during the three months ended September 30, 2020, as discussed in Note 9.

Income Taxes.

The amount of prepaid registry fees as of March 31, 2021 reflects amortization of $ 9.3 million during the three months ended March 31, 2021 which was recorded in Cost of Revenues.

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

September 30, December 31,

March 31, December 31,

(In thousands)

Accounts payable and accrued expenses $ 11,253 $ 12,340

Taxes payable and other tax liabilities 34,176 33,435

Customer deposits 46,595 53,631

Accrued employee compensation 44,106 49,869

Taxes payable and other tax liabilities 45,227 27,194

Interest payable 33,105 24,408

Accrued employee compensation 32,789 54,596

Accrued registry fees 14,481 13,090

2 unchanged sentences

Total accounts payable and accrued liabilities $ 201,463 $ 208,642

Taxes payable and other tax liabilities reflect amounts accrued for the income tax provision and payments made during the period.

Customer deposits primarily relate to advance payments to cover domain name registration activity by registrars.

Accrued employee compensation primarily consists of liabilities for employee leave, salaries, payroll taxes, employee contributions to the employee stock purchase plan, and incentive compensation.

Accrued employee incentive compensation as of December 31, 2019, was paid during the nine months ended September 30, 2020.

Taxes payable and other tax liabilities reflect amounts accrued for the income tax provision and payments made during the period.

Interest payable varies at each period-end based on the payment due dates for each Senior Note issuance.

Accrued employee compensation primarily consists of liabilities for employee leave, salaries, payroll taxes, employee contributions to the employee stock purchase plan, and incentive compensation.

Accrued employee incentive compensation as of December 31, 2020, was paid during the three months ended March 31, 2021.

Customer incentives payable includes amounts related to rebates and marketing programs payable to registrars.

These amounts may vary from period to period due to the timing of payments.

Long-term tax and other liabilities

September 30, December 31,

(In thousands)

Long-term tax liabilities $ 96,190 $ 308,112

Long-term operating lease liability 5,016 4,564

Long-term tax and other liabilities $ 101,206 $ 312,676

During the nine months ended September 30, 2020, the Company remeasured certain previously unrecognized income tax benefits, including those relating to the worthless stock deduction taken in 2013.

These remeasurements resulted in the recognition of $ 191.8 million of income tax benefits in the nine months ended September 30, 2020, as discussed in Note 9.

Income Taxes.

Stockholders’ Deficit

2 unchanged sentences

Purchases made under the program could be effected through open market transactions, block purchases, accelerated share repurchase agreements or other negotiated transactions.

During the three and nine months ended September 30, 2020, the Company repurchased 0.8 million and 2.8 million shares of its common stock, respectively, at an average stock price of $ 206.61 and $ 198.84 , respectively.

The aggregate cost of the repurchases in the three and nine months ended September 30, 2020 was $ 170.0 million and $ 564.9 million, respectively.

As of September 30, 2020, there was approximately $ 505.6 million remaining available for future share repurchases under the share repurchase program.

During the nine months ended September 30, 2020, the Company placed 0.2 million shares, at an average stock price of $ 209.90 , and for an aggregate cost of $ 38.8 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

During the three months ended March 31, 2021, the Company repurchased 0.9 million shares of its common stock at an average stock price of $ 197.02 .

The aggregate cost of the repurchases in the three months ended March 31, 2021 was $ 172.6 million.

As of March 31, 2021, there was approximately $ 910.0 million remaining available for future share repurchases under the share repurchase program.

During the three months ended March 31, 2021, the Company placed 0.1 million shares, at an average stock price of $ 200.10 , and for an aggregate cost of $ 12.8 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

Since inception, the Company has repurchased 241.3 million shares of its common stock for an aggregate cost of $ 11.17 billion, which is presented as a reduction of Additional paid-in capital.

1 unchanged sentence

The following table presents the computation of weighted-average shares used in the calculation of basic and diluted earnings per share:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(In thousands)

9 unchanged sentences

The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(In thousands)

10 unchanged sentences

As payment for domain name registrations and renewals are due in advance of our performance, we record these amounts as deferred revenues.

The increase in the deferred revenues balance for the nine months ended September 30, 2020 was primarily driven by amounts billed in the first nine months of 2020 for domain name registrations and renewals to be recognized as revenues in future periods, offset by refunds for domain name renewals deleted during the 45-day grace period, and $ 644.0 million of revenues recognized that were included in the deferred revenues balance at the beginning of the period.

The balance of deferred revenues as of September 30, 2020 represents our aggregate remaining performance obligations.

The increase in the deferred revenues balance for the three months ended March 31, 2021 was primarily driven by amounts billed in the first quarter of 2021 for domain name registrations and renewals to be recognized as revenues in future periods, offset by refunds for domain name renewals deleted during the 45-day grace period, and $ 288.4 million of revenues recognized that were included in the deferred revenues balance at the beginning of the period.

The balance of deferred revenues as of March 31, 2021 represents our aggregate remaining performance obligations.

Amounts included in current deferred revenues are all expected to be recognized in revenues within 12 months, except for a portion of deferred revenues that relates to domain name renewals that are deleted in the 45-day grace period following the transaction.

3 unchanged sentences

The following table presents the classification of stock-based compensation:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(In thousands)

5 unchanged sentences

The following table presents the nature of the Company’s total stock-based compensation:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(In thousands)

6 unchanged sentences

The following table presents the components of Non-operating income, net:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

Transition services income — 2,100

Gain on sale of business ( 9 ) 64 5,602 817

Other, net 228 563

Total non-operating income, net $ 444 $ 7,084

The lower interest income during the three and nine months ended September 30, 2020 reflects a decline in interest rates on our investments in debt securities.

The transition services income relates to the divested security services business.

The lower interest income during the three months ended March 31, 2021 reflects a decline in interest rates on our investments in debt securities.

The transition services income in 2020 relates to the divested security services business.

The transition services agreement ended in February 2020.

The gain on sale of business in 2020 represents the excess of the contingent consideration received related to the divested security services business compared to the estimated receivable.

The following table presents Income tax expense (benefit) and the effective tax rate:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(Dollars in thousands)

1 unchanged sentence

Effective tax rate 20 % ( 75 ) %

The effective tax rate for each of the periods in the table above differed from the statutory federal rate of 21 % due to a lower foreign effective tax rate and excess tax benefits related to stock-based compensation, offset by state income taxes and U.S.

taxes on foreign earnings, net of foreign tax credits.

Additionally, the Company remeasured certain previously unrecognized income tax benefits, which resulted in the recognition of $24.0 million and $ 191.8 million of income tax benefits in the three and nine months ended September 30, 2020, respectively.

The most significant portion of these tax benefits related to the worthless stock deduction taken in 2013, which resulted in the recognition of a $ 167.8 million benefit in the first quarter of 2020.

These remeasurements were based on written confirmations from Internal Revenue Service (“IRS”), received in the first and third quarters of 2020, indicating no examination adjustments would be proposed related to the worthless stock deduction or certain other matters reviewed as part of the audit of the Company’s federal income tax returns for 2010 through 2014.

Notwithstanding these written confirmations, the Company’s U.S.

federal income tax returns for those years remain under examination by the IRS.

The effective tax rate for the three months ended March 31, 2021 was lower than the statutory federal rate of 21 % primarily due to a lower effective tax rate on foreign income, partially offset by state income taxes.

The effective tax rate for the three months ended March 31, 2020 was lower than the statutory federal rate of 21 % primarily due to the remeasurement of unrecognized tax benefits discussed below, a lower effective tax rate on foreign income, and $ 11.8 million of excess tax benefits related to stock-based compensation, partially offset by state income taxes.

During the three months ended March 31, 2020, the Company remeasured its previously unrecognized income tax benefits relating to the worthless stock deduction taken in 2013.

The remeasurement, which resulted in the recognition of a $ 167.8 million benefit in the quarter, was based on Internal Revenue Service (“IRS”) written confirmation indicating no examination adjustment would be proposed.

Notwithstanding this written confirmation, the Company’s U.S.

federal income tax returns remain under examination by the IRS for 2010 through 2014.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements