What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 67 added, 132 removed, 206 unchanged (49% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

September 30,

(In millions, except par value)

2022 December 31,

29 unchanged sentences

Issued shares:

354,154 at September 30, 2021 and 353,789 at December 31, 2020;

354.4 at March 31, 2022 and 354.2 at December 31, 2021;

Outstanding shares:

111,283 at September 30, 2021 and 113,470 at December 31, 2020

109.8 at March 31, 2022 and 110.5 at December 31, 2021

13,438.2 13,620.1

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions, except per share data)

Three Months Ended March 31,

Revenues $ 346.9 $ 323.6

1 unchanged sentence

Cost of revenues 50.7 47.0

Sales and marketing 9,410 8,389 28,115 23,883

Research and development 22.9 20.3

General and administrative 36,160 38,109 112,212 111,719

Selling, general and administrative 48.5 45.9

Total costs and expenses 122.1 113.2

1 unchanged sentence

Interest expense ( 18.8 ) ( 22.5 )

Non-operating income (loss), net 164 775 ( 1,433 ) 15,262

Non-operating income, net 0.3 0.4

Income before income taxes 206.3 188.3

Income tax (expense) benefit ( 46,018 ) ( 13,908 ) ( 124,083 ) 90,226

Income tax expense ( 48.8 ) ( 37.9 )

Net income 157.5 150.4

Other comprehensive income (loss) 61 ( 383 ) ( 17 ) ( 120 )

Other comprehensive loss ( 0.2 ) —

Comprehensive income $ 157.3 $ 150.4

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(In thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In millions)

Three Months Ended March 31,

Total stockholders’ deficit, beginning of period $ ( 1,260.5 ) $ ( 1,390.2 )

2 unchanged sentences

Repurchase of common stock ( 204.6 ) ( 185.4 )

Stock-based compensation expense 14,819 13,078 42,282 37,526

Stock-based compensation 14.5 13.3

Issuance of common stock under stock plans 8.2 8.1

6 unchanged sentences

Beginning balance ( 2.8 ) ( 2.8 )

Other comprehensive income (loss) 61 ( 383 ) ( 17 ) ( 120 )

Other comprehensive loss ( 0.2 ) —

Balance, end of period ( 3.0 ) ( 2.8 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine Months Ended

September 30,

(In millions)

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Depreciation of property and equipment 11.9 11.6

Stock-based compensation 41,019 36,106

Stock-based compensation expense 14.2 13.0

Other, net 0.6 1.1

9 unchanged sentences

Purchases of property and equipment ( 6.6 ) ( 6.7 )

Proceeds received related to sale of business — 20,009

Net cash used in investing activities ( 215,093 ) ( 305,820 )

Net cash provided by (used in) investing activities 524.5 ( 175.2 )

Cash flows from financing activities:

Repayment of borrowings ( 750,000 ) —

Proceeds from senior note issuance, net of issuance costs 741,075 —

Repurchases of common stock ( 204.6 ) ( 185.4 )

2 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 0.1 ) ( 0.2 )

Net decrease in cash, cash equivalents, and restricted cash ( 148,102 ) ( 362,492 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 535.1 ( 154.4 )

Cash, cash equivalents, and restricted cash at beginning of period 228.8 410.6

13 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, 2021 (the “2021 Form 10-K”) filed with the SEC on February 18, 2022.

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,

(In thousands)

March 31, December 31,

(In millions)

Cash $ 23.1 $ 25.8

9 unchanged sentences

$ 1,215.0 $ 1,211.1

The fair value of the debt securities held as of September 30, 2021, included less than $ 0.1 million of gross and net unrealized gains.

All of the debt securities held as of September 30, 2021 are scheduled to mature in less than one year.

The gross and net unrealized gains and losses included in the fair value of the debt securities were not significant for the periods presented.

All of the debt securities held as of March 31, 2022 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, 2021, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2025, 2027, and 2031 were $ 563.6 million, $ 580.0 million, and $ 763.5 million, respectively, as of September 30, 2021.

As of March 31, 2022, the carrying value of these financial instruments approximated their fair value.

The fair values of the senior notes due 2025, 2027, and 2031 were $ 524.8 million, $ 562.0 million, and $ 688.3 million, respectively, as of March 31, 2022.

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,

(In thousands)

March 31, December 31,

(In millions)

Prepaid expenses $ 25.6 $ 24.8

6 unchanged sentences

Other long-term assets consist of the following:

September 30, December 31,

(In thousands)

March 31, December 31,

(In millions)

Long-term prepaid expenses $ 8.8 $ 11.0

Operating lease right-of-use asset 9,625 11,277

Long-term prepaid registry fees 8.6 8.7

Operating lease right-of-use asset 7.3 8.4

Restricted cash 5.4 5.3

1 unchanged sentence

Total other long-term assets $ 32.3 $ 35.7

The prepaid expenses included in Other current assets and Other long-term assets as of September 30, 2021 are primarily related to prepaid hardware and software maintenance expenses.

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, 2021 reflects amortization of $ 9.7 million and $ 28.5 million during the three and nine months ended September 30, 2021 which was recorded in Cost of Revenues.

The amount of prepaid registry fees as of March 31, 2022 reflects amortization of $ 9.8 million during the three months ended March 31, 2022 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,

(In thousands)

March 31, December 31,

(In millions)

Accounts payable and accrued expenses $ 7.4 $ 9.0

Taxes payable 66.1 26.8

Customer deposits 48.5 77.3

1 unchanged sentence

Interest payable 24.6 19.5

Taxes payable and other non-income tax liabilities 24,593 27,194

Accrued registry fees 14.0 12.9

2 unchanged sentences

Total accounts payable and accrued liabilities $ 211.1 $ 226.6

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

Taxes payable reflects amounts accrued for the income tax provision and payments made during the period.

This balance fluctuates from period to period due to the timing of income tax payments in the Company’s major tax jurisdictions.

The balance of Customer deposits varies from period to period due to the timing of payments from certain large customers.

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 nine months ended September 30, 2021.

Accrued employee incentive compensation as of December 31, 2021 was paid during the three months ended March 31, 2022.

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

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

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

Long-term tax and other liabilities consist of the following:

September 30, December 31,

(In thousands)

Long-term tax liabilities $ 82,108 $ 90,335

Long-term operating lease liability 2,761 5,159

Long-term tax and other liabilities $ 84,869 $ 95,494

Long-term tax liabilities as of September 30, 2021 reflects a $ 7.7 million reclassification of a portion of the transition tax liability on accumulated foreign earnings from non-current to current as of September 30, 2021.

Customer incentives payable includes amounts related to rebates payable to registrars.

These amounts may vary from period to period due to the timing of payments and the amount of rebates earned.

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, 2021, the Company repurchased 0.8 million and 2.5 million shares of its common stock, respectively, at an average stock price of $ 219.62 and $ 210.55 , respectively.

The aggregate cost of the repurchases in the three and nine months ended September 30, 2021 was $ 172.4 million and $ 517.6 million, respectively.

As of September 30, 2021, there was approximately $ 565.1 million remaining available for future share repurchases under the share repurchase program.

During the nine months ended September 30, 2021, the Company placed 0.1 million shares, at an average stock price of $ 205.10 , and for an aggregate cost of $ 19.3 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

During the three months ended March 31, 2022, the Company repurchased 0.9 million shares of its common stock at an average stock price of $ 218.50 .

The aggregate cost of the repurchases in the three months ended March 31, 2022 was $ 195.5 million.

As of March 31, 2022, there was $ 892.6 million remaining available for future share repurchases under the share repurchase program.

During the three months ended March 31, 2022, the Company placed less than 0.1 million shares, at an average stock price of $ 214.35 , and for an aggregate cost of $ 9.1 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).

Since inception, the Company has repurchased 244.6 million shares of its common stock for an aggregate cost of $ 11.91 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,

2021 2020 2021 2020

(In thousands)

Three Months Ended March 31,

(In millions)

Weighted-average shares of common stock outstanding 110.2 113.1

8 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,

2021 2020 2021 2020

(In thousands)

Three Months Ended March 31,

(In millions)

$ 224.6 $ 207.1

9 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, 2021 was primarily driven by amounts billed in the nine months ended September 30, 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 $ 665.1 million of revenues recognized that were included in the deferred revenues balance at the beginning of the period.

The higher deferred revenue balance as of September 30, 2021 also reflects an increase in the volume of early renewal transactions that occurred before the .

com price increase became effective on September 1, 2021.

The balance of deferred revenues as of September 30, 2021 represents our aggregate remaining performance obligations.

The increase in the deferred revenues balance for the three months ended March 31, 2022 was primarily driven by amounts billed in the three months ended March 31, 2022 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 $ 309.1 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, 2022 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,

2021 2020 2021 2020

(In thousands)

Three Months Ended March 31,

(In millions)

Cost of revenues $ 1.7 $ 1.6

Sales and marketing 1,202 830 3,241 2,558

Research and development 2.4 2.0

General and administrative 9,439 8,480 26,775 23,521

Total stock-based compensation expense $ 14,428 $ 12,678 $ 41,019 $ 36,106

Selling, general and administrative 10.1 9.4

Stock-based compensation expense 14.2 13.0

Capitalization (included in Property and equipment, net) 0.3 0.3

Total stock-based compensation $ 14.5 $ 13.3

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In thousands)

Three Months Ended March 31,

(In millions)

RSUs $ 10.2 $ 9.7

Performance-based RSUs 3.2 2.5

ESPP 1,063 1,105 3,222 3,320

Capitalization (included in Property and equipment, net) ( 391 ) ( 400 ) ( 1,263 ) ( 1,420 )

Total stock-based compensation expense $ 14,428 $ 12,678 $ 41,019 $ 36,106

On June 8, 2021, the Company issued $ 750.0 million of 2.700 % senior unsecured notes due June 15, 2031 (“2031 Notes”).

The 2031 Notes were issued at 99.712 % of par value.

The Company will pay interest on the notes semi-annually on June 15 and December 15, commencing on December 15, 2021.

The total discount and issuance costs of $ 8.9 million are presented on the balance sheet as a reduction of the debt obligation and are being amortized to Interest expense over the 10-year term of the notes.

On June 23, 2021, the Company used the net proceeds from the 2031 Notes and cash on hand, to redeem all of its $ 750.0 million aggregate principal amount of outstanding 4.625 % senior notes due 2023 (“2023 Notes”).

The redemption of the 2023 Notes resulted in a loss on debt extinguishment of $ 2.1 million related to the unamortized debt issuance costs on the notes in the second quarter of 2021.

The loss on extinguishment is included in Non-operating income (loss) during the nine months ended September 30, 2021.

Non-operating Income (Loss), Net

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(In thousands)

Interest income $ 111 $ 805 $ 438 $ 7,500

Loss on extinguishment of debt — — ( 2,149 ) —

Gain on sale of business — ( 9 ) — 5,602

Transition services income — — — 2,100

Other, net 53 ( 21 ) 278 60

Total non-operating income (loss), net $ 164 $ 775 $ ( 1,433 ) $ 15,262

The lower interest income during the three and nine months ended September 30, 2021 reflects a decline in interest rates on our investments in debt securities.

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

The transition services agreement ended in February 2020.

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in thousands)

Income tax expense (benefit) $ 46,018 $ 13,908 $ 124,083 $ ( 90,226 )

Total stock-based compensation $ 14.5 $ 13.3

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

Three Months Ended March 31,

(Dollars in millions)

Income tax expense $ 48.8 $ 37.9

Effective tax rate 24 % 20 %

When compared to the statutory federal rate of 21 %, the effective tax rates above reflect a lower effective tax rate on foreign income and excess tax benefits related to stock-based compensation, which are offset by state income taxes and U.S.

taxes on foreign earnings, net of foreign tax credits.

The effective tax rate for the three and nine months ended September 30, 2020 also reflected the remeasurement of unrecognized tax benefits discussed below.

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 the 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 each of the periods in the table above differed from the statutory federal rate of 21 %, due to state income taxes and U.S.

taxes on foreign earnings, net of foreign tax credits, offset by a lower foreign effective tax rate.

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