Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
June 30,
2022 December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents $ 606.3 $ 223.5
Marketable securities 390.6 982.3
Other current assets 65.3 62.9
Total current assets 1,062.2 1,268.7
Property and equipment, net 240.1 251.2
Goodwill 52.5 52.5
Deferred tax assets 230.6 230.7
Deposits to acquire intangible assets 145.0 145.0
Other long-term assets 32.1 35.7
Total long-term assets 700.3 715.1
Total assets $ 1,762.5 $ 1,983.8
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 184.3 $ 226.6
Deferred revenues 882.9 847.4
Total current liabilities 1,067.2 1,074.0
Long-term deferred revenues 298.7 306.0
Senior notes 1,786.8 1,785.7
Long-term tax and other liabilities 64.8 78.6
Total long-term liabilities 2,150.3 2,170.3
Total liabilities 3,217.5 3,244.3
Commitments and contingencies
Stockholders’ deficit:
Preferred stock—par value $ .001 per share; Authorized shares: 5.0 ; Issued and outstanding shares: none
— —
Common stock and additional paid-in capital—par value $ .001 per share; Authorized shares: 1,000.0 ; Issued shares: 354.4 at June 30, 2022 and 354.2 at December 31, 2021; Outstanding shares: 107.8 at June 30, 2022 and 110.5 at December 31, 2021
13,100.9 13,620.1
Accumulated deficit ( 14,553.0 ) ( 14,877.8 )
Accumulated other comprehensive loss ( 2.9 ) ( 2.8 )
Total stockholders’ deficit ( 1,455.0 ) ( 1,260.5 )
Total liabilities and stockholders’ deficit $ 1,762.5 $ 1,983.8
See accompanying Notes to Condensed Consolidated Financial Statements.
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VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenues $ 351.9 $ 329.4 $ 698.8 $ 653.0
Costs and expenses:
Cost of revenues 49.5 47.8 100.2 94.8
Research and development 20.3 19.8 43.2 40.1
Selling, general and administrative 46.1 48.8 94.6 94.7
Total costs and expenses 115.9 116.4 238.0 229.6
Operating income 236.0 213.0 460.8 423.4
Interest expense ( 18.9 ) ( 23.1 ) ( 37.7 ) ( 45.6 )
Non-operating income (loss), net 1.6 ( 2.0 ) 1.9 ( 1.6 )
Income before income taxes 218.7 187.9 425.0 376.2
Income tax expense ( 51.4 ) ( 40.2 ) ( 100.2 ) ( 78.1 )
Net income 167.3 147.7 324.8 298.1
Other comprehensive income (loss) 0.1 ( 0.1 ) ( 0.1 ) ( 0.1 )
Comprehensive income $ 167.4 $ 147.6 $ 324.7 $ 298.0
Earnings per share:
Basic $ 1.54 $ 1.31 $ 2.97 $ 2.64
Diluted $ 1.54 $ 1.31 $ 2.96 $ 2.64
Shares used to compute earnings per share
Basic 108.8 112.4 109.5 112.8
Diluted 108.8 112.5 109.6 112.9
See accompanying Notes to Condensed Consolidated Financial Statements.
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VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In millions)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Total stockholders’ deficit, beginning of period $ ( 1,285.1 ) $ ( 1,403.8 ) $ ( 1,260.5 ) $ ( 1,390.2 )
Common stock and additional paid-in capital
Beginning balance 13,438.2 14,111.2 13,620.1 14,275.2
Repurchase of common stock ( 351.5 ) ( 175.8 ) ( 556.1 ) ( 361.2 )
Stock-based compensation 14.2 14.1 28.7 27.4
Issuance of common stock under stock plans — — 8.2 8.1
Balance, end of period 13,100.9 13,949.5 13,100.9 13,949.5
Accumulated deficit
Beginning balance ( 14,720.3 ) ( 15,512.2 ) ( 14,877.8 ) ( 15,662.6 )
Net income 167.3 147.7 324.8 298.1
Balance, end of period ( 14,553.0 ) ( 15,364.5 ) ( 14,553.0 ) ( 15,364.5 )
Accumulated other comprehensive loss
Beginning balance ( 3.0 ) ( 2.8 ) ( 2.8 ) ( 2.8 )
Other comprehensive income (loss) 0.1 ( 0.1 ) ( 0.1 ) ( 0.1 )
Balance, end of period ( 2.9 ) ( 2.9 ) ( 2.9 ) ( 2.9 )
Total stockholders’ deficit, end of period $ ( 1,455.0 ) $ ( 1,417.9 ) $ ( 1,455.0 ) $ ( 1,417.9 )
See accompanying Notes to Condensed Consolidated Financial Statements.
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VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net income $ 324.8 $ 298.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment 23.8 23.6
Stock-based compensation expense 27.9 26.6
Other, net 1.5 4.4
Changes in operating assets and liabilities:
Other assets 1.1 ( 18.6 )
Accounts payable and accrued liabilities ( 41.9 ) ( 36.8 )
Deferred revenues 28.2 50.0
Net deferred income taxes and other long-term tax liabilities ( 13.4 ) ( 6.5 )
Net cash provided by operating activities 352.0 340.8
Cash flows from investing activities:
Proceeds from maturities and sales of marketable securities 1,057.4 1,483.0
Purchases of marketable securities ( 465.2 ) ( 1,623.6 )
Purchases of property and equipment ( 12.8 ) ( 24.3 )
Net cash provided by (used in) investing activities 579.4 ( 164.9 )
Cash flows from financing activities:
Repurchases of common stock ( 556.1 ) ( 361.2 )
Proceeds from employee stock purchase plan 8.2 8.1
Repayment of borrowings — ( 750.0 )
Proceeds from senior note issuance, net of issuance costs — 742.3
Net cash used in financing activities ( 547.9 ) ( 360.8 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 0.7 ) ( 0.3 )
Net increase (decrease) in cash, cash equivalents, and restricted cash 382.8 ( 185.2 )
Cash, cash equivalents, and restricted cash at beginning of period 228.8 410.6
Cash, cash equivalents, and restricted cash at end of period $ 611.6 $ 225.4
Supplemental cash flow disclosures:
Cash paid for interest $ 36.4 $ 48.7
Cash paid for income taxes, net of refunds received $ 113.3 $ 99.0
See accompanying Notes to Condensed Consolidated Financial Statements.
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VERISIGN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
Interim Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by VeriSign, Inc. (“Verisign” or the “Company”) in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and notes normally provided in audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of, nor comparable to, the results of operations for any other interim period or for a full fiscal year. 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.
Note 2. Financial Instruments
Cash, Cash Equivalents, and Marketable Securities
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:
June 30, December 31,
2022 2021
(In millions)
Cash $ 23.4 $ 25.8
Time deposits 4.1 3.7
Money market funds (Level 1) 354.3 165.6
Debt securities issued by the U.S. Treasury (Level 1) 620.4 1,016.0
Total $ 1,002.2 $ 1,211.1
Cash and cash equivalents $ 606.3 $ 223.5
Restricted cash (included in Other long-term assets) 5.3 5.3
Total Cash, cash equivalents, and restricted cash 611.6 228.8
Marketable securities 390.6 982.3
Total
$ 1,002.2 $ 1,211.1
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 June 30, 2022 are scheduled to mature in less than one year.
Fair Value Measurements
The fair value of the Company’s investments in money market funds approximates their face value. Such instruments are included in Cash and cash equivalents. The fair value of the debt securities consisting of U.S. Treasury bills is based on their quoted market prices. Debt securities purchased with original maturities in excess of three months are included in Marketable securities. The fair value of all of these financial instruments are classified as Level 1 in the fair value hierarchy.
The Company’s other financial instruments include cash, accounts receivable, restricted cash, and accounts payable. As of June 30, 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 $ 505.4 million, $ 538.8 million, and $ 604.3 million, respectively, as of June 30, 2022. The fair values of these debt instruments are based on available market information from public data sources and are classified as Level 2.
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Note 3. Selected Balance Sheet Items
Other Current Assets
Other current assets consist of the following:
June 30, December 31,
2022 2021
(In millions)
Prepaid expenses $ 29.3 $ 24.8
Prepaid registry fees 24.6 24.2
Taxes receivable 6.3 7.7
Accounts receivable, net 4.3 5.3
Other 0.8 0.9
Total other current assets $ 65.3 $ 62.9
Other Long-Term Assets
Other long-term assets consist of the following:
June 30, December 31,
2022 2021
(In millions)
Operating lease right-of-use asset $ 8.7 $ 8.4
Long-term prepaid registry fees 8.3 8.7
Long-term prepaid expenses 7.5 11.0
Restricted cash 5.3 5.3
Other 2.3 2.3
Total other long-term assets $ 32.1 $ 35.7
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 June 30, 2022 reflects amortization of $ 9.9 million and $ 19.7 million during the three and six months ended June 30, 2022 which was recorded in Cost of Revenues.
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
June 30, December 31,
2022 2021
(In millions)
Accounts payable and accrued expenses $ 8.9 $ 9.0
Customer deposits 60.4 77.3
Accrued employee compensation 40.5 58.5
Taxes payable 25.5 26.8
Interest payable 19.5 19.5
Accrued registry fees 13.7 12.9
Customer incentives payable 6.5 13.3
Other accrued liabilities 9.3 9.3
Total accounts payable and accrued liabilities $ 184.3 $ 226.6
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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, 2021 was paid during the six months ended June 30, 2022. 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.
Long-term Tax and Other Liabilities
Long-term tax and other liabilities consist of the following:
June 30, December 31,
2022 2021
(In millions)
Long-term tax liabilities $ 62.6 $ 76.1
Long-term operating lease liabilities 2.2 2.5
Long-term tax and other liabilities $ 64.8 $ 78.6
Long-term tax liabilities as of June 30, 2022 reflects a $ 14.5 million reclassification from long-term to current of the next installment of the transition tax liability on accumulated foreign earnings resulting from the 2017 Tax Cuts and Jobs Act.
Note 4. Stockholders’ Deficit
Effective February 10, 2022, the Company’s Board of Directors authorized the repurchase of its common stock in the amount of $ 705.4 million, in addition to the $ 294.6 million that remained available for repurchases under the share repurchase program, for a total repurchase authorization of up to $ 1.00 billion under the program. The program has no expiration date. 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 six months ended June 30, 2022, the Company repurchased 2.0 million shares and 2.9 million shares of its common stock, respectively, at an average stock price of $ 176.51 and $ 189.58 , respectively. The aggregate cost of the repurchases in the three and six months ended June 30, 2022 was $ 349.5 million and $ 545.0 million, respectively. As of June 30, 2022, there was $ 543.1 million remaining available for future share repurchases under the share repurchase program.
During the six months ended June 30, 2022, the Company placed less than 0.1 million shares, at an average stock price of $ 203.78 , and for an aggregate cost of $ 11.2 million, into treasury stock for purposes related to tax withholding upon vesting of Restricted Stock Units (“RSUs”).
Since inception, the Company has repurchased 246.6 million shares of its common stock for an aggregate cost of $ 12.26 billion, which is presented as a reduction of Additional paid-in capital.
Note 5. Calculation of Earnings per Share
The following table presents the computation of weighted-average shares used in the calculation of basic and diluted earnings per share:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
Weighted-average shares of common stock outstanding 108.8 112.4 109.5 112.8
Weighted-average potential shares of common stock outstanding:
Unvested RSUs and ESPP — 0.1 0.1 0.1
Shares used to compute diluted earnings per share 108.8 112.5 109.6 112.9
The calculation of diluted weighted average shares outstanding excludes performance-based RSUs granted by the Company for which the relevant performance criteria have not been achieved and any awards that are antidilutive. The number of potential shares excluded from the calculation was not significant in any period presented.
Note 6. Revenues
The Company generates revenues in the U.S.; Europe, the Middle East and Africa (“EMEA”); China; and certain other countries, including Canada, Australia, and Japan.
The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:
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Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
U.S. $ 230.9 $ 211.0 $ 455.5 $ 418.1
EMEA 56.4 57.7 115.0 114.1
China 26.5 25.4 52.5 51.1
Other 38.1 35.3 75.8 69.7
Total revenues $ 351.9 $ 329.4 $ 698.8 $ 653.0
Revenues in the table above are attributed to the country of domicile and the respective regions in which registrars are located; however, this may differ from the regions where the registrars operate or where registrants are located. Revenues for each region may be impacted by registrars reincorporating, relocating, or from acquisitions or changes in affiliations of resellers. Revenues for each region may also be impacted by registrars domiciled in one region, registering domain names in another region.
Deferred Revenues
As payments 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 six months ended June 30, 2022 was primarily driven by amounts billed in the six months ended June 30, 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 $ 549.5 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 June 30, 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. The long-term deferred revenues amounts will be recognized in revenues over several years and in some cases up to 10 years.
Note 7. Stock-based Compensation
Stock-based compensation is classified in the Condensed Consolidated Statements of Comprehensive Income in the same expense line items as cash compensation. The following table presents the classification of stock-based compensation:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
Cost of revenues $ 1.8 $ 1.7 $ 3.5 $ 3.3
Research and development 2.3 2.0 4.7 3.9
Selling, general and administrative 9.6 9.9 19.7 19.4
Stock-based compensation expense 13.7 13.6 27.9 26.6
Capitalization (included in Property and equipment, net) 0.5 0.5 0.8 0.8
Total stock-based compensation $ 14.2 $ 14.1 $ 28.7 $ 27.4
The following table presents the nature of the Company’s total stock-based compensation:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(In millions)
RSUs $ 10.7 $ 10.2 $ 20.9 $ 19.9
Performance-based RSUs 2.5 2.9 5.7 5.4
ESPP 1.0 1.0 2.1 2.1
Total stock-based compensation $ 14.2 $ 14.1 $ 28.7 $ 27.4
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Note 8. Income Taxes
The following table presents Income tax expense and the effective tax rate:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
(Dollars in millions)
Income tax expense $ 51.4 $ 40.2 $ 100.2 $ 78.1
Effective tax rate 24 % 21 % 24 % 21 %
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. The effective tax rate in the three and six months ended June 30, 2022 reflects an increased foreign effective tax rate primarily as a result of the transfer of intellectual property between certain non-U.S. subsidiaries that took place in the fourth quarter of 2021.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.