Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
March 31,
2023 December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents $ 819.8 $ 373.6
Marketable securities 195.2 606.8
Other current assets 58.1 58.3
Total current assets 1,073.1 1,038.7
Property and equipment, net 224.9 232.0
Goodwill 52.5 52.5
Deferred tax assets 232.6 234.6
Deposits to acquire intangible assets 145.0 145.0
Other long-term assets 28.9 30.6
Total long-term assets 683.9 694.7
Total assets $ 1,757.0 $ 1,733.4
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 239.2 $ 226.5
Deferred revenues 932.2 890.4
Total current liabilities 1,171.4 1,116.9
Long-term deferred revenues 328.7 328.7
Senior notes 1,788.5 1,787.9
Long-term tax and other liabilities 62.2 62.1
Total long-term liabilities 2,179.4 2,178.7
Total liabilities 3,350.8 3,295.6
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 ; Issued shares: 354.7 at March 31, 2023 and 354.5 at December 31, 2022; Outstanding shares: 104.3 at March 31, 2023 and 105.3 at December 31, 2022
12,434.2 12,644.5
Accumulated deficit ( 14,025.3 ) ( 14,204.0 )
Accumulated other comprehensive loss ( 2.7 ) ( 2.7 )
Total stockholders’ deficit ( 1,593.8 ) ( 1,562.2 )
Total liabilities and stockholders’ deficit $ 1,757.0 $ 1,733.4
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 March 31,
2023 2022
Revenues $ 364.4 $ 346.9
Costs and expenses:
Cost of revenues 49.9 50.7
Research and development 24.2 22.9
Selling, general and administrative 49.0 48.5
Total costs and expenses 123.1 122.1
Operating income 241.3 224.8
Interest expense ( 18.8 ) ( 18.8 )
Non-operating income, net 11.3 0.3
Income before income taxes 233.8 206.3
Income tax expense ( 55.1 ) ( 48.8 )
Net income 178.7 157.5
Other comprehensive loss — ( 0.2 )
Comprehensive income $ 178.7 $ 157.3
Earnings per share:
Basic $ 1.70 $ 1.43
Diluted $ 1.70 $ 1.43
Shares used to compute earnings per share
Basic 104.9 110.2
Diluted 105.0 110.3
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 March 31,
2023 2022
Total stockholders’ deficit, beginning of period $ ( 1,562.2 ) $ ( 1,260.5 )
Common stock and additional paid-in capital
Beginning balance 12,644.5 13,620.1
Repurchase of common stock ( 230.5 ) ( 204.6 )
Stock-based compensation 14.1 14.5
Issuance of common stock under stock plans 8.0 8.2
Excise tax on repurchase of common stock ( 1.9 ) —
Balance, end of period 12,434.2 13,438.2
Accumulated deficit
Beginning balance ( 14,204.0 ) ( 14,877.8 )
Net income 178.7 157.5
Balance, end of period ( 14,025.3 ) ( 14,720.3 )
Accumulated other comprehensive loss
Beginning balance ( 2.7 ) ( 2.8 )
Other comprehensive loss — ( 0.2 )
Balance, end of period ( 2.7 ) ( 3.0 )
Total stockholders’ deficit, end of period $ ( 1,593.8 ) $ ( 1,285.1 )
See accompanying Notes to Condensed Consolidated Financial Statements.
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VERISIGN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,
2023 2022
Cash flows from operating activities:
Net income $ 178.7 $ 157.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment 11.6 11.9
Stock-based compensation expense 13.8 14.2
Other, net ( 2.9 ) 0.6
Changes in operating assets and liabilities:
Other assets 1.9 8.3
Accounts payable and accrued liabilities 11.6 ( 14.9 )
Deferred revenues 41.8 28.3
Net deferred income taxes and other long-term tax liabilities 2.5 1.2
Net cash provided by operating activities 259.0 207.1
Cash flows from investing activities:
Proceeds from maturities and sales of marketable securities 562.0 696.0
Purchases of marketable securities ( 146.5 ) ( 164.9 )
Purchases of property and equipment ( 5.7 ) ( 6.6 )
Net cash provided by investing activities 409.8 524.5
Cash flows from financing activities:
Repurchases of common stock ( 230.5 ) ( 204.6 )
Proceeds from employee stock purchase plan 8.0 8.2
Net cash used in financing activities ( 222.5 ) ( 196.4 )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 0.2 ) ( 0.1 )
Net increase in cash, cash equivalents, and restricted cash 446.1 535.1
Cash, cash equivalents, and restricted cash at beginning of period 379.0 228.8
Cash, cash equivalents, and restricted cash at end of period $ 825.1 $ 763.9
Supplemental cash flow disclosures:
Cash paid for interest $ 13.1 $ 13.1
Cash paid for income taxes, net of refunds received $ 18.3 $ 2.2
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, 2022 (the “2022 Form 10-K”) filed with the SEC on February 17, 2023.
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:
March 31, December 31,
2023 2022
(In millions)
Cash $ 25.3 $ 27.0
Time deposits 4.4 4.1
Money market funds (Level 1) 169.2 178.6
Debt securities issued by the U.S. Treasury (Level 1) 821.4 776.1
Total $ 1,020.3 $ 985.8
Cash and cash equivalents $ 819.8 $ 373.6
Restricted cash (included in Other long-term assets) 5.3 5.4
Total Cash, cash equivalents, and restricted cash 825.1 379.0
Marketable securities 195.2 606.8
Total
$ 1,020.3 $ 985.8
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, 2023 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 March 31, 2023, the carrying value of these financial instruments approximated their fair value. The aggregate fair value of the Company’s senior notes is $ 1.69 billion and $ 1.65 billion as of March 31, 2023 and December 31, 2022, respectively. 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
Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
March 31, December 31,
2023 2022
(In millions)
Accounts payable and accrued expenses $ 6.6 $ 9.8
Customer deposits 71.9 72.0
Taxes payable 71.8 37.4
Accrued employee compensation 36.7 59.0
Interest payable 24.6 19.5
Accrued registry fees 14.2 12.7
Customer incentives payable 5.3 7.1
Other accrued liabilities 8.1 9.0
Total accounts payable and accrued liabilities $ 239.2 $ 226.5
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. 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, 2022 was paid during the three months ended March 31, 2023. Interest payable varies at each period-end based on the payment due dates for each Senior Note issuance.
Note 4. Share Repurchases
Effective October 27, 2022, our Board of Directors authorized the repurchase of our common stock in the amount of $ 803.0 million in addition to the $ 197.0 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. As of March 31, 2023 there was approximately $ 638.8 million remaining available for repurchases under the program.
The Company’s share repurchases are as following. Amounts may not add up due to rounding:
Three Months Ended March 31, 2023
Shares Total Costs Average Price
(In millions, except average price amounts)
Total repurchases under the repurchase plans 1.1 $ 220.0 $ 205.60
Total repurchases for tax withholdings 0.1 10.5 $ 210.01
Total repurchases 1.1 $ 230.5 $ 205.80
Since inception, the Company has repurchased 250.4 million shares of its common stock for an aggregate cost of $ 12.98 billion, which is recorded as a reduction of Additional paid-in capital. The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. In the first quarter of 2023, the Company reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in Accounts payable and accrued liabilities on our Condensed Consolidated Balance Sheet as of March 31, 2023. The share repurchase and authorization amounts disclosed in this Form 10-Q exclude the excise tax.
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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 March 31,
2023 2022
(In millions)
Weighted-average shares of common stock outstanding 104.9 110.2
Weighted-average potential shares of common stock outstanding:
Unvested RSUs and ESPP 0.1 0.1
Shares used to compute diluted earnings per share 105.0 110.3
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, Japan, and Singapore.
The following table presents our revenues disaggregated by geography, based on the billing addresses of our customers:
Three Months Ended March 31,
2023 2022
(In millions)
U.S. $ 242.8 $ 224.6
EMEA 55.0 58.6
China 25.1 25.1
Other 41.5 38.6
Total revenues $ 364.4 $ 346.9
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 three months ended March 31, 2023 was primarily driven by amounts billed in the three months ended March 31, 2023 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 $ 324.5 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 March 31, 2023 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.
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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 March 31,
2023 2022
(In millions)
Cost of revenues $ 1.3 $ 1.7
Research and development 2.5 2.4
Selling, general and administrative 10.0 10.1
Stock-based compensation expense 13.8 14.2
Capitalization (included in Property and equipment, net) 0.3 0.3
Total stock-based compensation $ 14.1 $ 14.5
The following table presents the nature of the Company’s total stock-based compensation:
Three Months Ended March 31,
2023 2022
(In millions)
RSUs $ 10.9 $ 10.2
Performance-based RSUs 2.1 3.2
ESPP 1.1 1.1
Total stock-based compensation $ 14.1 $ 14.5
Note 8. Non-operating Income, Net
Non-operating income, net, primarily consists of interest income from the Company’s surplus cash balances and marketable securities. Interest income was $ 10.7 million and $ 0.3 million during the three months ended March 31, 2023 and 2022, respectively. The increase in interest income in the first quarter of 2023 reflects higher interest rates on the Company’s investments in debt securities.
Note 9. Income Taxes
The following table presents Income tax expense and the effective tax rate:
Three Months Ended March 31,
2023 2022
(Dollars in millions)
Income tax expense $ 55.1 $ 48.8
Effective tax rate 24 % 24 %
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, partially offset by a lower foreign effective tax rate.
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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.