VRSN

VeriSign, Inc. (VRSN)

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VeriSign (VRSN)

Q4 2012 Earnings Call

January 24, 2013 4:30 pm ET

Executives

David Atchley - Corporate Treasurer

D. James Bidzos - Founder, Executive Chairman, Chief Executive Officer and President

George E. Kilguss - Chief Financial Officer and Senior Vice President

Patrick S. Kane - Senior Vice President and General Manager of Naming Services

Analysts

Philip Winslow - Crédit Suisse AG, Research Division

Gray Powell - Wells Fargo Securities, LLC, Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Walter H. Pritchard - Citigroup Inc, Research Division

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Rob D. Owens - Pacific Crest Securities, Inc., Research Division

Gregg Moskowitz - Cowen and Company, LLC, Research Division

Daniel T. Cummins - B. Riley & Co., LLC, Research Division

Craig Nankervis - First Analysis Securities Corporation, Research Division

Scott H. Kessler - S&P Equity Research

Presentation

Operator

Good day and welcome to the VeriSign's Fourth Quarter 2012 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. David Atchley. Please go ahead, sir.

David Atchley

Thank you, operator, and good afternoon, everyone. Thank you for joining us on VeriSign's Fourth Quarter and Full Year 2012 Earnings Conference Call. I am David Atchley, Director of Investor Relations and Corporate Treasurer. I'm here today with Jim Bidzos, Executive Chairman, President and CEO; George Kilguss, Senior Vice President and CFO; and Pat Kane, Senior Vice President and General Manager of Naming Services.

Please note that this call and accompanying slide presentation are being webcast from the Investor Relations section of our corporate website, www.verisigninc.com. Please refer to that website for important information, including the fourth quarter and full year 2012 earnings press release. A replay of this call will be available on the website within a few hours. Today's slide presentation will also be available for download after the call.

Financial results in today's press release are unaudited, and the matters we will be discussing today include forward-looking statements and, as such, are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent report on Forms 10-K and 10-Q and any applicable amendments which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.

I would like to remind you that in light of Regulation FD, VeriSign retains its longstanding policy to not comment on financial performance or guidance during the quarter unless it is done through a public disclosure.

The financial results in today's press release and the matters we will be discussing today include GAAP and non-GAAP measures used by VeriSign. The GAAP to non-GAAP reconciliation information is appended to our press release and slide presentation, as applicable, each of which can be found on the Investor Relations section of our website.

In a moment, Jim and George will provide some prepared remarks and afterward we will open up the call for your questions. Unauthorized recording of this conference call is not permitted. And with that, I would like to turn the call over to Jim.

D. James Bidzos

Thanks, David, and good afternoon, everyone. The fourth quarter capped a solid 2012 for VeriSign. We delivered for the global community of Internet users that increasingly rely on us by marking 15 years of uninterrupted availability for .com and .net. We renewed the .com agreement for another 6 years, reported 2012 revenue of $874 million which was 13% revenue year-over-year growth and delivered strong financial performance including $503 million in free cash flow. We continue to see benefits from our restructuring, focus and discipline.

In Naming we processed a record 33.1 million new gross registrations during 2012, finishing the year with 121.1 million names on the domain name base. Our balance sheet remains strong with approximately $1.6 billion in cash, cash equivalents and marketable securities. With the clarity of the .com renewal now behind us, we can now focus more of our attention on other strategic initiatives.

In 2013, we intend to put greater emphasis on developing new revenue streams as we explore new products, services and innovation to enhance our offerings. The certainty of the renewal also allows us to focus on our longer-term financial plan, including a review of our capital structure and putting more emphasis on finding efficiencies in our business.

Before I get into the fourth quarter results, I want to highlight a few events from the quarter. On November 30, 2012, we announced the approval of the renewal of the revised .com agreement by the U.S. Department of Commerce for the term beginning on December 1, 2012, and running through November 30, 2018, and the modified terms of the revised agreement.

This approval is an endorsement of our record on security and stability and our offerings of .com registry services on reasonable prices, terms and conditions. The price of a .com registration is now fixed at $7.85 and as of the fourth quarter 2012 end we have 106.2 million .com names in our domain name base.

On December 19, we announced an increase in registry domain name fees for .net per our agreement with ICANN. As of July 1, 2013 the registry fee for .net domain names will increase from $5.11 to $5.62. Also by way of update, in December, ICANN completed its prioritization draw for processing applications related to its new gTLD program.

As expected, ICANN gave priority to internationalized domain name transliterations. As you may recall, 12 of our 14 applications were for IDN versions of .com and .net. Based on ICANN's current time line, we are not likely to see revenue from this opportunity until 2014.

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