VeriSign, Inc. (VRSN)

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VeriSign (VRSN)

Q1 2013 Earnings Call

April 25, 2013 4:30 pm ET


David Atchley - Corporate Treasurer

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

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

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


Gregg Moskowitz - Cowen and Company, LLC, Research Division

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

Walter H. Pritchard - Citigroup Inc, Research Division

Harris Heyer

Harris Hayer

Daniel T. Cummins - B. Riley Caris, Research Division

Jaimin Soni - BofA Merrill Lynch, Research Division



Good day, and welcome to VeriSign's First Quarter 2013 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 First Quarter 2013 Earnings Conference Call. I'm 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, Naming and Directory 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 first quarter 2013 earnings news 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 long-standing 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. 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.

With that, I would like to turn the call over to Jim.

D. James Bidzos

Thanks, David, and good afternoon, everyone. The first quarter demonstrates a solid start to 2013 for VeriSign. We reported revenue of $236 million, which was 15% higher year-over-year and delivered strong financial performance, including $145 million in free cash flow. In Naming, we processed 8.8 million new gross registrations during the first quarter and added 1.99 million net new names, bringing the name base to a total of 123.1 million .com and .net names. Our balance sheet remains strong, with approximately $1.56 billion in cash, cash equivalents and marketable securities at the end of the quarter. We continue to see benefits from our focus and discipline in the execution of our strategic framework.

As you may have seen during April, we completed the issuance of a 10-year $750 million senior unsecured note with a 4.625% coupon. We're very pleased with the results of this issuance, which is part of our revised capital structure. In a few moments, George will discussed our capital structure in more detail.

During the first quarter, we continued our share repurchase program by repurchasing 3 million shares for $132 million. As of March 31, 2013, we have approximately $844 million remaining in our share repurchase program, which has no expiration. We continually evaluate the overall cash and investing needs of the business and consider the best uses for our cash, including potential share repurchases.

I'll comment now on first quarter operating highlights. In our Naming business, at the end of March, the total base of registered names in .com and .net was 123.1 million, with registered names in .com totaling 108.1 million names and in .net totaling 15 million names. This represents an increase of 5.5% year-over-year and a 1.6% quarter-over-quarter. In the first quarter, we added 1.99 million net names to the domain name base after processing 8.8 million new gross registrations. In the fourth quarter of 2012, the renewal rate was 72.9%, and the renewal rate for the whole of 2012 was 73.1%. While renewal rates are not totally measurable until 45 days after the end of the quarter, we believe that the renewal rate for the first quarter of 2013 will be approximately 73.3%. This rate compares to 73.9% achieved in the first of 2012. The renewal rate is still below the level of the first quarter 1 year ago. We see the continuing effects of changes in search algorithms and macroeconomic headwinds we discussed during the last few quarterly earnings calls. We cannot be certain of how long the renewal rate will be impacted by these factors, but we are now experiencing the fourth quarter of these effects. In light of these factors, we expect the second quarter net names for .com and .net added to the base will be between 0.9 million and 1.3 million names. As noted in prior calls, updates to the zone are posted on our website at least once per day, allowing you to track how the zone is growing throughout the coming quarter.

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