VeriSign Management Discusses Q2 2012 Results - Earnings Call Transcript

VeriSign (VRSN)

Q2 2012 Earnings Call

July 26, 2012 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

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

Analysts

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

Philip Winslow - Crédit Suisse AG, Research Division

Walter H. Pritchard - Citigroup Inc, Research Division

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

Daniel T. Cummins - ThinkEquity LLC, Research Division

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

Gray Powell - Wells Fargo Securities, LLC, Research Division

Gregg Moskowitz - Cowen and Company, LLC, Research Division

Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division

Jaimin Soni - BofA Merrill Lynch, Research Division

Presentation

Operator

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

David Atchley

Thank you, operator, and good afternoon, everyone. Thank you for joining us on VeriSign's Second Quarter 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 second quarter 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 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. Jim?

D. James Bidzos

Thanks, David, and good afternoon, everyone. The second quarter was another solid quarter for VeriSign, and we're pleased with the results. In Naming, we processed 8.4 million new registrations in Q2, a second quarter record, while adding 1.81 million net names, finishing the quarter with 118.5 million names in the domain name base. We were also able to achieve ongoing operating margin expansion through disciplined operations. Our balance sheet remains strong with $1.4 billion in cash and marketable securities.

During the second quarter, we continued our share repurchase program by repurchasing 1.9 million shares for $76 million. Thus far, in 2012, we have repurchased approximately 3.7 million shares or about $144 million, and we have approximately $687 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.

On June 23, 2012, ICANN approved the renewal of VeriSign's agreement to service the operator of the .com registry for the term commencing on December 1, 2012, through November 30, 2018. As you may know, the .com renewal agreement terms, including the pricing provisions, are substantially the same as the terms contained in the existing agreement, except for new provisions regarding indemnification and audit rights.

The U.S. Department of Commerce, under an agreement called the Cooperative Agreement, is now reviewing the renewal of the .com registry agreement. We expect their approval on the renewal of the .com agreement by November 30.

During the month of July, we marked 15 years of uninterrupted uptime for the .com and .net zone infrastructure. This is a tremendous achievement and I would like to recognize the efforts of our engineering and operation teams for meeting this milestone. We continue to make protecting our DNS infrastructure a priority, while continuing to meet and exceed requirements of our service-level agreements.

I'll comment now on second quarter operating highlights. In our Naming business, the base of registered names in .com equaled 103.7 million names, while .net equaled 14.8 million names. The total base of registered names in common net was approximately 118.5 million at the end of June. This represents increases of 7.8% year-over-year and 1.6% quarter-over-quarter.

In the second quarter, we added 1.81 million net names to the domain name base and we processed 8.4 million new registrations or a 4.2% increase in new registrations over the same period a year ago.

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