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VeriSign Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 29, 2011 10:34AM
VeriSign Inc. (VRSN) filed Quarterly Report for the period ended 2011-03-31.
Highlight of Business Operations:
Revenues related to our Registry Services are primarily derived from registrations for domain names in the .com, .net, .cc, .tv, .name, .gov, and .jobs domain name registries. Revenues from .cc, .tv, .name, .gov, and .jobs are not significant. For domain names registered with the .com and .net registries, we receive a fee from third-party registrars per annual registration that is fixed pursuant to our agreements with ICANN. Individual customers, called registrants, contract directly with third-party registrars or their resellers, and the third-party registrars in turn register the .com, .net, .cc, .tv, .name and .jobs domain names with Verisign. Changes in revenues are driven largely by increases in the number of new domain name registrations and the renewal rate for existing registrations, in each case as impacted by continued growth in online advertising, e-commerce, and the number of Internet users, which is partially driven by greater availability of broadband, as well as advertising and promotional activities carried out by us and third-party registrars. On July 1, 2010, we increased our .com domain name registration fees by 7% from $6.86 to $7.34. We have the contractual right to increase the fees for .com domain name registrations by up to 7% either in 2011 or in 2012 prior to the end of the current agreement with ICANN on November 30, 2012. On July 1, 2010, we increased our .net domain name registration fees by 10% from $4.23 to $4.65. We have the contractual right to increase the fees for .net domain name registrations by up to 10% in 2011. We offer promotional marketing programs for our registrars based upon market conditions and the business environment in which the registrars operate. We are largely insulated from the risk posed by fluctuations in exchange rates due to the fact that all revenues paid to us for .com and .net registrations are in U.S. dollars. Revenues from NIA Services are not significant.
Sales and marketing expenses increased during the three months ended March 31, 2011, as compared to the same period last year, primarily due to an increase in salary and employee benefits expenses, partially offset by a decrease in allocated overhead expenses. Salary and employee benefits expenses increased by $2.5 million, primarily due to an increase in average headcount to support our sales force, and an increase in stock-based compensation expenses due to additional vested RSUs granted during the three months ended March 31, 2011, to option holders, as they did not participate in the December 2010 special cash dividend. Allocated overhead expenses decreased by $1.7 million, primarily due to a decrease in allocable indirect costs and a decrease in proportional headcount within the sales and marketing function as a result of the divestiture of the Authentication Services business.
General and administrative expenses decreased during the three months ended March 31, 2011, as compared to the same period last year, primarily due to decreases in occupancy expenses and depreciation expenses, partially offset by a decrease in corporate overhead expenses allocated to other cost-types. Occupancy expenses decreased by $2.1 million, primarily due to lower rent expenses as the lease for certain office buildings expired in 2010. Depreciation expenses decreased by $1.9 million, primarily due to accelerated depreciation on an abandoned software project during the three months ended March 31, 2010, and ceasing further depreciation on corporate assets held for sale in May 2010, the results of operations of which were classified as continuing operations until the third quarter of 2010. Corporate overhead expenses allocated to other cost types decreased by $4.6 million, primarily due to a decrease in allocable indirect costs and proportionately higher headcount in the general and administrative function as a result of the divestiture of the Authentication Services business. Salary and employee benefits expenses remained consistent primarily due to a decrease in average headcount due to the divestiture of the Authentication Services business, offset by a $3.2 million increase in stock-based compensation expenses due to additional vested RSUs granted during the three months ended March 31, 2011, to option holders, as they did not participate in the December 2010 special cash dividend.
Under the 2010 Restructuring Plan, we expect to incur total estimated pre-tax cash charges for severance costs and other related employee termination costs of $22.5 million, and excess facility exit costs of $11.5 million, of which we have recorded a total of $21.5 million, and $1.0 million, respectively, through March 31, 2011. Additionally, we recognized stock-based compensation expenses of $13.4 million, inclusive of amounts for discontinued operations, through March 31, 2011, upon acceleration of stock-based awards for employees notified of termination and expect to recognize further expenses for employees to be terminated in the future. However, at this time, we are not able, in good faith, to make a determination of the estimated amount or range of amounts thereon. We expect to recognize all remaining cash and stock-based restructuring charges over the next several quarters through the end of fiscal 2011.
Stocks Discussed: VRSN,