VeriSign, Inc. (VRSN) reported a net income of $58.9 million or $0.36 per diluted share in the third quarter of 2011 compared to a net loss of $10.6 million or $0.06 per diluted share in the previous quarter and a net income of $784.9 million or $4.48 per share in the year-ago quarter.
Excluding one-time items but including stock-based compensation expense, net income came in at $0.35 per share, beating the Zacks Consensus Estimate of $0.33.
VeriSign reported revenue of $197 million in the third quarter of 2011, up 4% sequentially and up 14% from the year-ago quarter.
In 2010, VeriSign sold the Authentication Services business to Symantec (SYMC”>SYMC) and closed down the operations of non-core Content Portal Services (CPS).
The continuing operations of the company consist primarily of the results of the Naming Services business, which comprises Registry Services and Network Intelligence and Availability (NIA) Services. NIA Services include the Managed Domain Name System (Managed DNS), iDefense and Distributed Denial of Service (DDoS) mitigation businesses.
The base of registered names for .com and .net totaled 112 million active domain names, up from 110 million names at the end of June and growing 8% year over year. The company added 7.9 million net new domain names in the quarter, up 6% year over year.
Operating margin came in at 50.1%, down from 51.7% in the second quarter of 2011 but up from 43.1% in the previous quarter.
VeriSign generated $108 million of cash from operating activities and used $34 million in capital expenditures. The company also repurchased approximately 7.9 million shares for $235 million. VeriSign still has $831 million remaining under its existing share-repurchase program.
VeriSign ended the quarter with $1.20 billion of cash and equivalents, down from $1.22 billion at the end of the prior quarter. Deferred revenues came in at $723 million, an increase of $9 million from the prior quarter and $69 million from the year-ago quarter.
Guidance
VeriSign earlier announced that the Internet Corporation for Assigned Names and Numbers (ICANN) and Verisign have renewed Verisign’s contract to serve as the authoritative registry operator for the .net registry for another six years till 2017.
The company recently resolved its five-year long litigation with Coalition for ICANN Transparency (CFIT). VeriSign recently announced an increase in registry domain name fees for .com and .net as per the agreement with ICANN.
Going forward, management now expects revenues between $770 million and $775 million in 2011, up 13% to 14% year over year and up from the earlier guidance of a growth of 12% – 14%. The company had earlier expected revenues between $765 million and $775 million. Excluding one-time items and stock based compensation expense, gross margin is projected around 79%.
VeriSign expects to exit the fourth quarter with an operating margin of 50%, up from the previous target of 48%. Capital expenditures are expected to be 10% of revenue.
Last quarter, CEO Mark McLaughlin resigned as President and Chief Executive Officer effective August 1, 2011. Jim Bidzos, Verisign’s founder and previous CEO, became the President and Chief Executive Officer effective August 1, 2011.
Verisign recently appointed John Calys as the Vice President and Controller to the position of interim Chief Financial Officer.
