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 Verisign Reports Fourth Quarter and Full Year 2014 Results
   Thursday, February 05, 2015 4:05:03 PM ET

VeriSign, Inc. (VRSN ), a global leader in domain names and Internet security, today reported financial results for the fourth quarter and full year of 2014.

Fourth Quarter GAAP Financial Results VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $256 million for the fourth quarter of 2014, up 4.2 percent from the same quarter in 2013. Verisign reported net income of $65 million and diluted earnings per share (EPS) of $0.48 for the fourth quarter of 2014, compared to net income of $292 million and diluted EPS of $1.94 in the same quarter in 2013. The operating margin was 55.6 percent for the fourth quarter of 2014 compared to 53.0 percent for the same quarter in 2013. Fourth quarter 2014 net income was decreased by $26 million and diluted EPS was decreased by $0.19 primarily due to a non-U.S. income tax charge related to a reorganization of certain international operations and a change in estimate for U.S. income tax charges related to the repatriation of offshore assets in 2014.

As described in the fourth quarter 2013 earnings news release, results for the fourth quarter of 2013 included an income tax benefit related to a worthless stock deduction, pre-tax non-operating gains from the sale of certain cost-method investments, and an income tax expense related to estimated taxable income generated in the U.S. as a result of a planned repatriation of offshore assets in 2014, which collectively increased net income by $217.8 million and increased diluted EPS by $1.45.

Fourth Quarter Non-GAAP Financial Results Verisign reported, on a non-GAAP basis, net income of $95 million and diluted EPS of $0.70 for the fourth quarter of 2014, compared to net income of $98 million and diluted EPS of $0.65 for the same quarter in 2013. The non-GAAP operating margin was 59.4 percent for the fourth quarter of 2014 compared to 56.9 percent for the same quarter in 2013. Results for the fourth quarter of 2013 included a pre-tax, non-operating gain of $15.8 million from the sale of certain cost-method investments which increased non-GAAP net income by $11.4 million and diluted EPS by $0.07.

A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

"In 2014, Verisign marked more than 17 years of uninterrupted availability of the .com and .net domain name system, and continued to build on its financial performance since completing the divestitures in 2010, including exceeding $1 billion in annual revenues. During the year we repurchased 16.3 million shares, returning $867 million to shareholders," commented Jim Bidzos, executive chairman, president and chief executive officer.

2014 GAAP Financial Results For the year ended Dec. 31, 2014, Verisign reported revenue of $1.01 billion, up 4.7 percent from $965 million in 2013. Verisign reported net income of $355 million and diluted EPS of $2.52 in 2014, compared to net income of $544 million and diluted EPS of $3.49 in 2013. The operating margin for 2014 was 55.9 percent compared to 54.7 percent in 2013. Net income for 2014 was decreased by $10 million and diluted EPS was decreased by $0.07 primarily due to the fourth quarter 2014 non-U.S. income tax charge related to a reorganization of certain international operations and changes in estimates during 2014 for U.S. income taxes related to the 2013 worthless stock deduction and the 2014 repatriation of offshore assets.

As described in the fourth quarter 2013 earnings news release, results for 2013 included an income tax benefit recognized in the fourth quarter related to a worthless stock deduction, pre-tax non-operating gains from the sale of certain cost-method investments, and income tax expense related to estimated taxable income generated in the U.S. as a result of a planned repatriation of offshore assets in 2014, which collectively increased net income by $217.8 million and increased diluted EPS by $1.39.

2014 Non-GAAP Financial Results Verisign reported, on a non-GAAP basis, net income of $383 million and diluted EPS of $2.72 for 2014, compared to net income of $374 million and diluted EPS of $2.40 in 2013. The non-GAAP operating margin for 2014 was 60.2 percent compared to 58.5 percent in 2013. Results for 2013 included a pre-tax, non-operating gain of $15.8 million recognized during the fourth quarter from the sale of certain cost-method investments which increased non-GAAP net income by $11.4 million and diluted EPS by $0.07.

A table reconciling the GAAP to the non-GAAP results (which excludes items described below) is appended to this release.

Financial Highlights


--  Verisign ended the fourth quarter with cash, cash equivalents and
    marketable securities of $1.4 billion, a decrease of $299 million as
    compared with year-end 2013.
--  Cash flow from operations was $170 million for the fourth quarter of
    2014 and $601 million for the full year 2014 compared with $147 million
    for the same quarter in 2013 and $579 million for the full year 2013.
--  Deferred revenues on Dec. 31, 2014, totaled $890 million, an increase of
    $35 million from year-end 2013.
--  Capital expenditures were $9 million in the fourth quarter and $39
    million for the full year.
--  During the fourth quarter, Verisign repurchased 3.7 million shares of
    its common stock for $209 million. During the full year 2014, Verisign
    repurchased 16.3 million shares of its common stock for $867 million.
--  Effective Jan. 30, 2015, the Board of Directors approved an additional
    authorization for share repurchases of approximately $453 million of
    common stock, which brings the total amount to $1 billion authorized and
    available under Verisign’s share buyback program, which has no
    expiration.
--  For purposes of calculating diluted EPS, the fourth quarter diluted
    share count included 14.7 million shares related to subordinated
    convertible debentures, compared with 13.7 million shares in the same
    quarter in 2013. These represent diluted shares and not shares that have
    been issued.


Business Highlights


--  Verisign Registry Services added 0.59 million net new names during the
    fourth quarter, ending with 130.6 million .com and .net domain names in
    the domain name base, which represents a 2.7 percent increase over the
    base at the end of the fourth quarter in 2013.
--  In the fourth quarter, Verisign processed 8.2 million new domain name
    registrations for .com and .net, the same as for the fourth quarter in
    2013. During 2014, Verisign processed 34 million new domain name
    registrations, the same as in 2013.
--  The final .com and .net renewal rate for the third quarter of 2014 was
    72.0 percent compared with 72.7 percent for the same quarter in 2013.
    Renewal rates are not fully measurable until 45 days after the end of
    the quarter.


Non-GAAP Items Non-GAAP financial results exclude the following items that are included under GAAP: stock-based compensation, unrealized gain/loss on contingent interest derivative on subordinated convertible debentures, and non-cash interest expense. Non-GAAP net income is decreased by amounts accrued, if any, during the period for contingent interest payable resulting from upside or downside triggers related to the subordinated convertible debentures and is adjusted for a 28 percent tax rate which differs from the GAAP tax rate. A table reconciling the GAAP to non-GAAP operating income and net income is appended to this release.

Today’s Conference Call Verisign will host a live conference call today at 4:30 p.m. (EST) to review the fourth quarter and full year 2014 results. The call will be accessible by direct dial at (888) 676-VRSN (U.S.) or (913) 312-1385 (international), conference ID: Verisign. A listen-only live web cast of the conference call and accompanying slide presentation will also be available at http://investor.verisign.com . An audio archive of the call will be available at https://investor.verisign.com/events.cfm. This news release and the financial information discussed on today’s conference call are available at http://investor.verisign.com .

About Verisign Verisign, a global leader in domain names and Internet security, enables Internet navigation for many of the world’s most recognized domain names and provides protection for websites and enterprises around the world. Verisign ensures the security, stability and resiliency of key Internet infrastructure and services, including the .com and .net domains and two of the Internet’s root servers, as well as performs the root-zone maintainer functions for the core of the Internet’s Domain Name System (DNS). Verisign’s Network Intelligence and Availability services include intelligence-driven Distributed Denial of Service Protection, iDefense Security Intelligence and Managed DNS. To learn more about what it means to be Powered by Verisign, please visit VerisignInc.com.

VRSNF

Statements in this announcement other than historical data and information constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These statements involve risks and uncertainties that could cause our actual results to differ materially from those stated or implied by such forward-looking statements. The potential risks and uncertainties include, among others, the uncertainty of the impact of the U.S. government’s transition of key Internet domain name functions (the Internet Assigned Numbers Authority ("IANA") function), whether the U.S. Department of Commerce will approve any exercise by us of our right to increase the price per .com domain name, under certain circumstances, the uncertainty of whether we will be able to demonstrate to the U.S. Department of Commerce that market conditions warrant removal of the pricing restrictions on .com domain names and the uncertainty of whether we will experience other negative changes to our pricing terms; the failure to renew key agreements on similar terms, or at all; the uncertainty of future revenue and profitability and potential fluctuations in quarterly operating results due to such factors as restrictions on increasing prices under the .com Registry Agreement, changes in marketing and advertising practices, including those of third-party registrars, increasing competition, and pricing pressure from competing services offered at prices below our prices; changes in search engine algorithms and advertising payment practices; the uncertainty of whether we will successfully develop and market new products and services, the uncertainty of whether our new products and services, if any, will achieve market acceptance or result in any revenues; challenging global economic conditions; challenges of ongoing changes to Internet governance and administration; the outcome of legal or other challenges resulting from our activities or the activities of registrars or registrants, or litigation generally; the uncertainty regarding what the ultimate outcome or amount of benefit we receive, if any, from the worthless stock deduction will be; new or existing governmental laws and regulations; changes in customer behavior, Internet platforms and web-browsing patterns; system interruptions; security breaches; attacks on the Internet by hackers, viruses, or intentional acts of vandalism; whether we will be able to continue to expand our infrastructure to meet demand; the uncertainty of the expense and timing of requests for indemnification, if any, relating to completed divestitures; and the impact of the introduction of new gTLDs, any delays in their introduction, the impact of ICANN’s Registry Agreement for new gTLDs, and whether our new gTLDs or the new gTLDs for which we have contracted to provide back-end registry services will be successful; and the uncertainty regarding the impact, if any, of the delegation into the root zone of over 1,300 new gTLDs. More information about potential factors that could affect our business and financial results is included in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended Dec. 31, 2013, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Verisign undertakes no obligation to update any of the forward-looking statements after the date of this announcement.

A(C)2015 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN logo, and other trademarks, service marks, and designs are registered or unregistered trademarks of VeriSign, Inc. and its subsidiaries in the United States and in foreign countries. All other trademarks are property of their respective owners.


                               VERISIGN, INC.
                        CONSOLIDATED BALANCE SHEETS
                      (In thousands, except par value)
                                (Unaudited)

                                               December 31,    December 31,
                                                    2014            2013
                                             --------------- ---------------
                    ASSETS
Current assets:
  Cash and cash equivalents                  $      191,608  $      339,223
  Marketable securities                           1,233,076       1,384,062
  Accounts receivable, net                           13,448          13,631
  Other current assets                               52,475          66,283
                                             --------------- ---------------
    Total current assets                          1,490,607       1,803,199
                                             --------------- ---------------
Property and equipment, net                         319,028         339,653
Goodwill                                             52,527          52,527
Long-term deferred tax assets                       266,954         437,643
Other long-term assets                               25,743          27,745
                                             --------------- ---------------
    Total long-term assets                          664,252         857,568
                                             --------------- ---------------
    Total assets                             $    2,154,859  $    2,660,767
                                             =============== ===============
    LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
  Accounts payable and accrued liabilities   $      190,278  $      149,276
  Deferred revenues                                 621,307         595,221
  Subordinated convertible debentures,
   including contingent interest derivative         631,190         624,056
  Deferred tax liabilities                          477,781         660,633
                                             --------------- ---------------
    Total current liabilities                     1,920,556       2,029,186
                                             --------------- ---------------
Long-term deferred revenues                         269,047         260,615
Senior notes                                        750,000         750,000
Other long-term tax liabilities                      98,722          44,524
                                             --------------- ---------------
    Total long-term liabilities                   1,117,769       1,055,139
                                             --------------- ---------------
    Total liabilities                             3,038,325       3,084,325
                                             --------------- ---------------
Commitments and contingencies
Stockholders’ deficit:
  Preferred stock-par value $.001 per share;
   Authorized shares: 5,000; Issued and
   outstanding shares: none                               -               -
  Common stock-par value $.001 per share;
   Authorized shares: 1,000,000; Issued
   shares: 321,699 at December 31, 2014 and
   320,358 at December 31, 2013; Outstanding
   shares: 118,452 at December 31, 2014 and
   133,724 at December 31, 2013                         322             320
  Additional paid-in capital                     18,120,045      18,935,302
  Accumulated deficit                           (19,000,835)    (19,356,095)
  Accumulated other comprehensive loss               (2,998)         (3,085)
                                             --------------- ---------------
    Total stockholders’ deficit                    (883,466)       (423,558)
                                             --------------- ---------------
    Total liabilities and stockholders’
     deficit                                 $    2,154,859  $    2,660,767
                                             =============== ===============




<table>

VERISIGN, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except per share data) (Unaudited) Three Months Ended December 31, Year Ended December 31, --------------------------- --------------------------- 2014 2013 2014 2013 ------------- ------------- ------------- ------------- Revenues $ 255,917 $ 245,630 $ 1,010,117 $ 965,087 ------------- ------------- ------------- ------------- Costs and expenses: Cost of revenues 47,477 46,575 188,425 187,013 Sales and marketing 23,757 25,064 92,001 89,337 Research and development 17,324 17,766 67,777 70,297 General and administrative 25,138 26,051 97,487 90,208 ------------- ------------- ------------- ------------- Total costs and expenses 113,696 115,456 445,690 436,855 ------------- ------------- ------------- ------------- Operating income 142,221 130,174 564,427 528,232 Interest expense (21,586) (21,237) (85,994) (74,761) Non-operating income, net (159) 7,508 4,878 3,300 ------------- ------------- ------------- ------------- Income before income taxes 120,476 116,445 483,311 456,771 Income tax (expense) benefit (55,004) 175,704 (128,051) 87,679 ------------- ------------- ------------- ------------- Net income 65,472 292,149 355,260 544,450 ------------- ------------- ------------- ------------- Realized foreign currency translation adjustments, included in net income - 81 - 81 Unrealized gain (loss) on investments, net of tax 50 (28) 84 (369) Realized loss (gain) on investments, net of tax, included in net income 1 69 3 (2,409) ------------- ------------- ------------- ------------- Other comprehensive income (loss) 51 122 87 (2,697) ------------- ------------- ------------- ------------- Comprehensive income $ 65,523 $ 292,271 $ 355,347 $ 541,753 ============= ============= ============= ============= Income per share: Basic $ 0.54 $ 2.15 $ 2.80 $ 3.77 ============= ============= ============= ============= Diluted $ 0.48 $ 1.94 $ 2.52 $ 3.49 ============= ============= ============= ============= Shares used to compute net income per share: Basic 120,140 135,759 126,710 144,591 ============= ============= ============= ============= Diluted 135,899 150,422 140,895 155,786 ============= ============= ============= =============

</table>


                               VERISIGN, INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)
                                (Unaudited)
                                                    Year Ended December 31,
                                                 ---------------------------
                                                      2014          2013
                                                 ------------- -------------
Cash flows from operating activities:
  Net income                                     $    355,260  $    544,450
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation of property and equipment and
     amortization of other intangible assets.          63,690        60,655
    Stock-based compensation                           43,977        36,649
    Excess tax benefit associated with stock-
     based compensation                                (6,054)      (19,320)
    Unrealized (gain) loss on contingent interest
     derivative on Subordinated Convertible
     Debentures                                        (2,249)       17,801
    Loss (gain) on sale of investments                      5       (18,861)
    Other, net                                         11,353        14,182
    Changes in operating assets and liabilities
      Accounts receivable                                 (73)       (2,500)
      Prepaid expenses and other assets                11,571        (2,694)
      Accounts payable and accrued liabilities         45,419        19,065
      Deferred revenues                                34,518        43,254
      Net deferred income taxes and other long-
       term tax liabilities                            43,532      (113,284)
                                                 ------------- -------------
        Net cash provided by operating activities     600,949       579,397
                                                 ------------- -------------
Cash flows from investing activities:
  Proceeds from maturities and sales of
   marketable securities and investments            3,428,659     3,508,569
  Purchases of marketable securities               (3,277,096)   (3,450,068)
  Purchases of property and equipment                 (39,327)      (65,594)
  Other investing activities                              452        (3,969)
                                                 ------------- -------------
        Net cash provided by (used in) investing
         activities                                   112,688       (11,062)
                                                 ------------- -------------
Cash flows from financing activities:
  Proceeds from issuance of common stock from
   option exercises and employee stock purchase
   plans                                               17,597        20,667
  Repurchases of common stock                        (883,403)   (1,035,617)
  Proceeds from senior notes, net of issuance
   costs                                                    -       738,297
  Repayment of borrowings                                   -      (100,000)
  Excess tax benefit associated with stock-based
   compensation                                         6,054        19,320
                                                 ------------- -------------
        Net cash used in financing activities        (859,752)     (357,333)
                                                 ------------- -------------
Effect of exchange rate changes on cash and cash
 equivalents                                           (1,500)       (2,515)
                                                 ------------- -------------
Net (decrease) increase in cash and cash
 equivalents                                         (147,615)      208,487
Cash and cash equivalents at beginning of period      339,223       130,736
                                                 ------------- -------------
Cash and cash equivalents at end of period       $    191,608  $    339,223
                                                 ============= =============
Supplemental cash flow disclosures:
  Cash paid for interest, net of capitalized
   interest                                      $     75,088  $     58,928
                                                 ============= =============
  Cash paid for income taxes, net of refunds
   received                                      $     35,201  $     26,133
                                                 ============= =============




<table>

VERISIGN, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) Three Months Ended December 31, ------------------------------------------- 2014 2013 --------------------- --------------------- Operating Net Operating Net Income Income Income Income ---------- ---------- ---------- ---------- GAAP as reported $ 142,221 $ 65,472 $ 130,174 $ 292,149 Adjustments: Stock-based compensation 9,696 9,696 9,643 9,643 Unrealized loss on contingent interest derivative on the subordinated convertible debentures 1,704 8,078 Non-cash interest expense 2,641 2,292 Contingent interest payable on subordinated convertible debentures (2,613) - Tax adjustment 18,071 (213,912) ---------- ---------- ---------- ---------- Non-GAAP $ 151,917 $ 94,971 $ 139,817 $ 98,250 ========== ========== ========== ========== Revenues $ 255,917 $ 245,630 Non-GAAP operating margin 59.4% 56.9% ========== ========== Diluted shares 135,899 150,422 Per diluted share, non-GAAP $ 0.70 $ 0.65 ========== ==========

</table>

Verisign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with this information, we typically disclose and discuss certain non-GAAP financial information in our quarterly earnings release, on investor conference calls and during investor conferences and related events. This non-GAAP financial information does not include the following types of financial measures that are included in GAAP: stock-based compensation, unrealized gain/loss on contingent interest derivative on subordinated convertible debentures, and non-cash interest expense. Non-GAAP net income is decreased by amounts accrued, if any, during the period for contingent interest payable resulting from upside or downside triggers related to the subordinated convertible debentures and is adjusted for a 28 percent tax rate, which differs from the GAAP tax rate.

Management believes that this non-GAAP financial data supplements the GAAP financial data by providing investors with additional information that allows them to have a clearer picture of our operations. The presentation of this additional information is not meant to be considered in isolation nor as a substitute for results prepared in accordance with GAAP. We believe that the non-GAAP information enhances investors’ overall understanding of our financial performance and the comparability of our operating results from period to period. Above, we have provided a reconciliation of the non-GAAP financial information that we provide each quarter with the comparable financial information reported in accordance with GAAP for the given period.

SUPPLEMENTAL FINANCIAL INFORMATION The following table presents the classification of stock-based compensation:


                                                      Three Months Ended
                                                         December 31,
                                                 ---------------------------
                                                      2014          2013
                                                 ------------- -------------
  Cost of revenues                               $       1,652 $       1,517
  Sales and marketing                                    2,121         1,596
  Research and development                               1,829         1,885
  General and administrative                             4,094         4,645
                                                 ------------- -------------
Total stock-based compensation expense           $       9,696 $       9,643
                                                 ============= =============




<table>

VERISIGN, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) Year Ended December 31, ----------------------------------------------- 2014 2013 ----------------------- ----------------------- Operating Operating Income Net Income Income Net Income ----------- ----------- ----------- ----------- GAAP as reported $ 564,427 $ 355,260 $ 528,232 $ 544,450 Adjustments: Stock-based compensation 43,977 43,977 36,649 36,649 Unrealized (gain) loss on contingent interest derivative on the subordinated convertible debentures (2,249) 17,801 Non-cash interest expense 10,223 8,608 Contingent interest payable on subordinated convertible debentures (3,919) - Tax adjustment (20,725) (233,231) ----------- ----------- ----------- ----------- Non-GAAP $ 608,404 $ 382,567 $ 564,881 $ 374,277 =========== =========== =========== =========== Revenues $1,010,117 $ 965,087 Non-GAAP operating margin 60.2% 58.5% =========== =========== Diluted shares 140,895 155,786 Per diluted share, non-GAAP $ 2.72 $ 2.40 =========== ===========

</table>

Verisign provides quarterly and annual financial statements that are prepared in accordance with generally accepted accounting principles (GAAP). Along with this information, we typically disclose and discuss certain non-GAAP financial information in our quarterly earnings release, on investor conference calls and during investor conferences and related events. This non-GAAP financial information does not include the following types of financial measures that are included in GAAP: stock-based compensation, unrealized gain/loss on contingent interest derivative on subordinated convertible debentures, and non-cash interest expense. Non-GAAP net income is decreased by amounts accrued, if any, during the period for contingent interest payable resulting from upside or downside triggers related to the subordinated convertible debentures and is adjusted for a 28 percent tax rate, which differs from the GAAP tax rate.

Management believes that this non-GAAP financial data supplements the GAAP financial data by providing investors with additional information that allows them to have a clearer picture of our operations. The presentation of this additional information is not meant to be considered in isolation nor as a substitute for results prepared in accordance with GAAP. We believe that the non-GAAP information enhances investors’ overall understanding of our financial performance and the comparability of our operating results from period to period. Above, we have provided a reconciliation of the non-GAAP financial information that we provide each quarter with the comparable financial information reported in accordance with GAAP for the given period.

SUPPLEMENTAL FINANCIAL INFORMATION The following table presents the classification of stock-based compensation:


                                                   Year Ended December 31,
                                               -----------------------------
                                                     2014           2013
                                               -------------- --------------
  Cost of revenues                             $        6,400 $        6,156
  Sales and marketing                                   8,023          6,252
  Research and development                              7,018          7,199
  General and administrative                           22,536         17,042
                                               -------------- --------------
Total stock-based compensation expense         $       43,977 $       36,649
                                               ============== ==============




VERISIGN, INC. SUPPLEMENTAL FINANCIAL INFORMATION (Unaudited)

Following the offering of the 4.625% senior notes due 2023 (the "Notes"), we disclose our Adjusted EBITDA for the periods shown below. Adjusted EBITDA is a non-GAAP financial measure and is calculated in accordance with the terms of the indenture governing the Notes. Adjusted EBITDA refers to net income before interest, taxes, depreciation and amortization, stock-based compensation, unrealized loss (gain) on contingent interest derivative on the subordinated convertible debentures and unrealized loss (gain) on hedging agreements.

The following table reconciles GAAP net income to Adjusted EBITDA for the periods shown below (in thousands):


                                                       Three Months Ended
                                                          December 31,
                                                   -------------------------
                                                       2014         2013
                                                   ------------ ------------
Net Income                                         $    65,472  $   292,149
  Interest expense                                      21,586       21,237
  Income tax expense (benefit)                          55,004     (175,704)
  Depreciation and amortization                         15,767       15,240
  Stock-based compensation                               9,696        9,643
  Unrealized loss on contingent interest derivative
   on the subordinated convertible debentures            1,704        8,078
  Unrealized (gain) loss on hedging agreements            (267)           1
                                                   ------------ ------------
Adjusted EBITDA                                    $   168,962  $   170,644
                                                   ============ ============




<table>

Year Ended December 31, 2014 ------------------ Net Income $ 355,260 Interest expense 85,994 Income tax benefit 128,051 Depreciation and amortization 63,690 Stock-based compensation 43,977 Unrealized gain on contingent interest derivative on the subordinated convertible debentures (2,249) Unrealized gain on hedging agreements (152) ------------------ Adjusted EBITDA $ 674,571 ==================

</table>

Verisign’s management believes that presenting Adjusted EBITDA enhances investors’ overall understanding of our financial performance and the comparability of our operating results from period to period. However, Adjusted EBITDA has important limitations as an analytical tool. These limitations include, but are not limited to, the following:


--  Adjusted EBITDA does not reflect our cash expenditures, or future
    requirements, for capital expenditures or contractual commitments;
--  Adjusted EBITDA does not reflect changes in, or cash requirements for,
    our working capital needs;
--  Adjusted EBITDA does not reflect the significant interest expense, or
    the cash requirements necessary to service interest or principal
    payments, on our debt;
--  although depreciation and amortization are non-cash charges, the assets
    being depreciated and amortized will often have to be replaced in the
    future, and Adjusted EBITDA does not reflect any cash requirements for
    such replacements;
--  non-cash compensation is and will remain a key element of our overall
    long-term incentive compensation package, although we exclude it as an
    expense when evaluating its ongoing operating performance for a
    particular period; and
--  other companies in our industry may calculate Adjusted EBITDA
    differently than we do, limiting its usefulness as a comparative
    measure.


Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

FOR FURTHER INFORMATION PLEASE CONTACT:

SOURCE: VeriSign, Inc.




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