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VeriSign (ticker: VRSN) beat consensus estimates for Q2 but guided revenue below consensus for Q3. The stock traded down 16% in reaction. Details:


Q2 Results
(all comparisons are year over year unless stated otherwise)

  • Revenue of $445 million was up 74% and ahead of consensus estimate of $441 million.
  • GAAP net income was $41 million and EPS $0.15, up from $22 million and $.09.
  • Pro forma net income was $105 million and EPS $0.27, ahead of consensus of $0.26.
  • Non-GAAP results exclude amortization of  intangible assets related to acquisitions, in-process R&D, net gain on sale of investments, restructuring charges, stock-based compensation.
  • Balance sheet: cash and equivalents were $933 million, up $61 million sequentially.
  • Cash flow from operations was $136 million. 1.6 million shares were repurchased for $43 million.
  • Deferred revenue of $477 million at end quarter was up 6% sequentially.
  • Net days sales outstanding (Net DSO), which takes into account the change in deferred revenue  balance, was 52 days, up from 49 days in Q1.
  • Capex was $29 million, up from $17 million in Q1.
  • Currency impact on revenue was negative $7 million, or 1.6%.

Segment info 1: Internet Services Group (ISG)
(includes security, payments, and naming & directory services)

  • Revenue was $168 million.
  • "...included sequential growth in both VeriSign’s Security Services  (NYSEARCA:VSS) and VeriSign’s Naming & Directory Services (VNDS) businesses".
  • Web site certificate business issued 124,000 new and renewed certificates, ending the quarter with a base of 471,000 certificates, up from 462,000.
  • Payments business ended the quarter with 144,000 merchants under management, an increase of 8,000 merchants.
  • Payments business processed 127 million individual transactions with an  aggregate value of $11.4 billion during the quarter.
  • Naming & Directory Services business ended the quarter with 44 million active domain names in .com and .net, up 2.8 million names or 7%.

Segment info 2:  Communications Services (VCS) Group
(intelligent communications, commerce and content services for
telecommunications carriers and next  generation service providers)

  • Revenues of $277 million were up 14%.
  • Communications and Commerce revenue was $102 million, up 5% sequentially.
  • Content group revenue was$175 million.
  • Communications Services Group ended Q2 with a base of 7.2 million wireless billing customer subscribers, up slightly from 7.1 million in  Q1.
  • The VCS business supported 14.4 billion database queries in Q2 2005, up 13%.

Guidance

  • Q3 revenue of $435-440 million, below consensus of $460.
  • Q3 EPS of $0.27, in line with consensus.

Full press release here.

VRSN chart below.

Big2_6

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Source: VeriSign compressed on disappointing guidance (2Q05 VRSN earnings results)