Pro forma net income for the quarter ended March 31, 2001, excluding the amortization of goodwill and intangible assets related to acquisitions, stock-based compensation charges related to acquisitions, gains and losses on equity investments, and benefit for income taxes, was $48.6 million, or $0.23 diluted earnings per share compared to pro forma net income in the quarter ended March 31, 2000 of $2.2 million, or $0.02 diluted earnings per share. In addition, deferred revenue balances increased 7% sequentially to $542 million and cash and investments totaled $1.2 billion for the quarter ended March 31, 2001. Including the amortization of goodwill and intangible assets related to acquisitions, stock-based compensation charges, gains and losses on equity investments, and benefit for income taxes, the net loss for the quarter ended March 31, 2001 was $1.4 billion.
We are very pleased with our first quarter results which, we believe, underscore the continued demand we are seeing for our services and demonstrate the underlying power of our financial model. Even with the current macro-economic conditions facing the IT sector, we were able to grow our revenue sequentially, expand our operating margins and generate healthy operating cash flow during the quarter, said Stratton Sclavos, president and CEO of VeriSign. Consequently, we feel that we are well positioned to extend our leadership throughout 2001 as we execute on our strategy of moving complexity away from our customers and into the infrastructure to enable our customers to rapidly expand their business processes online.
Enterprise/Service Provider Division
VeriSign’s Enterprise and Service Provider Division, which sells its services through a direct sales force, includes managed public key infrastructure (PKI) services, network and security consulting, corporate domain name management, the worldwide affiliate program and global registry services, saw another quarter of strong results.
In the enterprise arena, VeriSign continued to experience strong demand for its broad range of services ending the first quarter with a total of 3,120 active enterprise customers. In particular, VeriSign continues to gain further traction with its managed PKI services adding over 200 new customers in the quarter, including Ernst & Young, Comerica, the Nuclear Regulatory Commission, and the Depository Trust Company. Approximately 2,000 businesses, government agencies, and healthcare organizations now use VeriSign’s managed PKI services to secure online business processes including supply chain and customer relationship management, secure messaging, and virtual private networks (VPNs).
VeriSign’s Affiliate program continued to thrive with the addition of two new service providers in Asia in the first quarter bringing the total number of affiliate members in the VeriSign Trust Network to 37 up from 35 in the fourth quarter ended December 31, 2000 and up from 23 in the first quarter ended March 31, 2000.
The Registry Services group continued to see healthy demand in the domain name market with the addition of 3.1 million new names in the first quarter. The Registry ended the quarter with 30.6 million active domain names in its authoritative database of domain names ending in .com, .net and .org, up 120% from 13.9 million names at the end of the first quarter ended March 31, 2000, and up 9% over the fourth quarter ended December 31, 2000. The Registry also processed the renewal, extension or transfer of an additional 2.7 million domain names during the quarter, bringing the total number of paid domain name transactions to 5.8 million.
Mass Market Division
VeriSign’s Mass Market Division, which sells its services through its retail Web sites as well as a network of ISPs, includes domain name registration and web presence services, website digital certificates, and B2C payment services.
In the web presence space, the NSI Registrar continued to demonstrate its market leadership in the first quarter by registering approximately 1.0 million new and transferred domain names. The NSI Registrar also renewed and extended 1.2 million domain names bringing its combined number of domain name transactions to approximately 2.2 million for the quarter. The NSI Registrar now supports 6.5 million customers with some 15.5 million active domain names, representing 57% growth in the registration base over the first quarter of 2000.
VeriSign’s website certificate business continues to benefit from an aggressive lead generation program, a successful upsell campaign and 80%+ retention rate, ending the quarter with a total of 90,000 new and renewed certificates issued, increasing the installed base to over 305,000 certificates. This represented 112% growth over the first quarter of 2000 and 11% growth over the fourth quarter ended December 31, 2000. The Mass Market installed base (excluding certificates sold into the Enterprise/Service Provider Division) grew to 225,000 up 96% over the first quarter of 2000.
The Payment Services business saw outstanding growth in the first quarter as it continues to benefit from larger lead volumes and increasing conversion rates for its entire range of payment services. VeriSign increased its active merchant count by over 5,000 in the quarter, exiting with a total of over 19,900 online merchants now using its service, up 32% over the fourth quarter of 2000.
