威瑞信 (VRSN) 2009 Q1 法說會逐字稿

Good day, everyone, and welcome to the VeriSign, Incorporated first quarter 2009 earnings conference call. Today's conference is being recorded. At this time for opening remarks, I'd like to turn the conference over to Ms. Nancy Fazioli of Investor Relations. Please go ahead, ma'am.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for VeriSign's first quarter 2009 earnings conference call. I'm Nancy Fazioli with Investor Relations, and I'm here today with Jim Bidzos, Executive Chairman and Interim CEO of VeriSign, along with President and Chief Operating Officer, Mark McLaughlin, and Brian Robins, our Acting Chief Financial Officer. Please note this call and accompanying slide presentation are being webcast from our Investor Relations website located at investor.VeriSign.com. Please refer to our website for important information including the Q1 2009 press release and a reconciliation of our GAAP to non-GAAP information. Replay of this call will be available on our website within a few hours. Today's slide presentation will also be available for download after the call.

Financial results in today's press release are unaudited and the matters we will be discussing today include forward-looking statements and as such are subject to the risks and uncertainties that we will discuss in detail in our documents filed with the SEC. Specifically the most recent report on Form 10-K, and 10-Q, and any applicable amendments which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements.

In conformity with the adoption of FAS 160, net income now includes income attributable to non-controlling interest. References made to net income or loss attributable to VeriSign, Inc. and subsidiaries, whenever we use the term net income or loss. This also applies to earnings per share. Additionally, financial results in today's press release and the matters we will be discussing today include non-GAAP measures used by VeriSign. Our non-GAAP income statement and the description of items excluded from non-GAAP financial information are located on the Investor Relations website. In a moment, Jim, Mark and Brian will provide prepared remarks, and afterwards, we will open up the call to your questions. Unauthorized recording of this conference call is not permitted. With that I'd like to turn the call over to Jim, Jim?

Thank you Nancy, and good afternoon to everyone joining us today. I'm pleased to report that VeriSign delivered a very solid quarter on the top end bottom line. This is particularly gratifying given the ongoing macroeconomic environment, and these positive results are a testament of the continued dedication of our employees, including those in businesses targeted for divestiture. VeriSign holds a unique and central position in the internet ecosystem and we believe our business model has enabled our global team to drive strong results during this difficult period.

Our Q1 results demonstrate we delivered all the goals we laid out last quarter. In the first quarter we delivered revenue in our core businesses of $252 million. We also saw improvement in our non-GAAP core operating margin, which came in at 36.9%. Non-GAAP earnings per share was $0.32, $0.01 of EPS was attributable to one-time benefit to other income stemming from an acquisition termination fee. Excluding this one-time event, we saw 48% EPS growth year-over-year, very strong results.

On the P&L there are some unexpected events that occurred in Q1 that contributed to the quarter being slightly better than we planned, including some favorable events on the expense side. The balance sheet continues to be a growing area of strength for the company. VeriSign's cash position remains strong as we ended the quarter with nearly $950 million cash. As a parenthetical comment, today our cash position is 1.291. On the divestiture front, I'm pleased to the TNS acquisition of our communications business closed on May 1 and that RTP, our real-time publish services closed on May 5.

In addition, VeriSign has entered into an exclusive letter of intent to sell MSS, subject to an agreement on final terms and conditions. The MSS business represents 65% of Q1 2009 revenue, of the enterprise security services or ESS bundle. In the first quarter we unbundled ESS into MSS, Global Security Consulting, and iDefense. Which as Mark will discuss later we decided to retain as part of our naming business.

When we first implemented our divestiture plan to date, we have sold 10 businesses of the 13 that we're currently holding for sale. Collectively, the net proceeds from these sales, including the sale of the remaining interest of the Jamba! joint venture is approximately $540 million. I would like to reaffirm that the board and our executive leadership team is committed to completing the divestitures of our non-core businesses, continuing to protect our core franchises of Leap and SSL, and investing in our core identity and authentication businesses that we firmly believe this is a strategy that will best enable us to create shareholder value. I'll note that comments and feedback from customers and partners globally indicate our leadership and solutions are needed now more than ever. We believe that the need for our services remains strong despite macro challenges to the economy that made us [stand alone].

With that, I'd like to turn the call over to Mark who will go into our business results a bit more for you. Brian will then provide a more detailed review of the financials, and I'll conclude with a brief outlook. Mark?

Thanks, Jim, good afternoon. I would like to echo Jim's thanks to the employees across the company for their performance this quarter. We have a great team committed to winning and it is a pleasure to be back with this team. As Jim mentioned we had a solid quarter in the space of a tough economy.

Before drilling down into the quarter, I wanted to note as you saw in the press release, and as Jim mentioned, our quarterly revenue includes iDefense, which was previously classified as a discontinued operation. I will now be included as part of naming services. iDefense provides information security threat intelligence, which has been a valuable resource for our naming business, as we continue to counter threats to the DNS. In addition, many government agencies that we interact with in our DNS operations are customers of the iDefense services, we therefore concluded this asset provides strategic value, that we're retaining it as part of the naming business.

Let me get into the business unit operating results for the quarter. In our naming business, we saw better than expected growth with the adjusted zone for registered names in dot-com and dot-net totaling 92.4 million names at the end of the quarter. This is an increase of 2 million net names added to the adjusted zone quarter-over-quarter and a 9% increase year-over-year. In total, in the quarter, we processed 7.3 million new domain name registrations during the quarter, compared with 7.8 million during Q1, 2008.

On the renewal rate side, as you may recall, renewal rate for Q4, 2008, bounded down to 70% which was down from 72% from Q3 2008. This decline stemmed largely from non-renewal of main names registered for the purpose of monetizing on line traffic. While renewal rates are not fully determinable until 45 days until the end of the quarter, we believe for Q1 2009 the renewal rate will be between 70 and 71%. Last quarter our tone was cautious regarding the Q1 outlook. We felt this was prudent given the economy and our view on overall market dynamics.

Our view on that has not changed. On the naming side, we were pleased to see better than expected growth in the quarter and believe it is due to a number of factors including seasonality, as the first quarter is typically the strongest quarter for this business. In addition to strong seasonality, during the quarter, we saw new unit promotion programs, international growth, and some strength from domain names being registered for the purpose of on line advertising in advance of the April implementation ICANN policy regarding use of ad rate period for registration deletion.

On the infrastructure side, we were able to reduce average daily peak loads by more 10% through enhanced security and monitoring tools, even in the face of growing average daily DNS usage. Our average daily query load has increased from 35 billion to 38 billion per day. To handle these increases we continue to invest in the DNS in order to optimally manage the increase in traffic on the internet. We're committed to investing in critical project in our infrastructure to maintain our record of 100% up time over the last 11 years, making us one of the most reliable and trusted networks in the world.

Now moving on to authentication services, the business unit that includes both our business authentication or SSL services, and user authentication, or IS. In the SSL business, we saw the installed base of certificates increase to 1.15 million certificates, compared to 1.12 million last quarter, and approximately 1 million in Q1, 2008. This represents a 13% year-over-year growth in the base. The annualized average unit revenue, or AUR, for the installed base of VeriSign, GeoTrust and Broadband Certificates was $244 for the quarter compared to $248 last quarter. As we've seen in the past, the AUR decline this quarter is primarily due to the product mix shift. We continue to see the lower end of the market grow faster than the high end, and our GeoTrust brand continues to grow faster than our overall portfolio as we participate in the high growth segment of the market.

At the highest end of our offering, while still a small portion of our SSL business, extended validation, or EV certificate sales are strong as we continue the trend of more than doubling the units sold a year ago. We remain the market share later for EV certificates. Finally within our IS business, we have now distributed over 2.3 million credentials as part of the VIP and one-time password program. In the first quarter, we released the iPhone version of our mobile one-time password, now available on more than 100 mobile phone models. We are seeing increased interest in stronger authentication as form factors become more convenient and cost-effective.

Now to give you a sense of what we expect as we move forward. Our continued focus in the naming business is on channel expansion, growth in our international footprint, and the introduction of new services. In our SSL business, we are focussed on unselling the base, driving sales at the low end, and leveraging the brand. And in general, we remain committed to implementing plans to continue to improve operating leverage as we grow the business. While there are some reports that the economic environment has a glimmer of stabilization, it is too early to tell what the future may hold. In addition to staying in close touch with our customers, things we look at when building our forecast include the projected growth in on line advertising and eCommerce growth.

While we expected both of these categories will show continued growth in 2009, it should be no surprise that any growth will be at its lower rate than previous years. With that in mind for the second quarter, we believe the naming base will grow by 1 million to 1.5 million names and that renewal rates will stay within the historical range of 70 to 71%. We continue to watch the impact of the structural changes in the business related to on-line advertising, most notably as it relates to our renewal base in business. And on the SSL side of our business, we are watchful of customer behaviors in this economic environment, which has resulted in us seeing customers renew later than usual and increasingly request discounts and price reductions as well as taking deals to RFP.

In summary, our core business performed well in the first quarter. With our strong market position, great team, well recognized and regarded brand, and our disciplined approach, we remain confident in our ability to make continued progress in our business in both the short term and over the long term. Thanks for your attention, and now I'll turn the call over to Brian. Brian?

Thanks, Mark, and thanks to everyone for joining us this afternoon. As Jim and Mark discussed we are proud of the progress made in Q1, particularly in light of uncertain macroeconomic headwinds that we faced coming into the quarter. This has been and still is unchartered territory for all of us. Before I jump into a more detailed discussion of first quarter results, I would like to briefly discuss the housekeeping items. As we discussed last quarter, beginning with Q1, we have adopted a more rigorous view of what is excluded as non-GAAP item in order to improve the quality of our earnings. A description of earnings excluded from our non-GAAP financial information is available in our press release. As of this quarter gains and losses on derivatives and equity investments, impairment of property, plant and equipment, and non-recurring costs are no longer excluded. The 2008 non-GAAP reconciliation has been restated for this change.

This inclusion of iDefense and the adoption of new accounting standard FSB, ABP 14-1 related to the accounting for a convertible debt instrument is posted on Investor Relations website at investor.VeriSign.com. We will be holding our 2009 Analysts Day on November 19th in New York City, additional details will be forthcoming, but please mark your calendars. We look forward to this event and hope to see many of you then.

Moving now to a more detailed discussion of results for our core businesses. Revenue for our core businesses came in slightly above our guidance at $252 million, up 2% sequentially, and up 13% year-over-year. As we noted in our press release, iDefense contributed $3 million to the quarter and is included in naming services. We expect iDefense to contribute approximately $10 million in revenue to 2009. Revenue growth in Q1 was largely driven by performance in naming which was up 17% year-over-year, authentication services revenue, which includes SSL, VSJ and IAS was up 8% year-over-year. As noted previously, we exited Q1 with non-GAAP core operating margin of 36.9%, which was above our internal expectations. Factors in Q1 contributing to lower expenses in plan include lower labor costs and expense reductions related to the implementation of smart spending programs.

Expense savings include a slower pace of hiring, more judicious use of outside labor and travel savings. Below the operating income line we incurred a loss of $5 million for our core operations. This was less than we expected due to the termination fee of $3 million from an acquisition received during the quarter. Due to the adoption of FSB APB 14-1, we expect future quarters to be a loss of approximately $9 million per quarter. Non-GAAP core net income for the first quarter was $61 million, resulting in non-GAAP earnings per share of $0.32. The diluted share count used in the EPS calculations was 193 million shares from approximately 194 million shares last quarter.

Moving on to cash flow and balance sheet items. Operating cash flow is approximately $38 million and free cash flow was $17 million. Q1 is seasonally low due to the payment of accrued employee bonuses. Consolidated capital expenditures for this quarter were $21 million. Capital spending continues to be related to the expansion and optimization of our infrastructure. We ended the quarter with a strong balance sheet, with ending cash and cash equivalence of $944 million, up approximately $153 million from last quarter. During the quarter, we received distributions from the reserve funds of approximately $94 million. There remains 56 million from the reserve funds that is currently classified in other current assets.

Net DSO for the fourth quarter was 31 days, down four days from last quarter, stemming from strong collection efforts. Deferred revenue from continuing operations ended the quarter at $872 million, up $27 million, or 3% from last quarter. We ended the quarter with approximately 3,200 employees, down 100 from last quarter, largely due to planned head count reductions. With the sale of communications services, international clearing, and real-time publisher services, we're currently at approximately 2800 employees. As previously discussed, head count will continue to decline with the sale of non-core businesses and further reduction in shared services head count. Our divide and focus approach continues to pay off as a non-core businesses that remain as well as those that are in the process of being sold again delivered solid results.

In summary, we're pleased with our results given the continued challenging economic environment, we delivered double-digit revenue growth as well as strong earnings growth this quarter. Although we benefit on the bottom line from some favorable events this quarter, on the whole, our performance speaks to the strength and durability of our business model. As we have noted, 2009 will continue to be challenging, but we will also continue to exercise financial and operational discipline to deliver strong results.

Moving on to our outlook. Q1 historically is a seasonally strong quarter. For Q2 we expect revenue for the core businesses will be flat to slightly up from Q1. As we look at 2009, we remain cautious in this environment. As we previously discussed, our 2009 revenue being at the low end of our original double-digit range, with the addition of iDefense revenue, we believe that this target is still achievable. Without iDefense, there are a few factors could impact our ability to hit this target by a couple of percentage points. Specifically those are swings in FX rate, the global economy, especially in Japan.

As context on FX, note there have been fairly dramatic swings in FX rates over the four months based on economic environment. The dollar has strengthened against the yen and Euro about 10% and 5% respectively from plan rates. We expect this to result in 2 to $3 million impact to revenue in the second quarter, and possibly by similar amounts in the second half. Q2 non-GAAP operating margin is forecasted as being in line with the first quarter. Given the uncertainties that remain with regard to the economy, we will continue to take a conservative approach to cash in the near term.

With that, I'll turn the call back to Jim. Jim?

Thanks, Brian. 2009 is off to a solid start for VeriSign, demonstrating strong execution in a tough environment. Our strategy is the right one and we believe the results demonstrate that. While it is easy to get caught up in the details of quarterly earnings, I think it is also important to step back and remember what a unique company VeriSign is, as well as the important foundation that we provide for the internet economy. We believe our business model puts us in a unique position in the industry and that combination of business model and strategic position has enabled us to deliver revenue growth, margin expansion and strong profitability in this economy. Additionally, our balance sheet is very healthy, and this allows us to aggressively protect and grow our business in this environment, while maintaining flexibility to pursue opportunities prudently.

While 2009 will be a year of challenges and opportunities, we are excited about VeriSign's role and potential as the most trusted provider of internet infrastructure services now and for many years to come. We would now like to open the call for your questions. Operator?

(Operator Instructions). We'll have our first question from Phil Winslow with Credit Suisse.

Hi, guys. I just wanted to chat a little bit more on margins. You mentioned a flat margin quarter to quarter in Q2. Mark, when you look longer term in the company, I would say some of the macro dynamics have changed but any sort of change in your opinion for the longer term margin targets are?

Thanks, Phil. On the longer term basis I think, as I think I mentioned on the last call, I think we can maintain the margins we're looking at now with possible slight improvement. Factors that go into that are the amount of revenue, continued leverage as we divest the remaining businesses and then some of the programs we have in place to reduce expenses. Those are counter balanced by the infrastructure or making investments from the talent and people as well as some product investment.

Great. And then also when you look at the SSL business, you mentioned that greater mix shift towards the low end. When you look at this year, what are you expectations when you think about pricing. Should that continue over the course of the year?

I would expect that the mix shift that we're seeing will continue, the low end of the market is growing faster than the high end of the market and there is no reason to believe that's going to change, as far as from an AUR standpoint I think if we look back a few quarters and see the percent declines we see in AUR, I expect that could continue for the foreseeable future.

Great. Thanks, guys.

We'll go next to Todd Raker with Deutsche Bank.

Hi, Todd.

If we look at the 2 million net add number on the DNS side, you get some demand stimulation in the quarter. When you think about Q2 and guidance of 1 to 1.5 million, are you guys going to repeat some of those stimulation programs and can you give us a sense in terms of what you think the impact of the ICANN change was in terms of tasting and that kind of, you mentioned you thought the low end momentum in Q1, some advertising momentum, sorry.

So a few things there. The, you know, we did better than we thought and we think it is related to those items. It is not just us who do programs. It's the industry-wide. We will continue to do programs, at least for a couple months in this quarter, and from what we hear from the industry, a number of the registrars will continue to run programs, as well. But it's not certain as to whether they would do that for the entire quarter or not. So it's very difficult to tell how much of the new units from the first quarter are directly related to those kind of programs, because that is just tough to break that out. We did see, as we got closer to April 1, some run-up on new names that we believe are the impact of that implementation of the PBC non-forgiveness. Hard to say which portion of that is attributable as well if I had to guess, I would put it in the few hundred thousand sort of category but that is a difficult thing to do.

Should we think that business is bottoming on a secular basis in Q2 as the anniversary some of the structural changes?

I think some of the structural -- there was two things we had talked about before structurally. One was the changes that Google particularly made on its programs and I think we've seen that impact flow through the system. From a new unit basis, and we're continue to go see that slow-down from the annual basis. Looks like the renewal stabilized in the historical rates of 70 to 71%. And then on the on the changes that are ICANN related about the restocking fee and the non-forgiveness fee, to the extent we might see impacts from those things other than the run-up of names , it would be the renewal rates, you know, a year or so from today, depending upon how those names

All right. Thanks, guys.

We'll go next to Sterling Auty with JPMorgan.

Thanks. I just want to focus, Jim, the comment you made about being conservative with the cash yet being opportunistic. I didn't hear any share repurchase in the quarter. How are you looking at the use of the cash to be opportunistic, share repurchase versus share acquisition?

Good question. Our share buy back strategy hasn't changed. We consider that to be a viable way to return value to shareholders. We currently have authorization for $950 million in repurchase. I think given the depth and the continued length of the recession, and the impact that we're seeing from it, I think it's just generally prudent for us to be extremely cautious with cash. Having said that, I would add a couple of things. Number one, is that we have bought some shares back in every quarter, and that in general our policy has been that we will repurchase at least an amount equal to the creep and that on an ongoing basis that strategy hasn't changed. I would also add that we would be disciplined and opportunistic in any acquisition opportunities. We simply don't see any at this point that would cause us to -- to rethink our view of cash. I would just simply call it one of caution based on the economic environment, and a continuing review of share buy-back as a way to return shareholder value.

Okay. And then can you just review first the decision process to keep the iDefense part of ESF and is there any chance you might keep any of the other discontinued ops still left for sale?

Okay. I'll turn that over to Mark. I'll say that decision with iDefense was purely strategic, not financial. And the ESF unbundling essentially was a way to help us get to divestiture quicker.

So I think the short answer is, no, we will not keep other portions of these assets. We don't have a plan to do that today. So the iDefense one was the one I got involved in when I got back. I think that is unique to the naming business. Our naming team uses iDefense services to help them counter the threats we see to the DNS and it seems like it might be a little short sighted to have to go to market to get those services for that capability when we had it in house. Secondly, we have a lot of happy customers in the US government who use those services today, and that's closer related from a relationship standpoint from our DNS business, I would like to continue to remain good relation'ships. Third point is that there is opportunity to grow that business as well which we're trying to do.

All right. Thank you.

We'll go next to Sarah Friar, Goldman-Sachs.

Good afternoon. The first question, can you talk about the pricing on the DNS side? Clearly I think you've made some comments about wanting to be more careful given the macroeconomic environment. Any thoughts about lifting the price overall?

Hi, Sarah. By way of reminder, for people who may not know, we have the ability to take 7% price increase or out of the six years of the agreement with dot-com. So far, we've taken two of these increases. In the past we were careful about the timing of the increases and we should continue to do so particularly in light of the impact the increase could have on sales in this weak economy as well as uncertainty in the multiple constituencies that are involved in this industry. There has been a bit of stabilization in the company, but it is hard to say whether that will last or increase. A few of the uncertainties on the constituency side have been answered, there's a newly confirmed Secretary of Commerce, Gary Locke, as of just about two weeks ago and nominated but not yet Senate confirmed, Head of NTIA, Larry Strickland is coming out of the SEC. Hard to say when he will be confirmed. There is not an announced CEO of ICANN. I don't expect to see that probably at a minimum until the next ICANN meeting in June. We take numerous items into consideration. We will continue to do that.

I think you have to give us six-month update, you upped the prices historically in the fall. It seems like right now we could think it is going to get pushed out a little bit from there. Is that fair?

We have to give a six-month notice period prior to increasing the prices. To the extent that two make a pattern we had noticed two previous ones in the springtime and taken the increases in the fall, but there is no rule about that.

Okay. And just a follow up for you coming back into the fold, I know you had a lot of ideas about what could be done on the registry side of the business, and new business creation there. Any update on the things you're particularly excited about as you come back and looked at what's there for you to do?

There's -- there are a couple of things, Sarah. I want to be careful, talking about things that are too early to talk about. But two that I spent a bit of time, or more than a bit of time since I got back on, was one the VIDN, which is the VeriSign Internet Defense Network which we launched in beta. I spent some time with customers on that and have had some positive feedback so far. But that doesn't mean that is going to be a big deal for us, yet. I'm trying to be cautious about that, as well.

And the second thing is really I think some clever ideas what the team is looking at what to do with the dot-name asset we purchased, particularly related to tieing together SNS and e-mail using a dot-name. And we're invading a few markets with that right now and getting some interesting feedback. But again these are early things for us, so I'd like to hold off on any details.

I appreciate the color though. Thank you.

(Operator Instructions). We'll go next to Walter Pritchard with Cowen & Company.

Hi, Mark, I wonder if you could talk about puts and takes on the DNS side. In the past you guys mentioned a number of new name ads, kind of a gross number, if you could give that number. And just for Brian in terms of shared services costs, now that you've got some of these divestitures behind you if you could help quantify, especially on the G&A expense side, how much of that you can take out given what's been completed and what's been announced here in terms of the divestitures.

Happy to, Walter. Just make sure I understand . You mean just as far as new registrations and what goes into

Right. In terms of I guess to give us some color on the renewal rate being 70 to 71% estimated for the quarter, but just kind of the, I don't know, help us out a bit with it sounds like you saw s or stronger new name registrations as well as maybe a bit less churn than expected. I'm trying to get more color around that qualitative commentary.

If you look back over the course of 2008, so this quarter we did 7.3 million new registrations and in the fourth quarter of 2008 we did 6.3 million. In the third quarter we did 6.9 million, and in the second quarter we did 7.5. So just if you charted that out we're roughly back to where we were in the second quarter of 2008, which I think correlates heavily to the end of the economic world as we knew it. And whether that's a trend that will continue, I think is definitely depends to some extent on the economy, and like I said, the things we watch on eCommerce growth and on line advertising there are lots of conflicting reports about that, but I've seen a lot to be flat to single-digits given the results that we've seen in the first quarter that they're probably growing in the high single-digits in both of those categories and we grow kind of closely to that. But the three things I mentioned that go into that number for the first quarter are better than we expected, where the -- we did see strong international growth. I think we definitely saw units coming from these promotion programs, and we did see a bit of a run-up in front of that PBC non-forgiveness. Does that answer your question?

Just, Brian, on the costs.

Walter, this is Brian. On the G&A costs, there will not be any direct immediate savings from the divestitures. The two divestitures that we mentioned, RTP, and BSB were relatively small. On the comms divestiture, which is one of the larger divestiture, we've been aggressive predivestiture in separating these assets that's going to discontinued operations, and so with comms particularly, that is actually operating out of our Overland Park office which are dedicated facilities. With that said, once the TSAs are done and we fully transferred all of the technology, there will be some reductions in facilities and data centers and so there will be some opportunity and so the next two quarters to trim out G&A. We did deliver higher margins this quarter, at 36.9% operating, due to some of the efforts we put in place over the last couple of quarters.

Walter, this is Jim, answer your question about what divestitures remain. I think there is generally very good news on this front. As you know we closed the comm business on May 1 and RTP on May 5. We have two of the three components of the enterprise security bundle that we're not keeping, MSS, we mentioned, we have a letter of intent.

We're not identifying the party per their non-disclosure. We have the consulting part of the security business. And then we have the messaging bundle that still remains. And that's it. That is 10 out of 13 that have closed. So we're pleased with our progress there.

Great. Thank you.

We'll go next to Katherine Egbert with Jefferies.

Hi, just a quick question, competing certificate services from the registrars, can you talk about that, how the business model is deferred and value proposition the customer might be versus yours.

This is Mark. So let me start with from a registrar standpoint are primarily a channel for certificates, not all registrars offer their own certificates. But ones that people know of, like GoDaddy offers their own certificates, they are almost totally at the very low end of the market and from a differentiation standpoint a lot of that is around price. What that really means from a customer standpoint is the level of authentication that is provided for those services, and when you get that very low into the market, it is usually very minimal, usually just verifying the domain name itself. Minimal level of authentication.

Go back to the price increase on dot-com. I heard your answer that, , about shifting around, government officials, and that's understandable. But is that what you're looking for the triggers to take this price increase, confirming the Head of NTIA or are there some other

There are a lot of factors in this, Katherine, but primarily what we're concerned about is just the economy itself. So a lot of the discussions we had from the customers' standpoint lead us to believe that in this current economy, unless we see some more stability, the price increases could lead to lower demand just people buy less. That is what we're looking for, stabilization of the economy. You throw into that mix some uncertainties that exist, because of the new administration, a lot of players that used to be around the table are different or not yet named, and how that's -- how that's received in this economy, is something we need to think about.

Okay. Thanks. Very good.

We'll go next to Rob Owens from Pacific Crest.

Couple questions around iDefense. With the incremental revenue contribution, did you break out what the incremental expense was to the quarter, as well.

Hey, Rob, this is Brian. We actually don't break that out but what we've committed to in guidance is that we'll deliver the same profitability.

So was it at the same type of corporate margin in Q1 or was it additive?

It was absolutely not at the same corporate margin.

Okay. And second I think you said your said your goal was to grow iDefense, it did 3 million in the first quarter, why you're only seeing 10 million fort year, and where should we see the weakness?

So we didn't put the decimals in but that is a round-up. So if you look throughout the year, part of the other issue, as well as since we're just integrating that back into VeriSign, when you go with the divestiture the willingness for customers to sign new business with you, as Mark talked about, we'll integrate that with VeriSign, go into the public sector, incorporate into our threat intelligence, and so I think you'll see more coming from that in the future.

Great. And then on your website are you going to give us comparability for what iDefense contributed in 2008?

It's there now.

Thank you.

We'll go next to Steve Ashley with Robert W. Baird.

Maybe I can start with a housekeeping question, Brian, would it be possible to get the revenue dollar breakdown between the naming business, the SSL and the IAS businesses?

I could give that to you. In fact, I'll give you approximate. Naming was approximately $148 million.

All right.

SSL was about $91 million. And then IAS, we've talked about is roughly around $12 million. On a go-forward basis, SSI acts as the authentication unit and so those will be combined.

Back to the surf business, anything you're doing from a marketing stand point or go to market to try to encourage the EV adoption?

Yes, this is Mark, Steve. Yes, we do, do that and the industry does that, as well. So EV is a standard which, is good and bad in that as a standard everybody can use it, everybody can adopt it. The bad news around that is that as far as putting enough marketing muscle behind it for it to make a difference, it takes quite a bit. So we certainly do our part for that. I'd like to see lots of other people step up to that as well, and I think that would help everybody. But we haven't really seen the entire industry particularly in the browser space do that.

Thank you.

We'll go next to Scott Sutherland with Wedbush, Morgan.

This is Kerry Rice for Scott. Touch on some things that were mentioned earlier. You mentioned I think a little bit of improvement from that in the domain names from the advertising, and I was curious if you've seen that sustainable here in April and maybe if you can without giving guidance, what you think the impact is about Q2?

Yes, so what we saw there, I think, is a run-up prior to the implementation of this non-forgiveness fee. So just for people who may not know what that means, as of April 1st, if you were registering domain names using the ad grace period and then returning those domain names, that used to be free, you had five days to do that and that used to be free and it kind of created this whole PPC industry. And then ICANN imposed what they called a restocking fee of $0.20 for everyone of those names, so that raised the bar on what you have to monetize that name. As of April 1st, there was no more forgiveness of the registry fee, which means you had to pay the entire registry fee to keep those names. So as a matter of monetizing those names, the bar went from zero up to the entire registration fee plus the restocking fee. So people were trying, I think, trying to get in front of the the implementation of that, right up through April 1st. Post-April 1st, I don't think we'll see names going into the category unless they can monetize at that rate and if that is the case there is really no difference between those names and what we call traditional names, they're the same thing now because they're costing the same amount and people are monetizing at the same level.

And for that run-up, and I don't know if you have any statistics on this, but the ones that we're still trying to beat that deadline, did they generally do the grace period and drop off, or did you see a lot of those retained going in, because of the restocking fee, or can you give any insight on that?

Actually I don't know. I don't know that. I can get back to you on that. But we used to see a very, very wide divergence between the number of names that were attempted to register and the number of names that would stick.

Right.

And, you know, that has gone down dramatically over the last year to something that is fairly negligible. I call it back to normal, but I could check on that.

It would be curious to see if they kind of retained them or if they just dropped off. And then the final question I have, there has been some of the discussion out of the EU of pushing ICANN to run independently and not in the US Department of Commerce. Do you have any thoughts on that or comments on that?

So that relates for folks who may not know, there is a contract between ICANN and the Department of Commerce called the JPA, by its terms it is going to expire in September. And that is -- that has been the case every year. It is a year-to-year contract. There is a lot of discussion about what will happen come September, and there's no specific proposal out there, yet people have all gotten behind ICANN is proposing self-governance, lot of people have proposed different models. Recently the commissioner of the EU suggested creating like a super-G12 nations to provide oversight. But that's one of many proposals that have been on the table.

Okay. Thank you very much.

And we have no further questions in the queue at this time. I'll turn the conference back over to Ms. Nancy Fazioli for any additional or closing remarks.

Thank you, operator. We anticipate that our next quarterly conference call, which will reflect our second quarter 2009, results will be held Thursday, August 6th, at 2:00 p.m. Pacific time. I would like to remind you that in light of regulation FD, VeriSign plans to retain its longstanding policy to not comment on financial guidance during the quarter unless it is done through a public disclosure. Please call the Investor Relations department with any follow-up questions from this call. Thank you for your participation and continued support. This concludes our call. Thank you, and good evening.