威瑞信 (VRSN) 2011 Q4 法說會逐字稿

Good day, everyone, and welcome to the fourth-quarter 2011 earnings call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mr. David Atchley. Please go ahead, sir.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for VeriSign's fourth-quarter and full-year 2011 earnings conference call. I am David Atchley, Corporate Treasurer and Director of Investor Relations, and I am here today with Jim Bidzos, Executive Chairman, President, and CEO; and John Calys, Vice President, Interim CFO, and Controller. Please note that this call and accompanying slide presentation are being webcast from the Investor Relations section of our corporate website, www.verisigninc.com. Please refer to that website for important information, including the Q4 and full-year 2011 earnings press release. A replay of this call will be available on the website within a few hours.

Today's slide presentation will also be available for download after the call. Financial results and 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 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. I would like to remind you that in light of Regulation FD, VeriSign retains its long-standing policy to not comment on financial performance or guidance during the quarter, unless it is done through a public disclosure.

The financial results in today's press release and the matters we will be discussing today include non-GAAP measures used by VeriSign. GAAP to non-GAAP reconciliation information is appended to our press release and slide presentation as applicable, each of which can be found on the Investor Relations section of our website. In a moment, Jim and John will provide some prepared remarks; and afterward, we will open up the call for your questions. Unauthorized recording of this conference call is not permitted. With that, I would like to turn the call over to Jim. Jim?

Thanks, David, and good afternoon, everyone. The fourth quarter capped a year of solid growth, execution, financial performance, and shareholder returns for VeriSign. During the past year, we completed a four-year, Board-directed restructuring plan, which included divesting non-core businesses, the sale of our authentication services business, and relocating our headquarters. This restructuring has resulted in a more efficient and more focused VeriSign that we believe is better prepared for the opportunities ahead. We delivered both for the global community of Internet users that increasingly rely on us and for our shareholders. As stewards of critical elements of Internet infrastructure, both what we do and how we do it are important for the secure and reliable operation of the global Internet, on which [b]illions of people worldwide depend. In 2011, we continued to demonstrate our commitment to shareholders by completing the return of divestiture proceeds. In May, we paid a special dividend of $463 million to shareholders and $100 million in contingent interest to bondholders. We also continued our share repurchase program during the year, with 16.3 million shares repurchased, returning $535 million during 2011.

On our last earnings call, we described several pending cash activities. These included the full payment for the Reston building purchase, potential financing scenarios, and the pending repatriation of previously taxed offshore cash. We mentioned this repatriation in our last call, but did not state the amount, which is $86 million. All of these items will result, as expected, by December 31. As these activities were pending during the fourth quarter, we took a conservative approach; and for this reason alone, we did not make share repurchases. Security and stability are paramount to the way we run our business, and this extends to the way we manage our liquidity. So, on December 31, with all the pending cash activity successfully concluded, we held $225 million in domestic cash and $1.125 billion in offshore cash. We have $831 million remaining under our current share repurchase authorization. We continually evaluate the overall cash and investing needs of the business and consider the best use for our cash, including potential share repurchases. John will discuss our cash balance in more detail in a few minutes.

During the fourth quarter, we completed the move to our new corporate headquarters in Reston, Virginia. We are excited about this new facility, as it brings our main core functions under one roof. We are already seeing efficiencies and enhanced collaboration among our teams in the new building. Also, I would like to give you a quick update from our last call regarding our search for a CFO. As mentioned last time, we have begun a search for a new CFO, and are starting the interviewing process. Of course, we will keep you updated as things progress. As we look towards 2012, one important area of focus is the dot-com agreement renewal. The process and time line are on track, and we will provide updates as appropriate leading up to the renewal. Since we last spoke to you, we are engaged and are pleased with the progress.

I will comment now on fourth-quarter operating highlights. In our naming business, the base of registered names in dot-com and dot-net totaled approximately 113.8 million at the end of December. This represents an 8% increase year over year in the base, and an approximately 2% increase quarter over quarter. In the fourth quarter, we added 1.9 million net names to the domain name base and we processed 7.9 million new registrations, which is about a 4% increase over the same period a year ago. The fourth quarter was our strongest Q4 for new registrations on record. In fact, that is true for each of the quarters in 2011, thus making it our strongest year for new registrations, with over 32 million new registrations processed. The Q3 2011 renewal rate was 73.3%. While renewal rates are not fully measurable until 45 days after the end of the quarter, we believe that the renewal rate for the fourth quarter of 2011 will be approximately 73.4%. We expect the Q1 net names added to the base to be between 2.4 million and 2.7 million names, which reflects the continued growth and the underlying drivers of the Internet, as well as seasonality.

Looking at our NIA business, the team performed very well and exceeded our full-year bookings target. The NIA sales team is now fully hired and in place, and we expect 2012 to be a year of execution for the business. We are focused on scaling the NIA business to achieve quality of revenue and stable growth. As we look forward to 2012, our focus will be to -- number one, continue providing unparalleled network and registry services performance; number two, renew the dot-com agreement with ICANN and receive approval of the agreement by the Department of Commerce; number three, invest in benefiting from the new gTLD program by both applying for strategic names ourselves, and teaming with other applicants as their back-end registry service provider. By the way, we have been selected by several brands that ran an early selection process in anticipation of their applications for these gTLDs succeeding. While the revenue is not material and not expected before 2013, I wanted to let you know that we are already competing successfully as a back-end service provider.

This says a lot about the quality work our registry services and network ops teams have been doing. Number four, we want to continue to invest in and grow the NIA business; number five, continue to identify and select opportunities for growth, through value-added services which leverage our core strengths and offer quality of revenue; and number six, of course, continue to act as responsible stewards for critical elements of global Internet infrastructure, both operationally and in the management of the business. We believe this is the appropriate and responsible strategy for balancing stability, growth, and shareholder interest, all of which are intertwined. Thanks for your attention, and I will now turn the call over to John.

Thanks, Jim, and good afternoon, everyone. As Jim explained, this is another solid quarter and year for us. During 2011, we generated revenue of $772 million and delivered non-GAAP operating income of $384 million, all while expanding non-GAAP operating margins by [792] basis points. These results drove approximately $157 million in free cash flow for the year. Following on to Jim's comments on our cash position, the total cash and investment balance ended Q4 at $1.35 billion. Of this balance, $225 million is domestic. During the quarter, we initiated a new five-year, $200 million credit facility. We borrowed $100 million against this facility, as short-term financing for our Reston building purchase. That [big] cash balance also includes $86 million of previously taxed income that was repatriated at the end of the quarter. Let me recap our performance for the fourth quarter and year on our key operating metrics, which are -- revenue, deferred revenue, non-GAAP operating margin, non-GAAP EPS, operating cash flow, and free cash flow. Then, I will discuss 2012 full-year guidance.

Revenue of $204 million for the fourth quarter was up 3% from the prior quarter, and up 14% year over year. 2011 revenue of $772 million was up 13% year over year. Deferred revenue ended the quarter at $729 million, a $6 million increase from Q3 2011 and a $66 million increase year over year, up 10%. Non-GAAP operating margin for Q4 was 50.9%, compared to 50.1% in Q3. 4Q non-GAAP operating expenses were $100 million, up sequentially and flat year over year. The fourth-quarter operating margin expansion was driven by revenue growth and through realizing efficiencies in our business. We will continue to look for further efficiencies in our business and ways to improve our operating margin. Net income and EPS, non-GAAP net income for the fourth quarter was $64 million, resulting in non-GAAP earnings per share of $0.40, compared to $0.39 in Q3 and $0.31 in the same period in 2010. 2011 non-GAAP earnings per share of $1.49 is a 43% increase over 2010.

Non-GAAP interest expense and non-GAAP non-operating income net for 2011 was $28 million. This included a pretax $4 million non-operating accrued expense booked in [Q4], which is nonrecurring in nature and had a negative effect of $0.02 on EPS. With respect to taxes, we think a non-GAAP tax rate of approximately 30% remains a reasonable estimate. In 2012, we expect to pay cash taxes of about $35 million to $50 million. We had a weighted average diluted share count of 160 million shares in Q4, compared to 164 million in third quarter. Operating cash flow on a consolidated basis was $124 million in the fourth quarter and $336 million for 2011, which includes the payout of $100 million in contingent interest to holders of our convertible debt. Free cash flow was $6.6 million in Q4, given $11.6 million in excess tax benefits and $129 million in capital expenditures in the quarter. Free cash flow for 2011 was $157 million, after $13 million in excess tax benefits and approximately $193 million in capital expenditures. Relating to capital expenditures, the Company closed the property purchase of the Reston, Virginia headquarters building on November 15, 2011 for $118 million.

To reiterate, we saw solid performance in Q4. We have grown non-GAAP operating income and net income. We have a strong balance sheet and expect cash flow -- strong cash flow generation to continue as a result of our financial model. With respect to 2012 guidance, revenue for 2012 should be in the range of $865 million to $890 million, representing growth of 12% to 15%. Non-GAAP gross margin is expected to be at least 80%. Q4 2012 exit non-GAAP operating margin is expected to be 52% to 54%. Non-GAAP interest expense and non-GAAP non-operating income net is expected to be approximately $38 million for 2012. Capital expenditures are expected to be 7% to 10% of revenue. Our guidance is based on expectations of continued growth and increased operating efficiencies in our businesses, in addition to our financial projections for interest income and expense. I will now turn the call back to Jim.

Thank you, John. In summary, we are pleased with the performance and milestones we have marked in 2011. In addition to completing the restructuring plan, we renewed dot-net until 2017, DNSSEC went live in dot-com, and we extended our dot-TV agreement. VeriSign was selected to run dot-gov for the US government, and we have been selected to serve as the registry operator for applicants for potential future gTLDs under the new ICANN program. We brought in new talent at all levels, and we moved into our new building in Reston. We will now take your questions. Operator, we are ready for the first question.

(Operator Instructions) Gregg Moskowitz, Cowen and Company. Please go ahead.

Wanted to ask about deferred revenue. Deferred revenue growth was lower than expected, and short-term deferred revenue basically didn't grow sequentially. Was there, Jim, any sort of registry purge or some other factor, or was it just a function of demand possibly being a little bit lower than you were expecting in the quarter?

This is John. Let me take that. I don't think that was really a surprise to us. A lot of the deferred revenue trends are seasonal. First quarter is always a strong seasonal quarter, so you see a little more of a bump. So, sometimes it can be choppy quarter over quarter. I think the full-year 10% increase is what was expected, but there was no unusual purge or anything of that nature.

Okay. And then, in terms of renewal rates, over the last three quarters, that is assuming that your expected Q4 estimate holds -- there hasn't been much change in the overall renewal rate. So, I just wanted to get your view on renewal rates in 2012. I would think you should start to see more of an uplift, particularly as the base gets a little bit more mature.

This is Jim. I have invited Pat Kane, who is our executive in charge of the registry -- and Pat, do you want to take that one?

Yes. So, as the age of the base, as you point out, gets older, you do see a change in the percentage of previously renewed domains versus first-time renewing domains. And since the previously renewed domains actually renew at a higher rate, you will see a natural growth.

Okay. And then, if I could just ask one other question -- so, there have been some corporations who have voiced opposition to the new gTLDs, including the time line and process. Was just curious to get your thoughts on that, and just more broadly, how you envision this moving forward. Do you expect everything to move according to plan? Thanks.

Yes, this is Jim. We monitor this closely. We are supportive of the [multistate recoverable] model and ICANN's plans to move forward. There has been opposition from patent holders. There were hearings both in the House and in the Senate; but the program opened up on January 12 for applications. The application period closes on April 12; and on May 1, ICANN will publish on its website a list of all of the applications. I expect that there will probably be some more comments from the various stakeholders, but that's how the process works. So, from our perspective, as I said, we are participants in the program. We are supportive of ours and participation of others in it. I think we have made our view of that clear -- that we apply for domain names, we see it as an opportunity to be a service provider. We don't expect the revenue to be material. We don't expect it before 2013, but we expect the market to grow and we expect our business to grow as a result.

Okay, thank you.

Phil Winslow, Credit Suisse.

Another good quarter. I just wanted to focus on margins for a moment. Obviously, the exit margin guidance you gave of -- whatever, 52% to 54%, I believe consensus was 51.6%, is clearly ahead of where consensus was. What is driving that continued leverage? And then, Jim, how should we think about margins going forward and the leverage of this business? And is there a target that you have in mind or a ceiling that you would see out there, or how do you think about it?

Well, I think that the guidance that we have -- margin guidance that we just delivered for 2012 is obviously the way we see it and describe it now. I will just say that post-restructuring, I think there is kind of a long tail that I would describe as a continual optimization of our efforts to do a better job, to focus on our customers better, and change the way we do things. Remember, we have gone from over 5,000 employees to roughly 1,000; actually, we ended 2011 at 1,009 employees. So, the process of discovering processes here at VeriSign that haven't caught up with the new VeriSign yet, I think, will probably continue for a while. So, I think you see that reflected in our guidance for the year. So, I expect in the process of finding ways to do our job better, we will probably find efficiencies, and we expect that to happen.

Great. Thanks, guys.

Steve Ashley, Robert W. Baird.

Any thoughts, high level, of how fast you expect the zone file to grow in 2012?

Yes, our -- the revenue guidance that we gave you was $865 million to $890 million for the year, and that has underlying a 6% to 8% unit growth rate for net new names.

Perfect. And this might be for Pat Kane, but on the new gTLDs, the question that I get asked is -- will this cannibalize dot-com? And if not, why not?

Well, what the new gTLD program is designed to do is to offer more choice for the individual registrant. And while that will certainly have people choose domain names in different TLDs for the first time, we also recognize there is tremendous value in having your domain name in dot-com; and so, we will likely see multiple registrations for individual registrants.

Great. And then, lastly, can you say how many new gTLDs VeriSign intends to bid for directly?

I think -- go ahead, Pat.

We intend to do about 12. Most of those will be transliterations of dot-com.

Thank you very much.

Ed Maguire, CLSA.

I was wondering if you could address your expectations around the NIA business. There has been a lot of headlines about the impact of hacker groups and denial of service attacks -- and what your expectations for that business to be over the next year.

Well, as we mentioned, that business exceeded our expectations in 2011. We like that business. We think it's a business of growing importance. In particular, I think what you are referring to, which is the DDoS mitigation part of that business, although we saw growth across all three sections of the NIA business. There is the iDefense Threat Intelligence unit, a Managed DNS business, and of course, the DDoS mitigation service. Certainly, denial of service attacks have been more visible, and there is tremendous interest in technology that is available, a service that is available for companies to protect themselves. We are well-positioned to benefit from that. I think it's one of the reasons we like the business. It's a growth area.

The other reason, of course, is that it leverages our core strengths and our reputation, and we have a tremendous amount of experience. In general, concerning NIA, we now have the sales force hired. We are where we want to be there. And the areas that we are working on, in NIA primarily, is to structure it for scalability, and also to find ways to improve the quality of revenue and make it closer to the quality of revenue that most of our revenues reflect. So, we are optimistic about it. But we are obviously not breaking it out separately, and can't tell you exactly when we will do that. But we are continuing to invest in that business.

Thanks. And just a follow-up on your uses of cash for buybacks. What pace of buybacks are you expecting to implement this year? And do you also have any plans to deploy some of that offshore cash?

I missed just the last word there, after --

To deploy the cash that's offshore.

Yes, right. We don't provide any specific guidance on our repurchase activity, normally. Obviously, we have $831 million left under our Board-approved plan. We evaluate our cash needs and potential uses for cash on a regular basis, and that includes evaluating our offshore cash balances as well, in terms of doing what we think is optimal for the Company and the shareholders.

This is Jim. I would just add that, basically, our view of buybacks as one option for returning value to shareholders is unchanged. The Board authorization of $831 million, as John mentioned, continues to stand. Nothing has changed in our view, and I think we made it clear that there were just pending cash liquidity issues that were unresolved and did all become favorably resolved at the end of Q4. But as we mentioned, that was the only reason that there were no buybacks in the quarter.

Okay, thank you.

Walter Pritchard, Citigroup.

Jim, I'm wondering what type of updates -- you said we will get updates on the dot-com process. What sort of updates do you envision providing us as we go through the next seven or eight months, with that process ongoing?

Let's see. I guess the material event that would certainly be disclosed, of course, would be the -- if you followed the dot-net process, as I'm sure most of you probably did, there was some point at which we came together with ICANN, agreed on the form of renewal. There were some minor issues, as we mentioned, in the contract. So, if you could look back at dot-net, when those issues were addressed and a version of the contract was ready for the public review process, it was then posted on ICANN's website for public comment for 30 days. I will say there has been one change since last year -- there is a new ICANN policy that became effective January 1 of 2012, in which their public comment periods have changed from a single 30-day comment period to two comment periods of 21 days each, effectively making the 30-day comment period a 42-day comment period. But I think the next visible event will be the presentation of that agreement for comment.

That then follows, of course, formal approval by ICANN's board of directors. And dot-com, of course, being a little different than dot-net, we then present that to the Department of Commerce for their approval. So, those are the high-level sequence of events. All of that should conclude no later than the termination date of the existing agreement, the expiration date, which is November 30, 2012. And as I mentioned in my prepared remarks, there is a timetable and a process. There has been engagement and activity since I last spoke to you, and we are pleased with that progress. So, I think that's what we can say to you right now. But that's an overview of the process itself, and I think those are the events you can expect to see being disclosed -- certainly by VeriSign, but also information that will appear on, in particular, the contract for public comment on ICANN's website.

Great. And then, just on -- maybe a question for Pat -- but on the domain name guidance, if I look at -- I guess this quarter, we had some confusion on our end whether or not it was 1.8 or 1.9 adds. But sort of in the lower end of your range -- I recall last quarter in the lower end of your range. And I'm wondering, if you look at guidance that you give, what in the last couple quarters -- and then, how are you looking at Q1, in terms of that range? And what factors are driving you to be in the -- have driven you to be in the low end and may influence Q1?

Well, growth is always dependent upon two factors -- one is the new registrations and one is the renewal rates, as well. So, when we take a look at the range, we have to take into account what renewal rates will look like, and renewal rates fluctuate from quarter to quarter, depending on specific activity from specific registrars. We know we will end up within the range, but I think it's just a function of the renewal rate as to how we end up where we end up within that range.

So, I guess what you are saying is, the last couple of quarters it has been more renewal rates that have been the delta within that range, rather than the gross new adds?

Well, I mean, it's -- I guess the answer would be yes.

Okay, okay. Thanks a lot.

Sterling Auty, JPMorgan.

Just wanted to follow up, Jim, on the renewal time line. Given it's an election year, and given the timing of when the contract expires, is there a chance that it can go beyond November 30? And can you just review for people, if it were to -- how the contract is actually handled at that point?

Well, we certainly don't anticipate that we wouldn't be finished. Our time line -- certainly, the time line and the engagement process are all designed to avoid any issues that would cause the process to extend beyond November 30. So, I just don't envision that happening. I suppose it's possible, but I don't see that happening. There is a requirement that the ICANN/VeriSign agreed contract be presented to the Department of Commerce for their approval 90 days prior to the expiration. And we are certainly planning to meet or beat that date, and make sure that there is plenty of time to get the contract renewed, which I think everybody feels is in everyone's best interest. So, I guess I don't envision that happening.

Okay. On a different topic -- when you look at the fourth quarter, did you guys run any special programs with registrars to help motivate name additions? What are your plans for your work with registrars as you look into the first half of 2012?

Yes, we ran some additional marketing and promotional programs in 4Q -- not particularly large, but a little bit. But I would expect for 2012 that those numbers would be pretty consistent with what they have been historically [for].

Generally, the programs we run are not material; and generally, they are sort of -- the first half of the year, I think we generally run more than we do in the second half.

Okay. And based on your talks and interactions with registrars, how do you feel about -- since they are your channel, how do you feel about the health of that channel and where they are positioned to help drive growth in the naming business for 2012?

Pat talks to them all the time, visits with them frequently, so perhaps he can --

Well, I think if you just take a look at the new unit numbers that Jim talked about earlier, where each quarter of this year was the strongest quarter we have ever had in that quarter, it's -- if it's a healthy channel, they are finding uses for domain names, whether it be small, medium businesses, enterprises, et cetera, they are -- it's strong.

Yes, great. Thank you.

The drivers, they haven't changed -- it's Internet adoption, there is more growth internationally than there is in the US, it's the continual move of dollars from traditional to online advertising. Basically, all the things that we are seeing just simply continuing. Internet adoption is a growth area.

All right, great.

(Operator Instructions) Scott Kessler, S&P Capital.

I was wondering if you could possibly highlight one or two examples. Jim, you highlighted value-added services as a potential growth area for this year, and maybe if you could just talk about one or two areas where you might see some uplift. Thanks a lot.

Sure. I guess the obvious area is -- first of all, there are several categories of value-added service. First of all, Pat's group is continually developing value-added services for the registrar channels, to help them manage their business. We provide them with information. We provide them with data, reports, analyses from the zone that help them manage their business better and hopefully maximize the registrations that they perform. We call that value-added services here at VeriSign. The other growth area that we talked about was NIA, which is an adjacency that is very relevant, in the sense that it plays to our strengths -- VIDN or our DDoS mitigation service, of course, is a result of home-grown efforts from a very purposed developed network, where we couldn't buy off-the-shelf solutions. And now, we have productized some of those. And Managed DNS is essentially our ability to deliver our experience in developing performance in the network and deliver that to customers. So, all of those things you might consider value-added services.

Certainly, even though we are the largest consumer of some of the threat intelligence information that comes from our iDefense unit, that is also a value-added services. There are new value-added services that we are exploring. We are not talking about these. These are areas of research that we have engaged in. I think it's fair to say we are focused on this like we haven't been before. We are investing more in research. We think there is a tremendous amount of opportunity there. We are seeing opportunities, and these are fundamental new value-added services that would complement and fit well with our current DNS look-up services. So, until we are ready to talk about those, we can't say more; but that is the focus of our research effort.

Great, thank you.

[Jay Menzoni], Bank of America.

I wanted to follow up on the last question. Looking at the margin guidance that you have provided, margins are obviously expected to grow at a nice clip next year. Do you think there is more opportunity in investing more of this upside back into the business, to fuel the other growth options that you guys are looking at, like NIA? And are you comfortable with the level of investment in these different opportunities?

Yes, that's a very good question. And the answer is absolutely yes. So, in the case of NIA in particular, I mentioned that we are doing a couple of things with NIA -- number one is that we are focusing on structuring it to scale for growth. So -- and also what we are doing with NIA is finding ways that we can sort of increase the quality of revenue, to look more like our traditional business. So, those are two things we want to do before we make the investment -- before we essentially step on the gas pedal, so to speak. We want to make sure that it's going to scale well, grow smoothly, and provide a quality of revenue. So, anything that we can do up front before we make the major investments, I think will pay great dividends down the road, if we are successful in achieving good scalable growth and quality of revenue. So, we will be making those investments. We have been making that effort to optimize the business, and that's been the focus of NIA. And we have plenty of cash, and I think essentially our guidance for you in 2012 incorporates our anticipated investments in those areas. There is no anticipation that we would make any acquisitions to fuel that growth.

I think most of what we want to do leverages our core strengths. VeriSign, I think most of you understand, is unique. We do have a very purposed, developed network that is actually unique. I think that's something that's not well understood, that in the future we are going to try to communicate better. Not only are we databases linked together by a high-speed network, but our ability to do updates, to do them quickly in real time essentially and replicate it globally across a very diverse network and reliably, is unique. And when you are talking about developing services that come from that sort of strength, trading on that kind of strength, those are investments that we have to make here. We have to make that, not buy it, because nobody is doing anything like that. Now, if there are opportunities that we see to accelerate that process, by making acquisitions that allow us to buy versus make pieces of those efforts as they start to come together, we will certainly look at those and do those. But it's our view that we have adequate cash to do all of those growth areas, make all of those investments, and that's all baked into our guidance for 2012 in margins.

So, Jim, when you say that you want to build a base on NIA a little bit more before you step on the accelerator, is this more of a second half of 2012 that we are thinking about, or 2013, when you think the timing would be right?

Well, I think what we have said is, that at this point, we fully staffed up the NIA sales team. We have done some optimization and restructuring a bit in how the products are packaged and bundled and sold. There are ways in which we have a billing relationship with the customer that will help us get the right scalable structure. I think we are getting pretty close to the end of that process. And 2012, as we said, is a year of execution. So, throughout the year, we will be making investments as we see appropriate, depending on how the marketing effort plays out. But I think we are pretty close to getting ready to make some investments and grow that business a little bit quicker. It's a solid growth area. It leverages our strengths. There is a need. And we like it.

Okay. Thank you. That's it for me.

Rob Owens, Pacific Crest.

Just a quick question on new name growth -- so, you mentioned the four record quarters that you had throughout 2011. And as I extrapolate your range for Q1, it seems like you are expecting again another record in Q1 of '12, and even maybe a little bit of acceleration in the year-over-year growth. So, as we think about '12, how should we begin to think about new name growth, especially kind of given the global economic situation?

Pat, you want to comment?

Yes, this is Pat. So, Jim mentioned some of the factors that we track in terms of Internet adoption, online advertising spend. And as those metrics continue to go up and to the right, we will -- people will find new ways to use domains, generate new small-medium businesses, and continue to find ways on the Internet. So, I think that as long as people continue to adopt the Internet both domestically and internationally, we are going to see continued growth within dot-com.

Yes, I think Internet adoption really is the key here. I know some numbers, but I don't know some others. For example, the GDP in the US is roughly $15 trillion. In Europe, it's roughly $16 trillion. And globally, it's about $63 trillion. What portion of US GDP is economic activity that is reliant on the Internet? It's probably more, substantially more, than the rest of the world, certainly, and probably more than Europe. But the rest of the world is catching up. I think that's one way to just think about the opportunity. That's right. Internet adoption and growth, greater reliance of economic activity on the use of the Internet, that's going to continue at a rate that's probably faster than in the US, only because of the amount of penetration in the market here. And I think the challenge is ours to find ways to make sure we get our fair share, and exploit it and be smart about how we go after it. And we look at those things, we think about them, and we see growth and we see opportunities.

Great. And then, any sense of how many names are up for renewal in Q1 of '12?

I'm sorry. The number of names that are up for renewal in calendar 2012?

No, Q1 of '12.

Oh, I'm sorry, Q1. I don't know if I have that number handy.

And the only other question with regard to the registry -- I think it's somewhat of a follow-on to Walter's question, when he talked about -- I think it's been four out of the last six quarters, you have been at the lower end of the range. And you talked about that really being a function of the renewal rate. I know there's two varying renewal rates that you guys track. It's names that are one-year-old and names that are multiple years old. So, if that's been coming in a little bit lower, is it one group or the other?

Renewal rates on both are trending up slightly, both for first time and times they are renewing past their first time. I think the renewal rate split is about 56.2% on first time and it's 82.2%, roughly, I think, for second-time and beyond. And certainly, as those names renewal beyond the first time, second, third, and fourth, that rate continues to climb.

Okay, great.

By the way, we found the other number.

Oh, you did? Great.

So, the number of names coming up for renewal in Q1 of 2012 is 25.2 million.

25.2 million. Thank you very much.

Dan Cummins, ThinkEquity.

Jim, I wonder if you could tell us -- if you would be willing to tell us how much NIA contribution or a growth range you are assuming for the revenue guidance for 2012. Thanks.

Yes. We are not breaking that out, so it's probably early to tell you that. I hope that during 2012, we will be able to tell you a lot more about it. We have always said at this point, and all I can say now, is that the team is over -- is exceeding its bookings target that we assigned it.

And just one follow-up related to NIA -- is the distribution model changing yet very much, quarter on quarter? Do you envision it changing much in 2012 for VeriSign?

There is a transition that is going on that we are very pleased with. It's going well. That's part of the scaling effort, is a shift in the distribution model. And that is going according to plan.

Okay, thank you.

Sterling Auty, JPMorgan.

I just had two housekeeping follow-ups -- can you go into a little bit more detail -- I missed the [TUSA] impact on the nonrecurring, I think you said it was a $4 million pretax charge. Can you give us a little detail what that was regarding? And then, I had one other follow-up.

That was a nonrecurring item that we booked in fourth quarter, one-time for $4 million; and we don't expect it to recur, and it's past us.

But what was it tied to? What was it referring to?

It referred to some non-income-related taxes.

Okay.

Non-income-tax --

Out of period.

Right.

Got you. And then, the other one is -- with the cash that you were able to repatriate, is there additional cash that you can use the same methods to repatriate additional cash, going forward?

At this point in time, what we repatriated was all of our previously taxed income, at least through the end of 2011 -- or 2010, I'm sorry, 2010. So, there's a small amount of incremental income that is earned offshore that gets taxed to US every year. Obviously, the objective is not to have any. But there is a little bit each year. That amount that we repatriated had built it up over a few-year period. So, I wouldn't say there is a substantial amount of previously taxed income to bring back, near term.

All right. Thank you.

And that concludes the question-and-answer session. I would like to turn the conference back over to Mr. Atchley for any additional or closing remarks.

Thank you, Operator. 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.

And that concludes today's teleconference. Thank you for your participation.