Neustar Reports Results for First Quarter 2013

Neustar Reports Results for First Quarter 2013

Expects to Purchase an Additional $250 Million of Common Stock in 2013

STERLING, Va.--(BUSINESS WIRE)-- Neustar, Inc. (NYS: NSR) , a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors, today announced results for the quarter ended March 31, 2013 and affirmed its guidance for 2013. The company also announced that it plans to purchase up to $250 million of its Class A common shares beginning May 7, 2013 through December 31, 2013.


Results for First Quarter 2013 Compared to First Quarter 2012

  • Revenue increased 8% to $216.4 million

  • Non-NPAC revenue increased 10% to $107.1 million

  • Net income decreased 1% to $33.8 million, including the impact of a $10.9 million charge for the loss on debt modification and extinguishment

  • Net income per share was flat at $0.50

Non-GAAP Results for First Quarter 2013 Compared to First Quarter 2012

  • Adjusted net income increased 23% to $54.1 million, representing a 25% margin

  • Adjusted net income per share increased 25% to $0.80

"In the first quarter, we made progress on each of our 2013 priorities," said Lisa Hook, Neustar's president and chief executive officer. "We submitted our proposal for the NPAC contract in early April, and we remain confident in our ability to provide world class service to the communications industry. In addition, we continued to implement our strategy through targeted investments in our people and platforms, while identifying and executing on significant growth opportunities."

Paul Lalljie, Neustar's chief financial officer added, "The 25% increase in first quarter adjusted earnings per share demonstrated strong operating leverage and prudent cost management. Our first quarter results and leading indicators provide us with the visibility to affirm our full-year guidance. In addition, we have announced a $250 million share repurchase program that returns significant capital to our shareholders while maintaining our ability to invest in the growth of our business."

Discussion of First Quarter Results

Consolidated revenue totaled $216.4 million, an 8% increase from $199.6 million in the first quarter of 2012. This $16.8 million increase included growth in all three of our operating segments. In particular:

  • Carrier Services revenue totaled $132.2 million, a 6% increase from $124.4 million in 2012. This increase was primarily due to a $7.5 million increase in NPAC Services revenue;

  • Enterprise Services revenue totaled $44.8 million, a 13% increase from $39.5 million in 2012. This increase was due to higher revenue in both Internet Infrastructure and Registry Services; and

  • Information Services revenue totaled $39.5 million, a 10% increase from $35.7 million in 2012. This increase was primarily due to higher revenue in Verification and Analytics Services.

Operating expense totaled $145.6 million, an 8% increase from $135.2 million in the first quarter of 2012. This increase was primarily due to the expansion of the company's operations. In particular, stock-based compensation increased $5.1 million driven by performance-based equity that was granted to a broader employee base.

Cash, cash equivalents and investments totaled $378.2 million as of March 31, 2013, compared to $343.9 million as of December 31, 2012. The debt refinancing completed in January 2013 resulted in total debt obligations of $623.8 million as of March 31, 2013, compared to $587.3 million as of December 31, 2012. During the first quarter, the company purchased approximately 551,000 shares of common stock at an average price of $44.38 per share, for a total purchase price of $24.4 million.

Business Outlook for 2013

The company affirmed its guidance for revenue and adjusted net income provided on February 5, 2013:

  • Revenue to range from $895 million to $915 million

  • Adjusted net income to range from $220 million to $230 million

  • Adjusted net income per share to range from $3.28 to $3.43

Conference Call

As announced on April 18, 2013, Neustar will conduct an investor conference call to discuss the company's results today at 4:30 p.m. (Eastern Time). Prior to the call, investors may access the conference call over the Internet via the Investor Relations tab of the company's website (www.neustar.biz). Those listening via the Internet should go to the website 15 minutes early to register, download and install any necessary audio software.

The conference call is also accessible via telephone by dialing (888) 437-9315 (international callers dial (719) 325-2223) and entering PIN 5300732. For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Thursday, May 9, 2013 by dialing (877) 870-5176 (international callers dial (858) 384-5517) and entering replay PIN 5300732, or by going to the Investor Relations tab of the company's website (www.neustar.biz).

Neustar will take live questions from securities analysts and institutional portfolio managers; the complete call is open to all other interested parties on a listen-only basis.

This press release, the financial tables and other supplemental information are available on the company's website under the Investor Relations tab. This includes reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures that may be used periodically by management when discussing the company's financial results with investors and analysts.

About Neustar, Inc.

Neustar, Inc. (NYS: NSR) is a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors. Neustar applies its advanced, secure technologies in location, identification, and evaluation to help its customers promote and protect their businesses. More information is available at www.neustar.biz.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release includes information that constitutes forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about the company's expectations, beliefs and business results in the future, such as its guidance. The company has attempted, whenever possible, to identify these forward-looking statements using words such as "may," "will," "should," "projects," "estimates," "expects," "plans," "intends," "anticipates," "believes" and variations of these words and similar expressions. Similarly, statements herein that describe the company's business strategy, prospects, opportunities, outlooks, objectives, plans, intentions or goals are also forward-looking statements. The company cannot assure you that its expectations will be achieved or that any deviations will not be material. Forward-looking statements are subject to many assumptions, risks and uncertainties that may cause future results to differ materially from those anticipated. These potential risks and uncertainties include, among others, general economic conditions in the regions and industries in which the company operates; the uncertainty offuture revenue and profitability and potential fluctuations in quarterly operating results due to such factors as disruptions to the company's operations, modifications to or terminations of its material contracts, the financial covenants in the company's secured credit facility and their impact on the company's financial and business operations; the company's indebtedness and the impact that it may have on the company's financial and operating activities and the company's ability to incur additional debt; the variable interest rates borne by the company's indebtedness and the effects of changes in those rates; its ability to successfully identify and complete acquisitions, integrate and support the operations of businesses the company acquires, increasing competition, market acceptance of its existing services, its ability to successfully develop and market new services, the uncertainty of whether new services will achieve market acceptance or result in any revenue, and business, regulatory and statutory changes in the communications industry. More information about risks factors, uncertainties and other potential factors that could affect the company's business and financial results is included in its filings with the Securities and Exchange Commission, including, without limitation, the company's most recent Annual Report on Form 10-K and subsequent periodic and current reports. All forward-looking statements are based on information available to the company on the date of this press release, and the company undertakes no obligation to update any of the forward-looking statements after the date of this press release.

NEUSTAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

March 31,

2012

2013

(unaudited)

Revenue:

Carrier Services

$

124,373

$

132,171

Enterprise Services

39,485

44,779

Information Services

35,724

39,466

Total revenue

199,582

216,416

Operating expense:

Cost of revenue (excluding depreciation and
amortization shown separately below)

44,898

49,297

Sales and marketing

38,353

42,260

Research and development

7,724

7,484

General and administrative

20,993

21,882

Depreciation and amortization

22,706

24,665

Restructuring charges

522

2

135,196

145,590

Income from operations

64,386

70,826

Other (expense) income:

Interest and other expense

(8,193

)

(17,562

)

Interest and other income

229

141

Income before income taxes

56,422

53,405

Provision for income taxes

22,460

19,641

Net income

$

33,962

$

33,764

Net income per share:

Basic

$

0.51

$

0.51

Diluted

$

0.50

$

0.50

Weighted average common shares outstanding:

Basic

67,205

66,184

Diluted

68,478

67,614

NEUSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,
2012

March 31,
2013

(audited)

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

340,255

$

376,675

Restricted cash

2,543

2,549

Short-term investments

3,666

1,564

Accounts receivable, net

131,805

144,319

Unbilled receivables

6,372

6,612

Notes receivable

2,740

2,619

Prepaid expenses and other current assets

17,707

20,344

Deferred costs

7,379

7,291

Income taxes receivable

6,596

Deferred tax assets

6,693

8,497

Total current assets

525,756

570,470

Property and equipment, net

118,513

113,723

Goodwill

572,178

572,178

Intangible assets, net

288,487

276,115

Notes receivable, long-term

1,008

406

Deferred costs, long-term

702

600

Other assets, long-term

20,080

26,979

Total assets

$

1,526,724

$

1,560,471

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

9,269

$

2,926

Accrued expenses

85,424

59,767

Income taxes payable

6,167

Deferred revenue

49,070

48,387

Notes payable

8,125

7,971

Capital lease obligations

1,686

1,105

Other liabilities

3,856

2,844

Total current liabilities

157,430

129,167

Deferred revenue, long-term

9,922

10,061

Notes payable, long-term

576,688

614,271

Capital lease obligations, long-term

817

422

Deferred tax liabilities, long-term

114,130

117,487

Other liabilities, long-term

21,129

21,592

Total liabilities

880,116

893,000

Stockholders' equity:

Common stock

86

87

Additional paid-in capital

532,743

550,709

Treasury stock

(604,042

)

(634,879

)

Accumulated other comprehensive loss

(767

)

(798

)

Retained earnings

718,588

752,352

Total stockholders' equity

646,608

667,471

Total liabilities and stockholders' equity

$

1,526,724

$

1,560,471

Reconciliation of Non-GAAP Financial Measures

In this press release and in other public statements, Neustar presents certain non-GAAP financial measures. These non-GAAP financial measures have limitations and may not be comparable with similar non-GAAP financial measures used by other companies and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Set forth below are reconciliations of the non-GAAP financial measures from the most directly comparable GAAP financial measure. These reconciliations should be carefully evaluated. Prior disclosures of non-GAAP figures may not exclude the same items and as such should not be used for comparison purposes.

Reconciliation of Net Income to Adjusted Net Income

The following is a reconciliation of net income to adjusted net income for the three months ended March 31, 2012 and 2013 and the year ending December 31, 2013. Management believes that this measure enhances investors' understanding of the company's financial performance and the comparability of the company's operating results to prior periods, as well as against the performance of other companies.

Three Months Ended
March 31,

Year Ending
December 31,
2013(1)

2012

2013

(in thousands, except per share data)
(unaudited)

Revenue

$

199,582

$

216,416

$

905,000

Net income

$

33,962

$

33,764

$

162,500

Add: Stock-based compensation

3,901

8,957

42,000

Add: Amortization of acquired intangible assets

12,572

12,372

49,000

Add: Loss on debt modification and extinguishment (2)

10,886

11,000

Less: Adjustment for provision for income taxes (3)

(6,557

)

(11,848

)

(39,500

)

Adjusted net income

$

43,878

$

54,131

$

225,000

Adjusted net income margin (4)