Neustar Reports Results for Second Quarter 2013

Neustar Reports Results for Second Quarter 2013

STERLING, Va.--(BUSINESS WIRE)-- Neustar, Inc. (NYS: NSR) , a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, technology, financial services, retail, and media and advertising sectors, today announced results for the quarter ended June 30, 2013 and updated its guidance for 2013.

Results for Second Quarter 2013 Compared to Second Quarter 2012

  • Revenue increased 7% to $220.4 million

  • Non-NPAC revenue increased 7% to $111.0 million

  • Net income increased 12% to $43.4 million

  • Net income per share increased 14% to $0.65


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

  • Adjusted net income increased 11% to $56.9 million, representing a 26% margin

  • Adjusted net income per share increased 13% to $0.85

"We continue to execute on our strategy to become a leading provider of real-time information and analytics," said Lisa Hook, Neustar's president and chief executive officer. "As we enhance our capabilities and infrastructure and build strategic partnerships, we are increasingly well positioned to deliver high-value workflow solutions to our clients and strong results for our shareholders."

Paul Lalljie, Neustar's chief financial officer, added, "Our second quarter results were strengthened by the acceleration of a portion of the transaction-based revenue originally anticipated in the second half of the year. In total, we are on track to achieve our full-year revenue guidance. In addition, our continued focus on making discreet investments while maintaining tight control of operating expense allows us to raise our adjusted net income and net income per share guidance for the year."

Discussion of Second Quarter Results

Consolidated revenue totaled $220.4 million, a 7% increase from $206.5 million in the second quarter of 2012. In particular:

  • Carrier Services revenue totaled $134.7 million, a 7% increase from $126.3 million in 2012. This increase was primarily due to a $7.4 million increase in NPAC Services revenue and a $2.9 million increase in Order Management Services revenue;

  • Enterprise Services revenue totaled $43.8 million, a 4% increase from $42.1 million in 2012. This increase was primarily due to higher revenue in Internet Infrastructure Services; and

  • Information Services revenue totaled $41.8 million, a 10% increase from $38.0 million in 2012. This increase was primarily due to higher revenue in Verification & Analytics Services.

Operating expense totaled $145.6 million, a 5% increase from $138.1 million in the second quarter of 2012. This increase was primarily due to additional personnel and personnel-related expense to support the expansion of the company's operations, including increased stock-based compensation expense of $2.0 million driven by performance-based equity that was granted to a broader employee base.

Cash, cash equivalents and investments totaled $381.6 million as of June 30, 2013, compared to $378.2 million as of March 31, 2013 and compared to $343.9 million as of December 31, 2012. During the second quarter, the company purchased approximately 1.5 million shares of its common stock at an average price of $47.09 per share, for approximately $69.3 million.

Business Outlook for 2013

The company reaffirmed its full-year guidance for revenue, previously provided on February 5, 2013 and affirmed on May 2, 2013 and increased its guidance for adjusted net income and adjusted earnings per share:

  • Revenue range remains unchanged at $895 million to $915 million;

  • Adjusted net income to range from $225 million to $235 million. Prior adjusted net income guidance was between $220 million and $230 million; and

  • Adjusted earnings per share to range from $3.38 to $3.53. Prior adjusted earnings per share was between $3.28 and $3.43.

Conference Call

As announced on July 16, 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 888-461-2031 (international callers dial 719-325-2248) and entering PIN 5171805. For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Tuesday, August 6, 2013 by dialing 877-870-5176 (international callers dial 858-384-5517) and entering replay PIN 5171805, or by going to the Investor Relations tab of the company's website (www.neustar.biz).

Neustar will take 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 most directly 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, technology, financial services, retail, and 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 regarding future results of operations. 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 of future revenue, expenses 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 and 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 and 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 risk 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

Six Months Ended

June 30,

June 30,

2012

2013

2012

2013

(unaudited)

Revenue:

Carrier Services

$

126,347

$

134,733

$

250,720

$

266,904

Enterprise Services

42,089

43,791

81,574

88,570

Information Services

38,026

41,826

73,750

81,292

Total revenue

206,462

220,350

406,044

436,766

Operating expense:

Cost of revenue (excluding depreciation and

amortization shown separately below)

46,127

50,219

91,025

99,516

Sales and marketing

41,073

41,955

79,426

84,215

Research and development

8,096

7,616

15,820

15,100

General and administrative

20,091

21,124

41,084

43,006

Depreciation and amortization

22,713

24,690

45,419

49,355

Restructuring charges

2

524

2

138,102

145,604

273,298

291,194

Income from operations

68,360

74,746

132,746

145,572

Other (expense) income:

Interest and other expense

(8,404

)

(5,793

)

(16,597

)

(23,355

)

Interest and other income

110

87

339

228

Income before income taxes

60,066

69,040

116,488

122,445

Provision for income taxes

21,474

25,642

43,934

45,283

Net income

$

38,592

$

43,398

$

72,554

$

77,162

Net income per share:

Basic

$

0.58

$

0.66

$

1.08

$

1.17

Diluted

$

0.57

$

0.65

$

1.06

$

1.15

Weighted average common shares outstanding:

Basic

66,917

65,531

67,060

65,855

Diluted

67,887

66,990

68,132

67,301

NEUSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,

June 30,

2012

2013

(audited)

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

340,255

$

380,153

Restricted cash

2,543

2,300

Short-term investments

3,666

1,462

Accounts receivable, net

131,805

141,579

Unbilled receivables

6,372

8,276

Notes receivable

2,740

2,291

Prepaid expenses and other current assets

17,707

21,395

Deferred costs

7,379

6,783

Income taxes receivable

6,596

Deferred tax assets

6,693

8,431

Total current assets

525,756

572,670

Property and equipment, net

118,513

112,113

Goodwill

572,178

576,038

Intangible assets, net

288,487

269,877

Notes receivable, long-term

1,008

Deferred costs, long-term

702

633

Other assets, long-term

20,080

26,428

Total assets

$

1,526,724

$

1,557,759

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

9,269

$

3,014

Accrued expenses

85,424

72,968

Income taxes payable

3,775

Deferred revenue

49,070

48,004

Notes payable

8,125

7,972

Capital lease obligations

1,686

602

Other liabilities

3,856

7,509

Total current liabilities

157,430

143,844

Deferred revenue, long-term

9,922

10,184

Notes payable, long-term

576,688

612,278

Capital lease obligations, long-term

817

409

Deferred tax liabilities, long-term

114,130

110,848

Other liabilities, long-term

21,129

22,247

Total liabilities

880,116

899,810

Stockholders' equity:

Common stock

86

87

Additional paid-in capital

532,743

567,667

Treasury stock

(604,042

)

(704,402

)

Accumulated other comprehensive loss

(767

)

(1,153

)

Retained earnings

718,588

795,750

Total stockholders' equity

646,608

657,949

Total liabilities and stockholders' equity

$

1,526,724

$

1,557,759

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 to their 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 and six months ended June 30, 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

Six Months Ended

Year Ending

June 30,

June 30,

December 31,

2012

2013

2012

2013

2013(1)

(in thousands, except per share data)

(unaudited)

Revenue

$

206,462

$

220,350

$

406,044

$

436,766

$

905,000

Net income

$

38,592

$

43,398

$

72,554

$

77,162

$

167,000

Add: Stock-based compensation

7,049

9,055

10,950

18,012

42,000

Add: Amortization of acquired intangible assets

12,571

12,377

25,143

24,749

49,000

Add: Loss on debt modification and extinguishment (2)

10,886

10,886

Less: Adjustment for provision for income taxes (3)

(7,014

)

(7,960

)

(13,613

)

(19,839

)

(38,886

)

Adjusted net income

$

51,198

$

56,870

$

95,034

$

110,970

$