News and Events

Neustar Reports Results for Fourth Quarter and Full-Year 2011

Feb 2, 2012

 

STERLING, Va., Feb. 2, 2012 — Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, entertainment, advertising and marketing industries, today announced results for the quarter and year ended December 31, 2011 and provided guidance for 2012.

Summary of Consolidated Fourth Quarter Results Compared to Fourth Quarter of 2010

 

  • Revenue increased 27% to $174.2 million
  • Income from continuing operations totaled $18.7 million, or $0.26 per diluted share
  • Adjusted net income from continuing operations increased 7% to $37.0 million, representing a margin of 21%
  • Adjusted net income from continuing operations per diluted share increased 11% to $0.51

 

Summary of Consolidated 2011 Results Compared to 2010

 

  • Revenue increased 19% to $620.5 million
  • Income from continuing operations totaled $123.6 million, or $1.66 per diluted share
  • Adjusted net income from continuing operations increased 16% to $159.0 million, representing a margin of 26%
  • Adjusted net income from continuing operations per diluted share increased 18% to $2.13
  • Share repurchases totaled $324.3 million or 10.1 million shares

 

“Neustar made significant progress across the board in 2011, from our financial performance to implementing our strategies through both organic and inorganic successes,” said Lisa Hook, Neustar’s president and chief executive officer.  “We continued to deliver strong revenue growth, margins and cash flow, while increasing our scale and strengthening our position as a neutral and trusted provider of services to an expanding number of customers and industries.  Our actions in 2011 have enhanced our ability to generate profitability and shareholder value.” 

Paul Lalljie, Neustar’s chief financial officer added, “Neustar’s acquisition of TARGUSinfo was the culmination of a successful year in which we delivered double-digit revenue growth with strong margins.  We improved our capital structure by securing $600 million of low-cost debt and repurchasing 10.1 million shares of our common stock.  Our 2012 guidance reflects our strong momentum and the ongoing integration of TARGUSinfo as we leverage our platforms to achieve long-term revenue growth.”

Business Outlook for 2012

 

  • Revenue to range from $810 million to $830 million
  • Adjusted net income from continuing operations to range from $178 million to $190 million
  • Adjusted net income from continuing operations per diluted share to range from $2.66 to $2.84

 

Discussion of Fourth Quarter and Full-Year 2011 Results

Fourth Quarter Revenue

Consolidated revenue totaled $174.2 million, a 27% increase from $136.9 million in the fourth quarter of 2010.  This increase consisted of growth in Carrier Services and Enterprise Services and the addition of revenue from the Company’s Information Services business segment. 

 

  • Carrier Services revenue totaled $113.3 million, a 14% increase from $99.7 million in 2010.  This increase was primarily due to a $10.9 million increase in revenue under the Company's contracts to provide NPAC Services.  Additionally, Order Management Services revenue increased $3.5 million due to greater customer usage and the addition of licensed order management services;
  • Enterprise Services revenue totaled $39.7 million, a 7% increase from $37.1 million in 2010.  Registry Services increased $1.4 million due to the number of common short codes under management, and Internet Infrastructure Services revenue increased $1.2 million due to the expansion of DNS solutions, including IP geolocation services; and
  • Information Services generated revenue of $21.2 million from the date of acquisition through the end of the year.

 

Full-Year Revenue

Consolidated revenue totaled $620.5 million, a 19% increase from $520.9 million in 2010.  This increase consisted of growth in Carrier Services and Enterprise Services and the addition of revenue from the Company’s Information Services business segment.

 

  • Carrier Services revenue totaled $447.9 million, a 14% increase from $391.8 million in 2010.  This increase was primarily due to a $43.5 million increase in revenue under the Company's contracts to provide NPAC Services.  Additionally, Order Management Services revenue increased $16.0 million due to greater customer usage and the addition of licensed order management services.  These increases were partially offset by a decrease in revenue from customer requests for functionality improvements;
  • Enterprise Services revenue totaled $151.4 million, a 17% increase from $129.1 million in 2010.  Internet Infrastructure Services increased $13.9 million due to the expansion of DNS solutions, including IP geolocation services.  Registry Services increased $8.4 million due to the number of common short codes under management; and
  • Information Services generated revenues of $21.2 million from the date of acquisition through the end of the year. 

 

Operating expense for the fourth quarter totaled $134.8 million, a 59% increase from $84.7 million in 2010. 

This increase in operating expense was primarily driven by the impact of the Company’s two acquisitions completed in 2011.  In particular, total personnel and personnel-related expense increased $26.9 million due primarily to a $5.0 million increase in stock-based compensation and additional costs associated with an increased number of employees resulting from acquisitions completed in 2011.  Total contractor and professional fees increased $13.9 million, primarily due to acquisition-related costs and expenses associated with the Company’s tender offer.  In addition, depreciation and amortization increased $8.2 million related to capital asset additions to support the Company’s expanded service offerings and acquired intangible assets.

Operating expense for 2011 totaled $411.4 million, a 31% increase from $315.1 million in 2010.  This increase in operating expense was driven by the impact of the Company’s two acquisitions completed in 2011.  In particular, total personnel and personnel-related expense increased $49.4 million due in part to a $10.4 million increase in stock-based compensation and increased costs associated with the addition of nearly 500 employees resulting from acquisitions completed in 2011.  Total contractor and professional fees increased $22.5 million, primarily due to an increase in acquisition-related costs and expenses associated with the Company’s tender offer.  In addition, depreciation and amortization increased $13.3 million related to capital asset additions to support the Company’s expanded service offerings and acquired intangible assets.

Cash, cash equivalents and investments totaled $135.3 million as of December 31, 2011, a decrease of $247.1 million from $382.4 million as of December 31, 2010.  This decrease was primarily due to the acquisitions of TARGUSinfo and certain numbering solutions assets from Evolving Systems.  In addition, the Company repurchased 10.1 million shares for a total of $324.3 million.  These uses of cash were partially offset by proceeds from the Company’s $600 million senior secured term loan and cash generated from operations.

Conference Call

As announced on January 13, 2012, 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             (800) 798-2796       (international callers dial            (617) 614-6204      ) and entering PIN 70950646.  For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Thursday, February 9, 2012 by dialing             (888) 286-8010      (international callers dial             (617) 801-6888      ) and entering replay PIN 44985569, 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, including a reconciliation of segment contribution to the nearest comparable GAAP measure and reconciliations of certain other 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, are available on the Company’s website under the Investor Relations tab.

About Neustar, Inc.

Neustar, Inc. (NYSE: NSR) is a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, entertainment, advertising and marketing industries throughout the world.  Neustar applies its advanced, secure technologies in routing, addressing and authentication to its customers’ data to help them identify new revenue opportunities, network efficiencies, cyber security and fraud protection measures.  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 guidance regarding its 2012 results.  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, the risks and uncertainties arising from the difficulties with the integration process or the realization of the benefits of the TARGUSinfo acquisition; general economic conditions in the regions and industries in which the Company operates; the uncertainty of  future 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, 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 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   Year Ended
    December 31,   December 31,
    2010   2011   2010   2011
    (unaudited)   (audited)   (unaudited)
Revenue:                
Carrier Services $ 99,713 $ 113,290 $ 391,762 $ 447,894
Enterprise Services   37,149   39,719   129,104   151,390
Information Services     21,171     21,171
Total revenue   136,862   174,180   520,866   620,455
Operating expense:                
Cost of revenue (excluding depreciation and amortization shown separately below)   29,704   41,329   111,282   137,992
Sales and marketing   21,677   33,580   86,363   109,855
Research and development   3,132   6,326   13,780   17,509
General and administrative   17,412   33,193   65,496   96,317
Depreciation and amortization   9,036   17,191   32,861   46,209
Restructuring charges   3,772   3,162   5,361   3,549
    84,733   134,781   315,143   411,431
Income from operations   52,129   39,399   205,723   209,024
Other (expense) income:                
Interest and other expense   (153)   (5,131)   (6,995)   (6,279)
Interest and other income   94   529   7,582   1,966
Income from continuing operations before income taxes   52,070   34,797   206,310   204,711
Provision for income taxes, continuing operations   20,712   16,077   82,282   81,137
Income from continuing operations   31,358   18,720   124,028   123,574
(Loss) income from discontinued operations, net of tax   (8,873)     (17,819)   37,249
Net income $ 22,485 $ 18,720 $ 106,209 $ 160,823
                 
Basic net income (loss) per common share:                
Continuing operations $ 0.42 $ 0.26 $ 1.66 $ 1.69
Discontinued operations   (0.12)     (0.24)   0.51
Basic net income per common share $ 0.30 $ 0.26 $ 1.42 $ 2.20
                 
Diluted net income (loss) per common share:                
Continuing operations $ 0.42 $ 0.26 $ 1.63 $ 1.66
Discontinued operations   (0.12)     (0.23)   0.50
Diluted net income per common share $ 0.30 $ 0.26 $ 1.40 $ 2.16
                 
Weighted average common shares outstanding:                
Basic   73,804   70,945   74,555   72,974
Diluted   75,458   72,865   76,065   74,496
                 

 

NEUSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                 
          December 31,     December 31,
        2010      2011 
          (audited)     (unaudited)
ASSETS
Current assets:          
  Cash, cash equivalents and short-term investments $  345,372    $  132,782 
  Restricted cash    556       10,251 
  Accounts and unbilled receivables, net   89,438       111,825 
  Prepaid expenses and other current assets    19,213       40,674 
  Income taxes receivable   −       37,599 
  Deferred tax assets    6,146       6,264 
Total current assets    460,725       339,395 
                 
Long-term investments    37,009       2,506 
Property and equipment, net    74,296       100,102 
Goodwill and intangible assets, net    143,625       913,419 
Other assets, long-term    8,082       27,216 
Deferred tax assets, long-term    10,137      − 
Total assets $  733,874    $  1,382,638 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities:          
  Accounts payable and accrued expenses $  61,690    $ 86,719 
  Deferred revenue    31,751       41,080 
  Note payable and capital lease obligations    6,325       7,921 
  Accrued restructuring    4,703       4,361 
  Other liabilities    11,035       5,317 
Total current liabilities    115,504       145,398 
                 
Deferred revenue, long-term    10,578       10,363 
Note payable and capital lease obligations, long-term    4,076       586,727 
Accrued restructuring, long-term    315      − 
Deferred tax liabilities, long-term   −      121,237 
Other liabilities, long-term    7,289       16,279 
Total liabilities    137,762       880,004 
Total stockholders' equity    596,112       502,634 
Total liabilities and stockholders' equity $  733,874    $ 1,382,638 
                 

 

 

                 
NEUSTAR, INC.
SEGMENT REVENUE AND CONTRIBUTION
(in thousands)
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2010   2011   2010   2011
    (unaudited)   (audited)   (unaudited)
Revenue: (1)(3)                
Carrier Services $ 99,713 $ 113,290 $ 391,762 $ 447,894
Enterprise Services   37,149   39,719   129,104   151,390
Information Services     21,171     21,171
Total revenue $ 136,862 $ 174,180 $ 520,866 $ 620,455
                 
Segment contribution:(2)(3)                
Carrier Services $ 90,530 $ 97,549 $ 352,317 $ 391,000
Enterprise Services   17,502   17,460   59,284   65,080
Information Services     12,583     12,583
Total segment contribution $ 108,032 $ 127,592 $ 411,601 $ 468,663
                 

 

 (1) Carrier Services:

 

  • Numbering Services
  • Order Management Services
  • IP Services

 

 

Enterprise Services:

 

  • Internet Infrastructure Services
  • Registry Services

 

 

Information Services:

 

  • Identification Services
  • Verification & Analytics Services
  • Local Search & Licensed Data Services

 

(2)  Segment contribution excludes certain unallocated costs within the following expense classifications:  cost of revenue, sales and marketing, research and development, and general and administrative.  In addition, depreciation and amortization and restructuring charges are excluded from segment contribution.  Such unallocated costs totaled $55.9 million and $88.2 million for the three months ended December 31, 2010 and 2011, respectively, and totaled $205.9 million and $259.6 million for the year ended December 31, 2010 and 2011, respectively.

(3)  The financial information above reflects the reclassification of the Company’s Converged Messaging Services business to discontinued operations for all periods presented.

 
 

 

Reconciliation of Non-GAAP Financial Measures

In this press release and in other public statements, Neustar presents certain non-GAAP financial data.  To place these data in an appropriate context, the following is a reconciliation of income from continuing operations to adjusted net income from continuing operations for the three and twelve months ended December 31, 2010 and 2011 and the year ending December 31, 2012 (projected).  The Company plans to use this non-GAAP profitability measure as a measure of its performance in 2012.  Also provided is a reconciliation of income from continuing operations to adjusted EBITDA from continuing operations.

These reconciliations allow investors to appropriately consider each non-GAAP financial measure.  These non-GAAP financial measures, however, should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.  Management believes that these measures enhance 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.  However, these non-GAAP financial measures 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.  Prior disclosures of non-GAAP figures do not exclude the same items and as such should not be used for comparison purposes.

 

Reconciliation of Income from Continuing Operations to Adjusted Net Income from Continuing Operations
 
    Three Months Ended     Year Ended     Year Ending
    December 31,     December 31,     December 31,
    2010   2011     2010 (1)   2011     2012 (2)
   

(in thousands, except per share data)

(unaudited)

Revenue $ 136,862  $ 174,180    $ 520,866  $ 620,455    $ 820,000 
                         
Income from continuing operations $ 31,358  $ 18,720    $ 124,028  $ 123,574    $ 138,400 
Add: Stock-based compensation   4,034    9,015      17,045    27,491      26,000 
Add: Amortization of acquired intangible assets   1,602    8,152      4,753    12,107      50,000 
Add: TARGUSinfo acquisition-related costs (3)   −    9,561      −    11,602      − 
Add: Tender offer costs (4)   −    2,413      −    2,413      − 
Add: Adjustment for provision for income taxes (5)   (2,242)   (10,821)     (8,694)   (18,173)     (30,400)
Adjusted net income from continuing operations $ 34,752  $ 37,040    $ 137,132  $ 159,014    $ 184,000 
Adjusted net income margin from continuing operations (6)   25%   21%     26%   26%     22%
Adjusted net income from continuing operations per diluted share $ 0.46  $ 0.51    $ 1.80  $ 2.13    $ 2.75 
Weighted average diluted common shares outstanding   75,458    72,865      76,065    74,496      67,000 

 

(1)  The amounts expressed in this column are derived from the Company’s audited consolidated financial statements for the year ended December 31, 2010.  Results related to the Company’s Converged Messaging Services business for prior periods have been reclassified to discontinued operations.

(2)  The amounts expressed in this column are current estimates as of the date of this press release of the results for the full year.  This reconciliation is based on the midpoint of the revenue guidance.

(3)  Amounts represent costs incurred by the Company in connection with its acquisition of Targus Information Corporation.

(4)  Amounts represent costs incurred by the Company to repurchase 7.2 million shares of its Class A common stock through a modified “Dutch auction” tender offer which closed on December 8, 2011.  These costs are not deductible for income tax purposes.

(5)  Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense, amortization of acquired intangible assets and approximately $6.3 million of tax deductible TARGUSinfo acquisition-related costs based on the effective tax rate for income from continuing operations for the applicable period.

(6)  Adjusted net income margin is a measure of adjusted net income from continuing operations as a percentage of revenue.

 

 
Reconciliation of Income from Continuing Operations to Adjusted EBITDA from Continuing Operations
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2010   2011   2010 (1)   2011
   

(in thousands, except per share data)

(unaudited)

                 
Revenue $ 136,862 $ 174,180 $ 520,866 $ 620,455
Income from continuing operations $ 31,358 $ 18,720 $ 124,028 $ 123,574
Add: TARGUSinfo acquisition-related costs (2)     9,561     11,602
Add: Tender offer costs (3)     2,413     2,413
Add: Amortization of acquired intangible assets   1,602   8,152   4,753   12,107
Add: Adjustment for provision for income taxes (4)   (637)   (6,656)   (1,896)   (7,277)
Adjusted income from continuing operations   32,323   32,190   126,885   142,419
Add: Depreciation and amortization (5)   7,434   9,039   28,108   34,102
Add: Other expense (income)   59   4,602   (587)   4,313
Add: Stock-based compensation   4,034   9,015   17,045   27,491
Add: Provision for income taxes, continuing operations (6)   21,349   22,733   84,178   88,414
Adjusted EBITDA from continuing operations $ 65,199 $ 77,579 $ 255,629 $ 296,739
                 
Adjusted EBITDA margin from continuing operations (7)   48%   45%   49%   48%
Adjusted income from continuing operations per diluted share $ 0.43 $ 0.44 $ 1.67 $ 1.91
Weighted average diluted common shares outstanding   75,458   72,865   76,065   74,496

 

(1)  The amounts expressed in this column are derived from the Company’s audited consolidated financial statements for the year ended December 31, 2010.  Results related to the Company’s Converged Messaging Services business for prior periods have been reclassified to discontinued operations.

(2)  Amounts represent costs incurred by the Company in connection with its acquisition of Targus Information Corporation.

(3)  Amounts represent costs incurred by the Company to repurchase 7.2 million shares of its Class A common stock through a modified “Dutch auction” tender offer which closed on December 8, 2011.  These costs are not deductible for income tax purposes.

(4)  Adjustment reflects the estimated tax effect of adjustments for approximately $6.3 million of tax deductible TARGUSinfo acquisition-related costs and the amortization of acquired intangible assets based on the effective tax rate for income taxes from continuing operations for the applicable period.

(5)  Adjustment represents depreciation and amortization expense, excluding amortization of acquired intangible assets.

(6)  Amounts represent the provision of income taxes included in adjusted income from continuing operations and when combined with the adjustment to provision for income taxes equals the recorded provision for income taxes during the periods presented. 

(7)  Adjusted EBITDA margin is a measure of Adjusted EBITDA as a percentage of revenue.

 

Contact Info:

 

Investor Relations Contact

Dave Angelicchio

            (571) 434-3443      

InvestorRelations@neustar.biz

 

Media Contact

Susan Wade

            (202) 368-5307      

susan.wade@neustar.biz