News and Events

Neustar Reports Results for Third Quarter 2012

Nov 5, 2012

STERLING, VA., November 5, 2012 — Neustar, Inc. (NYSE: 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 September 30, 2012 and updated its guidance for full-year 2012. 

GAAP Results for Third Quarter 2012 Compared to Third Quarter 2011

  • Revenue increased 38% to $211.2 million
  • Income from continuing operations increased 21% to $45.8 million.  Income from continuing operations for the third quarter of 2012 includes $5.2 million of discrete income tax benefits
  • Income from continuing operations per diluted share increased 33% to $0.68

Non-GAAP Results for Third Quarter 2012 Compared to Third Quarter 2011

  • Adjusted net income from continuing operations increased 36% to $60.7 million.  Adjusted net income from continuing operations for the third quarter of 2012 includes $5.2 million of discrete income tax benefits
  • Adjusted earnings per diluted share increased 50% to $0.90

 

“In the third quarter, we continued to execute well on our priorities – working towards the renewal of the NPAC contract, integrating Information Services and capitalizing on the opportunities it brings us, transforming our culture and achieving our financial performance targets,” said Lisa Hook, Neustar’s president and chief executive officer.  “With strong year-to-date results and continued progress in implementing our strategic plan, we are well-positioned to achieve both our short-term objectives and our long-term strategic goals.”

 

Paul Lalljie, Neustar’s chief financial officer added, “We generated solid profits in the third quarter while continuing to invest in the long-term growth of our business.  We continue to produce consistently high margins and strong cash flows through our operational efficiencies, which gives us the flexibility to continue to return capital to our shareholders.  We are updating our full-year guidance given our results and visibility into our key performance indicators.”

Discussion of Third Quarter Results

Consolidated revenue totaled $211.2 million, a 38% increase from $152.5 million in the third quarter of 2011.  In particular:

  • Carrier Services revenue totaled $125.2 million, a 10% increase from $114.2 million in 2011.  This increase was due to an $11.1 million increase in NPAC Services revenue;
  • Enterprise Services revenue totaled $43.6 million, a 14% increase from $38.3 million in 2011.  This increase was due to higher revenue in both Internet Infrastructure and Registry Services; and
  • Information Services contributed $42.3 million of revenue in the third quarter of 2012.  This business segment was created as a result of the TARGUSinfo acquisition completed in the fourth quarter of 2011.  Revenue from Information Services was comprised of $24.2 million in Identification Services, $13.1 million in Verification & Analytics Services, and $5.0 million in Local Search & Licensed Data Services. 

 

Total operating expense increased 45% to $136.5 million from $94.4 million in the third quarter of 2011.  This $42.1 million increase was driven by the addition of $31.4 million in operating expense from the acquisition of our Information Services business segment.  The remaining $10.7 million increase represents growth of 11% in the company’s operating expense.  In particular, personnel and personnel-related expense increased $8.9 million due to increased headcount in technology and operations, research and development, and sales and marketing.

 

For the third quarter of 2012, adjusted net income totaled $60.7 million, including the impact of discrete tax benefits primarily associated with a domestic production activities deduction.  Excluding the impact of these discrete tax benefits, our effective tax rate was approximately 38.8%.

Cash, cash equivalents and investments totaled $269.2 million as of September 30, 2012, compared to $235.0 million as of June 30, 2012 and $135.3 million as of December 31, 2011.  In the third quarter of 2012, the company purchased approximately 688,000 shares of common stock at an average price of $36.34 per share, for a total purchase price of $25.0 million.

Business Outlook for 2012

The company updated its full-year 2012 guidance, previously provided on July 26, 2012:

  • Revenue range remains unchanged at $825 to $835 million;
  • Adjusted net income to range from $200 to $206 million.  Prior adjusted net income guidance was $189 to $197 million; and
  • Adjusted net income per diluted share to range from $2.94 to $3.03.  Prior adjusted net income per diluted share range was $2.78 to $2.90

 

Conference Call

As announced on October 29, 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). 

The conference call is also accessible via telephone by dialing 866-382-9489 (international callers dial 706-679-4287) and entering PIN 43902736.  For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) on Tuesday, November 13, 2012 by dialing 855-859-2056 (international callers dial 404-537-3406) and entering replay PIN 43902736, or by going to the Investor Relations tab of the company’s website (www.neustar.biz).

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, 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 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, 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

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2011

 

2012

 

2011

 

2012

 

 

(unaudited)

Revenue:

 

 

 

 

 

 

 

 

Carrier Services

$

114,155

$

125,202

$

334,604

$

375,922

Enterprise Services

 

38,342

 

43,630

 

111,671

 

125,204

Information Services

 

 

42,340

 

 

116,090

Total revenue

 

152,497

 

211,172

 

446,275

 

617,216

Operating expense:

 

 

 

 

 

 

 

 

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

 

34,194

 

46,339

 

96,663

 

137,364

Sales and marketing

 

25,069

 

38,040

 

76,275

 

117,466

Research and development

 

3,746

 

7,663

 

11,183

 

23,483

General and administrative

 

20,960

 

20,915

 

63,124

 

61,999

Depreciation and amortization

 

10,486

 

23,622

 

29,018

 

69,041

Restructuring (recoveries) charges

 

(33)

 

(32)

 

387

 

492

 

 

94,422

 

136,547

 

276,650

 

409,845

Income from operations

 

58,075

 

74,625

 

169,625

 

207,371

Other (expense) income:

 

 

 

 

 

 

 

 

Interest and other expense

 

(675)

 

(8,517)

 

(1,148)

 

(25,114)

Interest and other income

 

304

 

140

 

1,437

 

479

Income from continuing operations before income taxes

 

57,704

 

66,248

 

169,914

 

182,736

Provision for income taxes, continuing operations

 

19,931

 

20,495

 

65,060

 

64,429

Income from continuing operations

 

37,773

 

45,753

 

104,854

 

118,307

Income from discontinued operations, net of tax

 

 

 

37,249

 

Net income

$

37,773

$

45,753

$

142,103

$

118,307

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

 

Continuing operations

$

0.52

$

0.69

$

1.42

$

1.77

Discontinued operations

 

 

 

0.51

 

Basic net income per common share

$

0.52

$

0.69

$

1.93

$

1.77

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

Continuing operations

$

0.51

$

0.68

$

1.40

$

1.74

Discontinued operations

 

 

 

0.49

 

Diluted net income per common share

$

0.51

$

0.68

$

1.89

$

1.74

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

73,237

 

66,523

 

73,658

 

66,880

Diluted

 

74,632

 

67,623

 

75,079

 

67,961

 

 

 

 

 

 

 

 

 


 

NEUSTAR, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

September 30,

 

 

 

 

 

2011 

 

 

2012 

 

 

 

 

 

 

(audited)

 

 

(unaudited)

 

ASSETS

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

 122,237 

 

$

261,049 

 

Restricted cash

 

 10,251 

 

 

10,248 

 

Short-term investments

 

 10,545 

 

 

8,147 

 

Accounts receivable, net

 

 106,274 

 

 

147,564 

 

Unbilled receivables

 

 5,551 

 

 

7,213 

 

Notes receivable

 

 2,786 

 

 

2,860 

 

Prepaid expenses and other current assets

 

 30,166 

 

 

18,450 

 

Deferred costs

 

 8,174 

 

 

7,929 

 

Income taxes receivable

 

 38,687 

 

 

4,093 

 

Deferred tax assets

 

 6,264 

 

 

5,850 

 

Total current assets

 

 340,935 

 

 

473,403 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments

 

 2,506 

 

 

– 

 

Property and equipment, net

 

 100,102 

 

 

107,825 

 

Goodwill

 

 573,307 

 

 

573,307 

 

Intangible assets, net

 

 338,768 

 

 

301,056 

 

Notes receivable, long-term

 

 3,748 

 

 

1,601 

 

Deferred costs, long-term

 

 701 

 

 

651 

 

Other assets, long-term

 

 22,767 

 

 

19,891 

 

Total assets

$

 1,382,834 

 

$

1,477,734 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

$

7,385 

 

$

2,906 

 

Accrued expenses

 

 79,334 

 

 

69,200 

 

Deferred revenue

 

 41,080 

 

 

47,595 

 

Note payable

 

 4,856 

 

 

59,324 

 

Capital lease obligations

 

 3,065 

 

 

2,294 

 

Accrued restructuring reserve

 

 4,361 

 

 

741 

 

Other liabilities

 

 5,317 

 

 

3,241 

 

Total current liabilities

 

 145,398 

 

 

185,301 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue, long-term

 

 10,363 

 

 

10,115 

 

Note payable, long-term

 

 584,809 

 

 

526,690 

 

Capital lease obligations, long-term

 

 1,918 

 

 

817 

 

Deferred tax liability, long-term

 

121,237 

 

 

116,526 

 

Other liabilities, long-term

 

 16,475 

 

 

20,875 

 

Total liabilities

 

 880,200 

 

 

            860,324 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock

 

 83 

 

 

86 

 

Additional paid-in capital

 

 436,598 

 

 

516,349 

 

Treasury stock

 

 (495,790)

 

 

(579,224)

 

Accumulated other comprehensive loss

 

 (758)

 

 

(609)

 

Retained earnings

 

 562,501 

 

 

680,808 

 

Total stockholders' equity

 

 502,634 

 

 

617,410 

 

Total liabilities and stockholders' equity

$

1,382,834 

 

$

1,477,734 

 

 

 

 

 

 

 

 

 

 

 

NEUSTAR, INC.

SEGMENT REVENUE AND CONTRIBUTION

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2011

 

2012

 

2011

 

2012

 

 

(unaudited)

Revenue: (1)

 

 

 

 

 

 

 

 

Carrier Services

$

114,155

$

125,202

$

334,604

$

375,922

Enterprise Services

 

38,342

 

43,630

 

111,671

 

125,204

Information Services

 

 

42,340

 

 

116,090

Total revenue

$

152,497

$

211,172

$

446,275

$

617,216

 

 

 

 

 

 

 

 

 

Segment contribution:(2)

 

 

 

 

 

 

 

 

Carrier Services

$

99,302

$

109,359

$

293,451

$

328,243

Enterprise Services

 

16,551

 

20,314

 

47,620

 

55,911

Information Services

 

 

24,064

 

 

59,069

Total segment contribution

$

115,853

$

153,737

$

341,071

$

443,223

 

 

 

 

 

 

 

 

 

                                   

 

(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 $57.8 million and $79.1 million for the three months ended September 30, 2011 and 2012, respectively, and totaled $171.4 million and $235.9 million for the nine months ended September 30, 2011 and 2012, respectively.

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 nine months ended September 30, 2011 and 2012 and the year ending December 31, 2012.

 

This reconciliation allows 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

 

Nine Months Ended

 

 

Year Ending

 

 

September 30,

 

September 30,

 

 

December 31,

 

 

2011

 

2012

 

2011

 

2012

 

 

2012 (1)

 

 

(in thousands, except per share data)

 

 

(unaudited)

Revenue

$

152,497 

$

211,172 

$

446,275 

$

617,216 

 

$

830,000 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

37,773 

$

45,753 

$

104,854 

$

118,307 

 

$

154,000 

Add: Stock-based compensation

 

      6,460

 

9,037 

 

18,476 

 

19,987 

 

 

27,000 

Add: Amortization of acquired intangible assets

 

1,716 

 

12,569 

 

3,955 

 

37,712 

 

 

50,000 

Add: TARGUSinfo acquisition-related costs (2)

 

1,361 

 

– 

 

2,041 

 

– 

 

 

– 

Add: Adjustment for provision for income taxes (3)

 

(2,824)

 

(6,684)

 

(8,589)

 

(20,344) 

 

 

(28,000)

Adjusted net income from continuing operations

$

44,486 

$

60,675 

$

120,737 

$

155,662 

 

$

203,000 

Adjusted net income margin from continuing operations (4)

 

29% 

 

29% 

 

27% 

 

25% 

 

 

24% 

Adjusted net income from continuing operations per diluted share

$

0.60 

$

0.90 

$

1.61 

$

2.29 

 

$

2.99 

Weighted average diluted common shares outstanding

 

74,632 

 

67,623 

 

75,079 

 

67,961 

 

 

68,000

 

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

(2)   Amounts represent costs incurred by the company in connection with its acquisition of Targus Information Corporation.  These costs are not deductible for income tax purposes.

(3)   Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense and amortization of acquired intangible assets based on the effective tax rate for income from continuing operations for the applicable period.

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

 

 

Contact Info:

Investor Relations Contact

Dave Angelicchio

(571) 434-3443

InvestorRelations@neustar.biz

 

Media Contact

Kim Hart

(202) 533-2934

Kim.Hart@neustar.biz