News and Events

Neustar Reports Results for Fourth Quarter and Full-Year 2012

Feb 5, 2013

 

STERLING, Va., Feb. 5, 2013 — 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 and year ended December 31, 2012 and provided guidance for 2013.

 

Summary of Fourth Quarter Results Compared to Fourth Quarter of 2011

·         Revenue increased 23% to $214.2 million

·         Income from continuing operations increased 102% to $37.8 million or $0.56 per share

·         Adjusted net income increased 37% to $50.7 million, representing a margin of 24%

·         Adjusted earnings per share increased 47% to $0.75

·         Adjusted EBITDA was $101.3 million compared to $78.5 million

Summary of 2012 Results Compared to 2011

·         Revenue increased 34% to $831.4 million

·         Income from continuing operations increased 26% to $156.1 million or $2.30 per share

·         Adjusted net income increased 30% to $206.4 million, representing a margin of 25%

·         Adjusted earnings per share increased 43% to $3.04

·         Adjusted EBITDA was $398.2 million compared to $298.7 million

 

“We successfully executed on our priorities in 2012.  We exceeded our financial performance targets, we successfully integrated a major acquisition that furthered our transition into information and analytics, and we made strong progress in instilling a culture of ownership,” said Lisa Hook, Neustar’s president and chief executive officer.  “We look forward to continuing to capitalize on the opportunities we see in the market and renewing the NPAC contract.”

 

Paul Lalljie, Neustar’s chief financial officer added, “Our 2012 operating results demonstrate strong execution across all of our business segments while integrating a significant acquisition.  In addition, we repurchased nearly $100 million of our common stock and improved our financial flexibility through our recently executed credit facility and notes offering.  Our guidance for 2013 reflects the momentum from 2012, operating leverage, and the impact of our new debt structure.”

Business Outlook for 2013

·         Revenue to range from $895 million to $915 million or growth of 8% to 10%

·         Adjusted net income to range from $220 to $230 million or growth of 7% to 11%.  This growth rate was influenced by discrete tax benefits totaling $6.8 million which resulted in higher adjusted net income in 2012.  On a per share basis, adjusted net income is expected to range from $3.28 to $3.43

 

Discussion of Fourth Quarter and Full-Year 2012 Results

Fourth Quarter Revenue

Consolidated revenue totaled $214.2 million, a 23% increase from $174.2 million in the fourth quarter of 2011.  In particular:

·         Carrier Services revenue totaled $126.2 million, an 11% increase from $113.3 million in 2011.  This increase was primarily due to an $11.2 million increase in NPAC Services revenue; 

·         Enterprise Services revenue totaled $45.2 million, a 14% increase from $39.7 million in 2011.  This increase was due to higher revenue in both Internet Infrastructure Services and Registry Services; and

·         Information Services generated revenue of $42.8 million in the fourth quarter as compared to revenue of $21.2 million from the November 8, 2011 acquisition date through the end of the year.  

Full-Year Revenue

Consolidated revenue totaled $831.4 million, a 34% increase from $620.5 million in 2011.  In particular:

·         Carrier Services revenue totaled $502.1 million, a 12% increase from $447.9 million in 2011.  This increase was primarily due to a $43.8 million increase in NPAC Services revenue;

·         Enterprise Services revenue totaled $170.4 million, a 13% increase from $151.4 million in 2011.  This increase was due to higher revenue in both Internet Infrastructure Services and Registry Services; and

·         Information Services generated revenues of $158.9 million for 2012.  Revenue from Information Services was $21.2 million from the November 8, 2011 acquisition date through the end of 2011.

Operating expense for the fourth quarter totaled $144.9 million, a 7% increase from $134.8 million in 2011.  This $10.1 million increase was driven by incremental operating expense of $19.2 million from the acquisition of our Information Services segment.  This increase of $19.2 million was partially offset by $9.6 million of acquisition costs incurred in the 2011 quarter.  

 

Operating expense for 2012 totaled $554.7 million, an increase of 35% or $143.3 million from $411.4 million in 2011.  This increase was driven by incremental operating costs of $130.4 million from the acquisitions completed in 2011. This increase of $130.4 million was partially offset by expenses incurred in 2011 driven by acquisition costs of $11.6 million.  The remaining $24.5 million increase represents a growth of 6% in the Company’s operating expense.

 

For 2012, adjusted net income totaled $206.4 million, including the impact of discrete tax benefits totaling $6.8 million, primarily associated with a domestic production activities deduction.  Excluding the impact of these discrete tax benefits, our effective tax rate was approximately 38.6%.

Cash, cash equivalents and investments totaled $343.9 million as of December 31, 2012, an increase of $208.6 million from December 31, 2011.

As of December 31, 2012, the Company’s outstanding debt under its 2011 credit facility was $592.5 million.  On January 22, 2013, the Company refinanced this credit facility.  In particular, the Company issued $300 million of 4.5% senior notes that mature in 2023.  In addition, the Company completed a $525 million credit facility that includes a $325 million term loan A and a $200 million revolver.  The interest rate for the term loan A and the revolver is leverage-based and ranges from LIBOR plus 1.50% to LIBOR plus 1.75%.  At the Company’s current leverage, the applicable interest rate is LIBOR plus 1.50%.  The Company will record a non-operating expense of approximately $11.0 million in the first quarter of 2013 related to the modification and extinguishment of its 2011 credit facility.

Conference Call

As announced on January 23, 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 (877) 440-5791 (international callers dial (719) 325-2271) and entering PIN 5221477.  For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Tuesday, February 12, 2013 by dialing (877) 870-5176 (international callers dial (858) 384-5517) and entering replay PIN 5221477, 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, 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 2013 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, 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 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,

 

 

2011

 

2012

 

2011

 

2012

 

 

(unaudited)

 

(audited)

 

(unaudited)

 

Revenue:

 

 

 

 

 

 

 

 

Carrier Services

$

113,290

$

126,163

$

447,894

$

502,085

Enterprise Services

 

39,719

 

45,236

 

151,390

 

170,440

Information Services

 

21,171

 

42,773

 

21,171

 

158,863

Total revenue

 

174,180

 

214,172

 

620,455

 

831,388

Operating expense:

 

 

 

 

 

 

 

 

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

 

41,329

 

48,601

 

137,992

 

185,965

Sales and marketing

 

33,580

 

46,263

 

109,855

 

163,729

Research and development

 

6,326

 

6,311

 

17,509

 

29,794

General and administrative

 

33,193

 

19,798

 

96,317

 

81,797

Depreciation and amortization

 

17,191

 

23,914

 

46,209

 

92,955

Restructuring charges (recoveries)

 

3,162

 

(3)

 

3,549

 

489

 

 

134,781

 

144,884

 

411,431

 

554,729

Income from operations

 

39,399

 

69,288

 

209,024

 

276,659

Other (expense) income:

 

 

 

 

 

 

 

 

Interest and other expense

 

(5,131)

 

(9,041)

 

(6,279)

 

(34,155)

Interest and other income

 

529

 

117

 

1,966

 

596

Income from continuing operations before income taxes

 

34,797

 

60,364

 

204,711

 

243,100

Provision for income taxes, continuing operations

 

16,077

 

22,584

 

81,137

 

87,013

Income from continuing operations

 

18,720

 

37,780

 

123,574

 

156,087

Income from discontinued operations, net of tax

 

 

 

37,249

 

Net income

$

18,720

$

37,780­

$

160,823

$

156,087

 

 

 

 

 

 

 

 

 

Basic net income per common share:

 

 

 

 

 

 

 

 

Continuing operations

$

0.26

$

0.57

$

1.69

$

2.34

Discontinued operations

 

 

 

0.51

 

Basic net income per common share

$

0.26

$

0.57

$

2.20

$

2.34

 

 

 

 

 

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

Continuing operations

$

0.26

$

0.56

$

1.66

$

2.30

Discontinued operations

 

 

 

0.50

 

Diluted net income per common share

$

0.26

$

0.56

$

2.16

$

2.30

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

70,945

 

66,309

 

72,974

 

66,737

Diluted

 

72,865

 

67,762

 

74,496

 

67,956

 

 

 

 

 

 

 

 

 

                           

 

NEUSTAR, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands)

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2011 

 

 

2012 

 

 

 

(audited)

 

 

(unaudited)

 

ASSETS

 

Current assets:

 

Cash and cash equivalents

$

 122,237 

 

$

340,255 

 

Restricted cash

 

 10,251 

 

 

2,543 

 

Short-term investments

 

 10,545 

 

 

3,666 

 

Accounts receivable, net

 

 106,274 

 

 

131,805 

 

Unbilled receivables

 

 5,551 

 

 

6,372 

 

Notes receivable

 

 2,786 

 

 

2,740 

 

Prepaid expenses and other current assets

 

 30,420 

 

 

17,707 

 

Deferred costs

 

 8,174 

 

 

7,379 

 

Income taxes receivable

 

 37,874 

 

 

6,596 

 

Deferred tax assets

 

 7,728 

 

 

6,693 

 

Total current assets

 

 341,840 

 

 

525,756 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments

 

 2,506 

 

 

– 

 

Property and equipment, net

 

 100,102 

 

 

118,513 

 

Goodwill

 

 572,178 

 

 

572,178 

 

Intangible assets, net

 

 338,768 

 

 

288,487 

 

Notes receivable, long-term

 

 3,748 

 

 

1,008 

 

Deferred costs, long-term

 

 701 

 

 

702 

 

Other assets, long-term

 

 22,767 

 

 

20,080 

 

Total assets

$

 1,382,610 

 

$

1,526,724 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

$

7,385 

 

$

9,269 

 

Accrued expenses

 

 79,334 

 

 

85,424 

 

Deferred revenue

 

 41,080 

 

 

49,070 

 

Note payable

 

 4,856 

 

 

8,125 

 

Capital lease obligations

 

 3,065 

 

 

1,686 

 

Accrued restructuring reserve

 

 4,361 

 

 

372 

 

Other liabilities

 

 5,317 

 

 

3,484 

 

Total current liabilities

 

 145,398 

 

 

157,430

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue, long-term

 

 10,363 

 

 

9,922 

 

Note payable, long-term

 

 584,809 

 

 

576,688 

 

Capital lease obligations, long-term

 

 1,918 

 

 

817 

 

Deferred tax liability, long-term

 

120,948 

 

 

114,130 

 

Other liabilities, long-term

 

 16,540 

 

 

21,129 

 

Total liabilities

 

 879,976 

 

 

880,116

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock

 

 83 

 

 

86 

 

Additional paid-in capital

 

 436,598 

 

 

532,743 

 

Treasury stock

 

 (495,790)

 

 

(604,042)

 

Accumulated other comprehensive loss

 

 (758)

 

 

(767)

 

Retained earnings

 

 562,501 

 

 

718,588 

 

Total stockholders' equity

 

 502,634 

 

 

646,608 

 

Total liabilities and stockholders' equity

$

1,382,610 

 

$

1,526,724 

 

 

 

 

 

 

 

 

 

 

 

NEUSTAR, INC.

 

SEGMENT REVENUE AND CONTRIBUTION

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2011

 

2012

 

2011

 

2012

 

 

(unaudited)

 

(audited)

 

(unaudited)

Revenue: (1)

 

 

 

 

 

 

 

 

Carrier Services

$

113,290

$

126,163

$

447,894

$

502,085

Enterprise Services

 

39,719

 

45,236

 

151,390

 

170,440

Information Services

 

21,171

 

42,773

 

21,171

 

158,863

Total revenue

$

174,180

$

214,172

$

620,455

$

831,388

 

 

 

 

 

 

 

 

 

Segment contribution:(2)

 

 

 

 

 

 

 

 

Carrier Services

$

97,549

$

109,970

$

391,000

$

438,213

Enterprise Services

 

17,460

 

17,555

 

65,080

 

73,466

Information Services

 

12,583

 

18,222

 

12,583

 

77,291

Total segment contribution

$

127,592

$

145,747

$

468,663

$

588,970

 

 

 

 

 

 

 

 

 

                                                                     

 

(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 (recoveries) are excluded from segment contribution.  Such unallocated costs totaled $88.2 million and $76.5 million for the three months ended December 31, 2011 and 2012, respectively, and totaled $259.6 million and $312.3 million for the year ended December 31, 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 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.  Reconciliations from financial results calculated in accordance with GAAP should be carefully evaluated.  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

 

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, 2011 and 2012 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

 

Year Ended

 

 

Year Ending

 

 

December 31,

 

December 31,

 

 

December 31,

 

 

2011

 

2012

 

2011 (1)

 

2012

 

 

2013 (2)

 

 

(in thousands, except per share data)

 

 

(unaudited)

Revenue

$

174,180 

$

214,172 

$

620,455 

$

831,388 

 

$

905,000 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

18,720 

$

37,780 

$

123,574

$

156,087 

 

$

162,500 

Add: Stock-based compensation

 

9,015 

 

8,071 

 

27,491

 

28,058 

 

 

42,000 

Add: Amortization of acquired intangible assets

 

8,152 

 

12,569 

 

12,107 

 

50,281 

 

 

49,000 

Add: TARGUSinfo acquisition-related costs (3)

 

9,561 

 

– 

 

11,602 

 

– 

 

 

– 

Add: Tender offer costs (4)

 

2,413 

 

– 

 

2,413 

 

– 

 

 

– 

Add: Unamortized debt issuance costs(5)

 

– 

 

– 

 

– 

 

– 

 

 

11,000 

Add: Adjustment for provision for income taxes (6)(7)

 

(10,821)

 

(7,722)

 

(18,173)

 

(28,040) 

 

 

(39,500)

Adjusted net income from continuing operations

$

37,040 

$

50,698 

$

159,014 

$

206,386 

 

$

225,000 

Adjusted net income margin from continuing operations (8)

 

21% 

 

24% 

 

26% 

 

25% 

 

 

25% 

Adjusted net income from continuing operations per diluted share

$

0.51 

$

0.75 

$

2.13 

$

3.04 

 

$

3.36 

Weighted average diluted common shares outstanding

 

72,865 

 

67,762 

 

74,496 

 

67,956 

 

 

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, 2011.

(2)     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.

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

(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 were not deductible for income tax purposes.

(5)     Amounts represent the acceleration of unamortized costs associated with the debt modification and the debt extinguishment loss related to the refinancing of the Company’s 2011 credit facility.

(6)     Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense, amortization of acquired intangible assets, unamortized debt issuance costs, 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.

(7)     Quarterly amounts for the adjustment for provision for income taxes do not add to the full year amount due to differences in the effective tax rate for income from continuing operations for the applicable quarters compared to effective annual tax rate.

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

 


 

The Company believes that adjusted EBITDA is useful to investors and debt holders because it serves as an indicator of its ability to satisfy debt obligations. The Company believes that the inclusion of adjusted EBITDA is appropriate to provide additional information to investors and debt holders about its operating performance and to provide a measure of operating results comparable to other companies. To place these data in an appropriate context, the following is a reconciliation of income from continuing operations to adjusted EBITDA for the years ended December 31, 2011 and 2012.

 

Reconciliation of Income from Continuing Operations to Adjusted EBITDA

 

The following is a reconciliation of income from continuing operations to adjusted EBITDA for the three and twelve months ended December 31, 2011 and 2012.  Management believes that the inclusion of adjusted EBITDA is appropriate to provide additional information to debt holders about its operating performance and its ability to satisfy certain debt obligations.

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2011

 

2012

 

2011

 

2012

 

 

 

(in thousands, unaudited)

Income from continuing operations

$

18,720

$

37,780 

$

123,574

$

156,087 

 

Add: Provision for income taxes, continuing operations

 

 

16,077

 

22,584 

 

81,137

 

87,013 

 

Add: Interest expense

 

4,435

 

8,711 

 

4,831

 

34,200 

 

Add: Depreciation and amortization

 

17,191

 

23,914 

 

46,209

 

92,955 

 

Add:  Non-cash other (income) and expense, net(1)

 

696

 

330 

 

1,448

 

(45)

 

Add: Stock-based compensation

 

9,015

 

8,071 

 

27,491

 

28,058 

 

Add: Restructuring charges (recoveries)

 

3,162

 

(3)

 

3,549

 

489 

 

Add: Acquisition-related costs(2)

 

9,561

 

− 

 

11,602

 

− 

 

Add: Other adjustments(3)

 

126

 

− 

 

126

 

− 

 

Less: Interest income

 

511

 

117 

 

1,265

 

596 

 

Adjusted EBITDA

$

78,472

$

101,270 

$

298,702

$

398,161 

 

 

 

(1)     Amounts represent loss on foreign currency transactions, realized gains on available-for-sale investments and loss on asset disposals.

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

(3)     Other adjustments represent certain non-capitalized charges incurred in connection with the Company’s financing activities.

 

 

 

 

Contact Info:

Investor Relations Contact

Dave Angelicchio

(571) 434-3443

InvestorRelations@neustar.biz

 

Media Contact

Kim Hart

(202) 533-2934

Kim.Hart@neustar.biz