News and Events

Neustar Reports Results for Second Quarter 2013

Jul 30, 2013

STERLING, VA — Neustar, Inc. (NYSE: 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. (NYSE: 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 
 June 30,

 

Six Months Ended 
 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,
2012

 

June 30,
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 
 June 30,

 

Six Months Ended 
 June 30,

 

Year Ending

 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

 

 

$

230,000

 

Adjusted net income margin (4)

25

%

 

26

%

 

23

%

 

25

%

 

25

%

Adjusted net income per diluted share

$

0.75

 

 

$

0.85

 

 

$

1.39

 

 

$

1.65

 

 

$

3.46

 

Weighted average shares outstanding - diluted

67,887

 

 

66,990

 

 

68,132

 

 

67,301

 

 

66,500

 

 

(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)   Amount represents loss on debt modification and extinguishment related to the refinancing of the company’s 2011 credit facility in the first quarter of 2013.

(3)   Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense, amortization of acquired intangible assets and loss on debt modification and extinguishment based on the effective tax rate for the applicable period.

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

 

Reconciliation of Net Income to Adjusted EBITDA

 

The following is a reconciliation of net income to adjusted EBITDA for the three and six months ended June 30, 2012 and 2013.  Management believes that this measure provides additional information to debt holders and other investors about its operating performance and its ability to satisfy certain debt obligations.

 

 

 

Three Months Ended 
 June 30,

 

Six Months Ended 
 June 30,

 

 

2012

 

2013

 

2012

 

2013

 

 

(in thousands, unaudited)

Net income

 

$

38,592

 

 

$

43,398

 

 

$

72,554

 

 

$

77,162

 

Add: Provision for income taxes

 

21,474

 

 

25,642

 

 

43,934

 

 

45,283

 

Add: Interest expense

 

8,254

 

 

5,772

 

 

16,867

 

 

12,337

 

Add: Depreciation and amortization

 

22,713

 

 

24,690

 

 

45,419

 

 

49,355

 

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

 

150

 

 

21

 

 

(270

)

 

132

 

Add: Stock-based compensation

 

7,049

 

 

9,055

 

 

10,950

 

 

18,012

 

Add: Restructuring charges

 

2

 

 

 

 

524

 

 

2

 

Add: Other adjustments (2)

 

 

 

 

 

 

 

10,975

 

Less: Interest income

 

(110

)

 

(87

)

 

(339

)

 

(228

)

Adjusted EBITDA

 

$

98,124

 

 

$

108,491

 

 

$

189,639

 

 

$

213,030

 

 

  1. Amounts represent (gain) loss on foreign currency transactions, realized gains on available-for-sale investments and (gain) loss on asset disposals.
  2. Amount represents the loss on debt modification and extinguishment related to the refinancing of the company’s 2011 credit facility and 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