News and Events

Neustar Reports Results for Third Quarter 2014

Oct 30, 2014

STERLING, VA, October 30, 2014 — Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information services and analytics, today announced results for the quarter ended September 30, 2014, and updated its guidance for 2014.

Results for Third Quarter 2014 Compared to Third Quarter 2013

• Revenue increased 7% to $243.9 million

• Revenue from Marketing Services increased 21% to $37.5 million

• Revenue from Security Services increased 25% to $35.9 million, including $4.4 million in revenue from the acquisition of .CO Internet S.A.S.

• Net income increased 1% to $48.2 million, which includes a net benefit of $9.8 million in discrete income tax items  

• Net income per share increased 15% to $0.84

Non-GAAP Results for Third Quarter 2014 Compared to Third Quarter 2013

• Adjusted net income increased 25% to $78.1 million, which includes a net benefit of $9.8 million in discrete income tax items  

• Adjusted net income per share increased 44% to $1.37

“During the third quarter, we continued to deliver consistent, strong results while broadening the scope of our suite of services and forming important strategic partnerships that deepen our capabilities in Information Services and Analytics,” said Lisa Hook, Neustar’s President and Chief Executive Officer.  “We remain focused on expanding our service offerings in high-growth markets, increasing shareholder value, and competing vigorously for the NPAC contract.”

Paul Lalljie, Neustar’s Chief Financial Officer, added, “In the third quarter, we delivered year-over-year revenue growth of over 20% in both Marketing and Security Services, while making investments to further our strategy.  We are updating our full-year guidance given our leading indicators, results to date and visibility into the next quarter.”

Discussion of Third Quarter Results

Revenue totaled $243.9 million, a 7% increase from $227.6 million in 2013.  Marketing Services revenue of $37.5 million grew 21% driven by higher demand for the company's workflow solutions.  Security Services revenue of $35.9 million grew 25% due to revenue from the acquisition of .CO Internet S.A.S. and increased demand for DDoS protection services.  NPAC Services revenue of $118.7 million grew 6% driven by an increase in the fixed fee established under the contracts to provide local number portability services.  Data Services revenue of $51.8 million declined 8% due to lower revenue from caller identification services.

Operating expense totaled $177.1 million, a 20% increase from $147.2 million in the third quarter of 2013.  This $29.8 million increase included the addition of $12.4 million in operating expense from the company’s recent acquisitions.  Of the remaining $17.4 million, personnel and personnel-related expense increased $13.9 million driven primarily by stock-based compensation.  In addition, professional fees and marketing expenses associated with the NPAC vendor selection process increased $4.4 million.

As of September 30, 2014, cash and cash equivalents totaled $244.3 million, compared to $223.3 million as of December 31, 2013.  At September 30, 2014, the company's outstanding debt under its term facilities and  senior notes was $785.3 million.  During the third quarter, the company purchased approximately 2.1 million shares at an average price of $27.79 per share, for approximately $58.8 million.  In September, the company completed its $200 million share repurchase plan announced on January 29, 2014.

Business Outlook for 2014

The company updated its guidance:

• Revenue range increased to $955 million to $970 million, or growth of 6% to 8%, from $945 million to $970 million

• Adjusted net income range increased to $245 million to $255 million, or growth of 5% to 9%, from $233 million to $243 million

• On a per share basis, adjusted net income range increased to $4.08 to $4.25, or growth of 16% to 20%, from $3.88 to $4.05 

Conference Call

As announced on October 20, 2014, 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 888-204-4485 (international callers dial 913-981-5552) and entering PIN 3085723.  For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Thursday, November 6, 2014 by dialing 877-870-5176 (international callers dial 858-384-5517) and entering PIN 3085723, 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 investors; 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.  The supplemental information includes reconciliations of certain non-GAAP measures to their most directly comparable GAAP measures.  These non-GAAP measures 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 the first real-time provider of cloud-based information services and data analytics, enabling marketing and IT security professionals to promote and protect their businesses. With a commitment to privacy and neutrality, Neustar operates complex data registries and uses its expertise to deliver actionable, data-driven insights that help clients make high-value business decisions in real time, one customer interaction at a time. 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 and, beliefs about its future results, such as its guidance regarding future 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, expenses and profitability and potential fluctuations in quarterly results due to such factors as disruptions to the company's operations resulting from network disruptions, security breaches or other events, an inability to obtain high quality data on favorable terms or otherwise, modifications to or terminations of its material contracts, including its contracts to serve as the Local Number Portability Administrator; 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; the company's ability to incur additional debt; the variable interest rates applicable under the company's indebtedness and the effects of changes in those rates; the effectiveness of the company's restructuring initiatives in improving efficiencies; the company's ability to successfully identify and complete acquisitions and integrate and support the operations of businesses the company acquires; increasing competition; market acceptance of the company’s existing services; the company's ability to successfully develop and market new services and the uncertainty of whether new services will achieve market acceptance or result in any revenue; the company’s ability to raise additional capital on favorable terms or at all; business, regulatory and statutory changes related to the communications and Internet industries; and the impacts on the company of any litigation, arbitration, investigation or other similar proceeding.  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
 September 30,

 

Nine Months Ended
 September 30,

 

2013

 

 

2014

 

 

2013

 

 

2014

 

 

(unaudited)

Revenue

$

227,633

 

 

$

243,859

 

 

$

664,399

 

 

$

711,213

 

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

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

51,434

 

 

62,801

 

 

150,950

 

 

182,256

 

Sales and marketing

40,253

 

 

47,937

 

 

124,468

 

 

146,565

 

Research and development

7,196

 

 

7,266

 

 

22,296

 

 

21,257

 

General and administrative

23,751

 

 

27,702

 

 

66,757

 

 

80,001

 

Depreciation and amortization

24,586

 

 

29,999

 

 

73,941

 

 

87,725

 

Restructuring charges

 

 

1,355

 

 

2

 

 

6,521

 

 

147,220

 

 

177,060

 

 

438,414

 

 

524,325

 

Income from operations

80,413

 

 

66,799

 

 

225,985

 

 

186,888

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

Interest and other expense

(5,496

)

 

(6,270

)

 

(28,851

)

 

(19,537

)

Interest and other income

64

 

 

32

 

 

292

 

 

290

 

Income before income taxes

74,981

 

 

60,561

 

 

197,426

 

 

167,641

 

Provision for income taxes

27,442

 

 

12,388

 

 

72,725

 

 

50,938

 

Net income

$

47,539

 

 

$

48,173

 

 

$

124,701

 

 

$

116,703

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.74

 

 

$

0.87

 

 

$

1.91

 

 

$

1.99

 

Diluted

$

0.73

 

 

$

0.84

 

 

$

1.87

 

 

$

1.94

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

63,978

 

 

55,494

 

 

65,223

 

 

58,548

 

Diluted

65,510

 

 

57,171

 

 

66,713

 

 

60,050

 

 

NEUSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

December 31,
 2013

 

September 30,
 2014

 

(audited)

 

(unaudited)

ASSETS

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

223,309

 

 

$

244,323

 

Restricted cash

1,858

 

 

2,207

 

Accounts receivable, net

152,821

 

 

158,043

 

Unbilled receivables

10,790

 

 

10,552

 

Notes receivable

1,008

 

 

 

Prepaid expenses and other current assets

23,914

 

 

21,504

 

Deferred costs

6,324

 

 

6,395

 

Income taxes receivable

7,328

 

 

3,647

 

Deferred tax assets

8,532

 

 

11,580

 

Total current assets

435,884

 

 

458,251

 

Property and equipment, net

124,285

 

 

151,498

 

Goodwill

641,404

 

 

685,712

 

Intangible assets, net

275,141

 

 

318,579

 

Other assets, long-term

28,704

 

 

25,154

 

Total assets

$

1,505,418

 

 

$

1,639,194

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

9,620

 

 

$

9,327

 

Accrued expenses

94,457

 

 

84,182

 

Deferred revenue

54,004

 

 

63,512

 

Notes payable

7,972

 

 

7,972

 

Capital lease obligations

1,894

 

 

3,054

 

Other liabilities

3,580

 

 

4,990

 

Total current liabilities

171,527

 

 

173,037

 

Deferred revenue, long-term

12,061

 

 

15,486

 

Notes payable, long-term

608,292

 

 

777,311

 

Capital lease obligations, long-term

2,419

 

 

5,891

 

Deferred tax liabilities, long-term

80,275

 

 

50,246

 

Other liabilities, long-term

41,270

 

 

64,987

 

Total liabilities

915,844

 

 

1,086,958

 

Stockholders’ equity:

 

 

 

 

 

Common stock

87

 

 

81

 

Additional paid-in capital

602,796

 

 

655,525

 

Treasury stock

(893,852

)

 

(899,881

)

Accumulated other comprehensive loss

(797

)

 

(1,678

)

Retained earnings

881,340

 

 

798,189

 

Total stockholders’ equity

589,574

 

 

552,236

 

Total liabilities and stockholders’ equity

$

1,505,418

 

 

$

1,639,194

 

 

Reconciliation of Non-GAAP Financial Measures

In this press release and in other 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 is the reconciliation of the non-GAAP financial measure to its most directly comparable GAAP financial measure.  This reconciliation 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 nine months ended September 30, 2013 and 2014 and the year ending December 31, 2014.  Management believes that this measure enhances investors' understanding of the company's financial performance and the comparability of the company's results to prior periods, as well as against the performance of other companies.

 

 

Three Months Ended

September 30,

 

Nine Months Ended
 September 30,

 

Year Ending
December 31,

 

2013

 

 

2014

 

 

2013

 

 

2014

 

 

2014 (1)

 

(in thousands, except per share data)
(unaudited)

Revenue

$

227,633

 

 

$

243,859

 

 

$

664,399

 

 

$

711,213

 

 

$

962,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

47,539

 

 

$

48,173

 

 

$

124,701

 

 

$

116,703

 

 

$

158,000

 

Add: Stock-based compensation

9,663

 

 

20,007

 

 

27,675

 

 

47,292

 

 

63,000

 

Add: Amortization of acquired intangible assets

12,385

 

 

16,295

 

 

37,134

 

 

46,346

 

 

62,000

 

Add: Loss on debt modification and extinguishment (2)

 

 

 

 

10,886

 

 

 

 

 

Add: Restructuring charges (3)

 

 

1,355

 

 

2

 

 

6,521

 

 

8,500

 

Add: Acquisition-related costs (4)

924

 

 

 

 

924

 

 

2,379

 

 

2,500

 

Less: Adjustment for income taxes (5)

(8,168

)

 

(7,703

)

 

(27,983

)

 

(31,156

)

 

(44,000

)

Adjusted net income

$

62,343

 

 

$

78,127

 

 

$

173,339

 

 

$

188,085

 

 

$

250,000

 

Adjusted net income margin (6)

27

%

 

32

%

 

26

%

 

26

%

 

26

%

Adjusted net income per diluted share

$

0.95

 

 

$

1.37

 

 

$

2.60

 

 

$

3.13

 

 

$

4.17

 

Weighted average shares outstanding - diluted

65,510

 

 

57,171

 

 

66,713

 

 

60,050

 

 

60,000

 

 

(1)   The amounts expressed in this column represent the midpoint of the company's guidance as of the date of this press release.

(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)   Amounts represent restructuring charges related to the termination or relocation of certain employees and the reduction in or closure of leased facilities.

(4)   Amounts represent costs incurred by the company in connection with completed acquisitions.

(5)   Adjustments reflect the estimated impact of income taxes using the effective rate for the applicable period.  Certain of the reconciling items are not tax deductible.

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

Contact Info:

Investor Relations Contact:

Dave Angelicchio

(571) 434-3443

InvestorRelations@neustar.biz