News and Events

Neustar Reports Results for Second Quarter 2015

Jul 30, 2015

Acquires Strategic Domain Name Registry

Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information services, today announced results for the quarter ended June 30, 2015, and increased its guidance for full-year 2015.

In a separate announcement, the company stated that it has acquired Australia-based Bombora Technologies Pty Ltd, the registry services provider of the .au top-level domain and numerous other top-level domains, for approximately AUD $118.5 million, or approximately USD $86.9 million in cash.

Results for Second Quarter 2015 Compared to Second Quarter 2014

• Revenue increased 8% to $256.8 million

• Marketing Services revenue increased 17% to $40.9 million

• Security Services revenue increased 18% to $40.5 million

• Net income increased 22% to $45.1 million

• Net income per share increased 31% to $0.80

Non-GAAP Results for Second Quarter 2015 Compared to Second Quarter 2014

• Adjusted net income increased 7% to $61.7 million

• Adjusted net income per share increased 16% to $1.10

“Our strong second quarter results reflect increased demand for the differentiated services we provide clients, based on our unique datasets and proprietary algorithms,” said Lisa Hook, Neustar’s President and Chief Executive Officer.  “With exceptional accuracy and our core expertise in authentication, we help clients make informed, real-time decisions to promote their services and protect their brands online.”

Paul Lalljie, Neustar’s Chief Financial Officer, added, “Information Services continued to deliver impressive revenue growth, with a 10% year-over-year increase.  In addition, our strong profits and cash flows reflect the strength in our business model and the ability to execute on our strategic initiatives.  With this continued momentum and the registry acquisition announced today, we are increasing our full-year revenue and adjusted net income guidance.”

Discussion of Second Quarter Results
Revenue totaled $256.8 million, an 8% increase from $237.5 million in 2014.  Marketing Services revenue grew 17% to $40.9 million driven by increased demand for the company's services that help its clients make informed and high-impact decisions to promote their products and services.  Security Services revenue grew 18% to $40.5 million driven by increased demand for the company's DNS Services and additional revenue from domain name registries.  Data Services revenue was flat at $49.2 million.  NPAC Services revenue grew 6% to $126.2 million driven by an increase in NPAC fixed-fee revenue.

Operating expense totaled $178.7 million, a 3% increase from $172.7 million in the second quarter of 2014.  This $6.0 million increase was driven by a $3.3 million increase in personnel and personnel-related expense, and a $4.6 million increase in costs related to information technology and systems.  In addition, the company incurred an increase of $1.1 million in professional fees and marketing expense associated with the NPAC.

As of June 30, 2015, the company's cash and cash equivalents totaled $412.0 million, an increase of $85.4 million from $326.6 million as of December 31, 2014.  As of June 30, 2015, the company's outstanding debt under its term facilities and senior notes was $779.3 million.  During the quarter, the company purchased approximately 1.4 million shares at an average price of $27.72 per share, for approximately $38.0 million.

Business Outlook for 2015

The company increased its full-year 2015 guidance provided on April 29, 2015:

• Adjusted net income per share to range $4.34 to $4.51 or flat to 4% growth

The company's business outlook excludes the impact of any future share repurchases.

Conference Call

As announced on July 16, 2015, 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 877-704-5378 (international callers dial 913-312-1485) and entering PIN 8258371.  For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) August 6, 2015 by dialing 877-870-5176 (international callers dial 858-384-5517) and entering PIN 8258371, 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, 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 of operations.  The company has attempted, whenever possible, to identify these forward-looking statements by 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 uncertainty of future revenue, expenses and profitability and potential fluctuations in quarterly results due to such factors as modifications to, terminations of, or failures to renew (or announcements related to any of the foregoing) the company's material contracts, including its contracts to serve as the Local Number Portability Administrator, disruptions to the company's operations resulting from network disruptions, security breaches or other events, or an inability to obtain high quality data on favorable terms or otherwise; general economic conditions in the regions and industries in which the company operates; 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 company's ability to acquire Bombora Technologies Pty Ltd and realize the expected benefits in a timely manner or at all; the company's ability to successfully identify and complete other acquisitions and integrate and support the operations of other 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 impact 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
 June 30,

 

Six Months Ended
 June 30,

 

2014

 

2015

 

2014

 

2015

 

(unaudited)

Revenue

$

237,457

 

 

$

256,767

 

 

$

467,354

 

 

$

508,155

 

Operating expense:

 

 

 

 

 

 

 

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

60,844

 

 

67,551

 

 

119,455

 

 

131,709

 

Sales and marketing

48,637

 

 

50,942

 

 

98,628

 

 

97,676

 

Research and development

6,932

 

 

5,997

 

 

13,991

 

 

12,451

 

General and administrative

26,008

 

 

24,729

 

 

52,299

 

 

49,386

 

Depreciation and amortization

30,086

 

 

29,438

 

 

57,726

 

 

59,362

 

Restructuring charges

200

 

 

 

 

5,166

 

 

 

 

172,707

 

 

178,657

 

 

347,265

 

 

350,584

 

Income from operations

64,750

 

 

78,110

 

 

120,089

 

 

157,571

 

Other (expense) income:

 

 

 

 

 

 

 

Interest and other expense

(7,270

)

 

(6,481

)

 

(13,267

)

 

(13,203

)

Interest income

163

 

 

69

 

 

258

 

 

295

 

Income before income taxes

57,643

 

 

71,698

 

 

107,080

 

 

144,663

 

Provision for income taxes

20,796

 

 

26,640

 

 

38,550

 

 

53,391

 

Net income

$

36,847

 

 

$

45,058

 

 

$

68,530

 

 

$

91,272

 

Net income per common share:

 

 

 

 

 

 

 

Basic

$

0.62

 

 

$

0.81

 

 

$

1.14

 

 

$

1.64

 

Diluted

$

0.61

 

 

$

0.80

 

 

$

1.11

 

 

$

1.61

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

58,973

 

 

55,377

 

 

60,100

 

 

55,676

 

Diluted

60,388

 

 

56,238

 

 

61,539

 

 

56,563

 

 

NEUSTAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

December 31,
 2014

 

June 30,
 2015

 

(audited)

 

(unaudited)

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

326,577

 

 

$

411,975

 

Restricted cash

2,191

 

 

2,531

 

Accounts receivable, net

155,086

 

 

162,847

 

Unbilled receivables

13,084

 

 

13,498

 

Prepaid expenses and other current assets

24,392

 

 

31,187

 

Deferred costs

6,951

 

 

7,758

 

Income taxes receivable

15,956

 

 

 

Deferred income tax assets

10,380

 

 

16,513

 

Total current assets

554,617

 

 

646,309

 

Property and equipment, net

161,604

 

 

147,611

 

Goodwill

692,269

 

 

691,033

 

Intangible assets, net

302,622

 

 

271,187

 

Other assets, long-term

30,996

 

 

32,491

 

Total assets

$

1,742,108

 

 

$

1,788,631

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

8,439

 

 

$

6,455

 

Accrued expenses

94,771

 

 

89,073

 

Income taxes payable

 

 

4,847

 

Deferred revenue

73,908

 

 

74,244

 

Notes payable

7,972

 

 

7,972

 

Capital lease obligations

3,702

 

 

4,175

 

Other liabilities

23,125

 

 

24,116

 

Total current liabilities

211,917

 

 

210,882

 

Deferred revenue, long-term

27,017

 

 

21,872

 

Notes payable, long-term

775,318

 

 

771,331

 

Capital lease obligations, long-term

5,579

 

 

3,928

 

Deferred income tax liabilities, long-term

49,111

 

 

60,372

 

Other liabilities, long-term

53,683

 

 

61,200

 

Total liabilities

1,122,625

 

 

1,129,585

 

Total stockholders’ equity

619,483

 

 

659,046

 

Total liabilities and stockholders’ equity

$

1,742,108

 

 

$

1,788,631

 

 

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 six months ended June 30, 2014 and 2015 and the year ending December 31, 2015.  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

June 30,

 

Six Months Ended
 June 30,

 

Year Ending
December 31,

 

2014

 

2015

 

2014

 

2015

 

2015 (1)

 

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

Revenue

$

237,457

 

 

$

256,767

 

 

$

467,354

 

 

$

508,155

 

 

$

1,040,000

 

 

 

 

 

 

 

 

 

 

 

Net income

$

36,847

 

 

$

45,058

 

 

$

68,530

 

 

$

91,272

 

 

$

184,000

 

Add: Stock-based compensation

15,559

 

 

9,467

 

 

27,285

 

 

17,697

 

 

38,000

 

Add: Amortization of acquired intangible assets

15,985

 

 

15,717

 

 

30,051

 

 

31,435

 

 

63,000

 

Add: Restructuring charges (2)

200

 

 

 

 

5,166

 

 

 

 

 

Add: Acquisition-related costs (3)

799

 

 

793

 

 

2,379

 

 

793

 

 

793

 

Less: Adjustment for provision for income taxes (4)

(11,741

)

 

(9,357

)

 

(23,358

)

 

(18,133

)

 

(35,793

)

Adjusted net income

$

57,649

 

 

$

61,678

 

 

$

110,053

 

 

$

123,064

 

 

$

250,000

 

Adjusted net income margin (5)

24

%

 

24

%

 

24

%

 

24

%

 

24

%

Adjusted net income per diluted share

$

0.95

 

 

$

1.10

 

 

$

1.79

 

 

$

2.18

 

 

$

4.42

 

Weighted average common shares outstanding - diluted

60,388

 

 

56,238

 

 

61,539

 

 

56,563

 

 

56,500

 

 

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

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

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

(4)    Adjustments reflect the estimated impact of income taxes using the effective tax rate for the applicable period.

(5)    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

 

Press Contact:

Lara Wyss

(415) 659-6154

PR@neustar.biz