Neustar Reports Results For Third Quarter 2012

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.

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