Neustar Reports Results For Second Quarter 2012

Neustar, Inc. (NYSE: NSR), a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, entertainment and marketing industries, today announced results for the quarter ended June 30, 2012 and increased its guidance for full-year 2012.

GAAP Results for Second Quarter 2012 Compared to Second Quarter 2011
  • Revenue increased 40% to $206.5 million
  • Income from continuing operations increased 15% to $38.6 million
  • Income from continuing operations per diluted share increased 27% to $0.57
  • Cash, cash equivalents and investments totaled $235.0 million
  • Share repurchases totaled $25.0 million or 742,000 shares

Non-GAAP Results for Second Quarter 2012 Compared to Second Quarter 2011
  • Adjusted net income from continuing operations increased 33% to $51.2 million
  • Adjusted earnings per diluted share increased 47% to $0.75

“Our second quarter results exceeded our expectations, reinforcing our confidence in our ability to execute on our strategy,” said Lisa Hook, Neustar’s president and chief executive officer. “Neustar has long been a leader in addressing, routing, and policy management. We are now emerging as a leader in real-time information and analytics, and doing so while meeting our growth targets and other objectives.”

Paul Lalljie, Neustar’s chief financial officer, added, “Our results this quarter demonstrate strength across all of our businesses and our ability to execute on our plan. In particular, we experienced sequential top-line growth, strong profits, and robust cash generation. Given our performance to date and the key leading indicators of the business, we are confident in our ability to execute our operational plan and achieve the higher financial projections we are providing today.”

Discussion of Second Quarter Results

Consolidated revenue totaled $206.5 million, a 40% increase from $147.7 million in the second quarter of 2011. This increase included revenue of $38.0 million from our Information Services operating segment. In particular:
  • Carrier Services revenue totaled $126.3 million, a 14% increase from $110.8 million in 2011. This increase was primarily due to an $11.0 million increase in NPAC Services revenue and a $2.1 million increase in Order Management Services revenue.
  • Enterprise Services revenue totaled $42.1 million, a 14% increase from $36.8 million in 2011. This increase was due to higher revenue in Registry Services and Internet Infrastructure Services; and
  • Information Services revenue totaled $38.0 million comprised of $23.0 million in Identification Services, $9.8 million in Verification & Analytics Services, and $5.2 million in Local Search & Licensed Data Services.

Operating expense totaled $138.1 million, a 49% increase from $92.4 million in the second quarter of 2011. This increase was primarily driven by the addition of $37.1 million in operating expense from the Company’s recent acquisitions as it continues to diversify its portfolio of services. The remaining $8.6 million of the increase was primarily driven by the growth in the Company’s operations. In particular, personnel and personnel-related expense increased $3.4 million due to increased headcount in the areas of sales and marketing, technology and operations.

Cash, cash equivalents and investments totaled $235.0 million as of June 30, 2012, compared to $188.7 million as of March 31, 2012 and compared to $135.3 million as of December 31, 2011. During the second quarter, the Company repurchased approximately 742,000 shares of common stock at an average price of $33.67 per share, for a total purchase price of approximately $25.0 million.

Business Outlook for 2012

The Company increased the full-year guidance for revenue and adjusted net income from continuing operations that was provided on February 2, 2012 and affirmed on April 26, 2012:
  • Revenue to range from $825 to $835 million. Prior revenue guidance was between $810 and $830 million
  • Adjusted net income to range from $189 to $197 million. Prior adjusted net income guidance was $178 to $190 million
  • Adjusted earnings per diluted share to range from $2.78 to $2.90. Prior adjusted earnings per diluted share was $2.66 to $2.84

Conference Call

As announced on July 12, 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 99777389. For those who cannot listen to the live broadcast, a replay will be available through 11:59 p.m. (Eastern Time) Thursday, August 2, 2012 by dialing 855-859-2056 (international callers dial 404-537-3406) and entering replay PIN 99777389, 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, entertainment and marketing industries throughout the world. Neustar applies its advanced, secure technologies in routing, addressing and authentication to its customers’ data to help them identify new revenue opportunities and network efficiencies, and institute cybersecurity and fraud protection measures. 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, the risks and uncertainties arising from the difficulties with the integration process or the realization of the benefits of the TARGUSinfo acquisition; 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 Six Months Ended
June 30, June 30,
2011   2012   2011   2012  
(unaudited)
Revenue:
Carrier Services $ 110,834 $ 126,347 $ 220,449 $ 250,720
Enterprise Services 36,849 42,089 73,329 81,574
Information Services   38,026     73,750  
Total revenue 147,683 206,462 293,778 406,044
Operating expense:

Cost of revenue (excluding depreciation and

amortization shown separately below)
31,417 46,127 62,469 91,025
Sales and marketing 26,267 41,073 51,206 79,426
Research and development 3,441 8,096 7,437 15,820
General and administrative 21,949 20,091 42,164 41,084
Depreciation and amortization 9,386 22,713 18,532 45,419
Restructuring (recoveries) charges (12 ) 2   420   524  
92,448   138,102   182,228   273,298  
Income from operations 55,235 68,360 111,550 132,746
Other (expense) income:
Interest and other expense (126 ) (8,404 ) (473 ) (16,597 )
Interest and other income 930   110   1,133   339  
Income from continuing operations before income taxes 56,039 60,066 112,210 116,488
Provision for income taxes, continuing operations 22,423   21,474   45,129   43,934  
Income from continuing operations 33,616 38,592 67,081 72,554
(Loss) income from discontinued operations, net of tax (1,261 )   37,249    
Net income $ 32,355   $ 38,592   $ 104,330   $ 72,554  
 
Basic net income (loss) per common share:
Continuing operations $ 0.46 $ 0.58 $ 0.91 $ 1.08
Discontinued operations (0.02 )   0.50    
Basic net income per common share $ 0.44   $ 0.58   $ 1.41   $ 1.08  
 
Diluted net income (loss) per common share:
Continuing operations $ 0.45 $ 0.57 $ 0.89 $ 1.06
Discontinued operations (0.02 )   0.50    
Diluted net income per common share $ 0.43   $ 0.57   $ 1.39   $ 1.06  
 
Weighted average common shares outstanding:
Basic 73,807   66,917   73,872   67,060  
Diluted 75,015   67,887   75,129   68,132  
 
 
NEUSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
   
December 31, June 30,
2011   2012  
(audited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 122,237 $ 224,635
Restricted cash 10,251 10,247
Short-term investments 10,545 10,381
Accounts receivable, net 106,274 127,210
Unbilled receivables 5,551 8,439
Notes receivable 2,786 2,870
Prepaid expenses and other current assets 30,166 19,091
Deferred costs 8,174 7,764
Income taxes receivable 38,687
Deferred tax assets 6,264   7,738  
Total current assets 340,935 418,375
 
Long-term investments 2,506
Property and equipment, net 100,102 108,651
Goodwill 573,307 573,307
Intangible assets, net 338,768 313,625
Notes receivable, long-term 3,748 2,291
Deferred costs, long-term 701 831
Other assets, long-term 22,767   20,942  
Total assets $ 1,382,834   $ 1,438,022  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,385 $ 3,569
Accrued expenses 79,334 61,156
Income taxes payable 6,126
Deferred revenue 41,080 47,597
Note payable 4,856 59,336
Capital lease obligations 3,065 3,094
Accrued restructuring reserve 4,361 1,287
Other liabilities 5,317   3,660  
Total current liabilities 145,398 185,825
 
Deferred revenue, long-term 10,363 10,392
Note payable, long-term 584,809 527,892
Capital lease obligations, long-term 1,918 1,011
Deferred tax liability, long-term 121,237 120,222
Other liabilities, long-term 16,475   18,375  
Total liabilities 880,200 863,717
 
Stockholders' equity:
Common stock 83 85
Additional paid-in capital 436,598 493,790
Treasury stock (495,790 ) (553,909 )
Accumulated other comprehensive loss (758 ) (716 )
Retained earnings 562,501   635,055  
Total stockholders' equity 502,634   574,305  
Total liabilities and stockholders' equity $ 1,382,834   $ 1,438,022  
 
       
NEUSTAR, INC.
SEGMENT REVENUE AND CONTRIBUTION
(in thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,
2011 2012 2011 2012
(unaudited)
Revenue: (1)
Carrier Services $ 110,834 $ 126,347 $ 220,449 $ 250,720
Enterprise Services 36,849 42,089 73,329 81,574
Information Services 38,026 73,750
Total revenue $ 147,683 $ 206,462 $ 293,778 $ 406,044
 
Segment contribution:(2)
Carrier Services $ 97,570 $ 110,438 $ 194,149 $ 218,884
Enterprise Services 15,418 18,866 31,069 35,597
Information Services 16,991 35,005
Total segment contribution $ 112,988 $ 146,295 $ 225,218 $ 289,486
 

(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 $77.9 million for the three months ended June 30, 2011 and 2012, respectively, and totaled $113.7 million and $156.7 million for the six months ended June 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 six months ended June 30, 2011 and 2012 and the year ending December 31, 2012.

This reconciliation allows investors to appropriately consider each non-GAAP financial measure. These non-GAAP financial measures, however, should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes that these measures enhance 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. However, these non-GAAP financial measures 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. 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
 
 
Three Months Ended Six Months Ended Year Ending
June 30, June 30, December 31
2011   2012   2011   2012  

2012 (1)
(in thousands, except per share data)
(unaudited)
Revenue $ 147,683   $ 206,462   $ 293,778   $ 406,044   $ 830,000  
 
Income from continuing operations $ 33,616 $ 38,592 $ 67,081 $ 72,554 $ 146,800
Add: Stock-based compensation 6,000 7,049 12,016 10,950 27,000

Add: Amortization of acquired intangible assets
1,110 12,571 2,239 25,143 50,000

Add: TARGUSinfo acquisition-related costs (2)
680 680

Add: Adjustment for provision for income taxes (3)
(2,845 ) (7,014 ) (5,733 ) (13,613 ) (30,800 )

Adjusted net income from continuing operations
$ 38,561   $ 51,198   $ 76,283   $ 95,034   $ 193,000  

Adjusted net income margin from continuing operations (4)
26 % 25 % 26 % 23 % 23 %

Adjusted net income from continuing operations per diluted share
$ 0.51   $ 0.75   $ 1.02   $ 1.39   $ 2.84  

Weighted average diluted common shares outstanding
75,015   67,887   75,129   68,132   68,000  
 
(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) Amounts represent costs incurred by the Company in connection with its acquisition of Targus Information Corporation. These costs are not deductible for income tax purposes.
(3) Adjustment reflects the estimated tax effect of adjustments for stock-based compensation expense and amortization of acquired intangible assets based on the effective tax rate for income from continuing operations for the applicable period.
(4) Adjusted net income margin is a measure of adjusted net income from continuing operations as a percentage of revenue.

Copyright Business Wire 2010

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