NeuStar Management Discusses Q2 2012 Results - Earnings Call Transcript

NeuStar (NSR)

Q2 2012 Earnings Call

July 26, 2012 4:30 pm ET

Executives

David Angelicchio

Lisa A. Hook - Chief Executive Officer, President, Director and Member of Neutrality Committee

Paul S. Lalljie - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

John F. Bright - Avondale Partners, LLC, Research Division

William V. Power - Robert W. Baird & Co. Incorporated, Research Division

Scott P. Sutherland - Wedbush Securities Inc., Research Division

Julio C. Quinteros - Goldman Sachs Group Inc., Research Division

Saket Kalia - JP Morgan Chase & Co, Research Division

Daniel Meron - RBC Capital Markets, LLC, Research Division

Jonathan Ho - William Blair & Company L.L.C., Research Division

Presentation

Operator

Good afternoon. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the NeuStar Second Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Dave.

David Angelicchio

Thank you, and good afternoon, everyone. Welcome to today's conference call. Joining us today from NeuStar are Lisa Hook, President and Chief Executive Officer; and Paul Lalljie, our Chief Financial Officer. Our call today will begin with comments from Lisa Hook and Paul Lalljie, followed by Q&A.

Before we begin, I'd like to remind everyone that today's discussion contains forward-looking statements based on the information as of today, July 26, 2012, and as such, is subject to many risks and uncertainties that may cause actual results to differ materially from those anticipated. Additional information concerning these risks and uncertainties can be found in our earnings releases and our filings with the U.S. Securities and Exchange Commission, including our last annual report on Form 10-K. We assume no obligation to update any forward-looking statements.

As you listen to today's call, we will discuss certain non-GAAP financial measures and supplemental key performance metrics by revenue categories, headcount and additional expense detail. This information, including reconciliations to the most comparable GAAP measures, can be found in today's earnings release and under our Investor Relations tab on our website, www.neustar.biz.

With that I'm pleased to introduce Neustar's President and Chief Executive Officer, Lisa Hook. Lisa?

Lisa A. Hook

And thank you, Mr. Dave. Let me start by reminding you all that we have 4 key priorities this year. We are hitting our financial targets, of course, positioning to win a renewal of the NPAC contract, integrating TARGUSinfo and transforming our culture. First, let me offer some perspective on our strong performing in the quarter, then Paul will walk you through our results with more detail and texture.

Second quarter results exceeded our expectations and demonstrates how well we are executing on our strategy. With respect to continuing operations, revenue increased 40% year-over-year to $206.5 million, and adjusted net income increased 33% to $51.2 million while adjusted earnings per share increased 47% to $0.75.

In the second quarter, we continue to deliver on the top line. Segment highlights include Carrier Services delivering 14% year-over-year growth, largely driven by NPAC revenue. Enterprise Services also delivering 14% year-over-year growth with contributions from all service offerings including our return to double-digit growth in Internet Infrastructure Services, and Information Services contributing $38 million in the second quarter, representing 6% sequential revenue growth. We're particularly pleased with the strong momentum in new bookings in Information Services, which will support revenue and earnings growth in the business throughout the remainder of 2012 and beyond.

For our business as a whole, we continue to generate the healthy margins that our investors have come to expect, and we continue to return capital to our shareholders through $25 million of stock repurchases. With regard to our next priority, we are well positioned to retain the NPAC contract when the current term expires 3 years from now, that is, at the end of June 2015. We participated in the RFI that was issued by the NAPM LLC in late 2011. We expect the RFP to be issued late in the third or early in the fourth quarter of this year with the contract being awarded in 2013.

The NPAC is a vital component of our national and telecommunications infrastructure. Thus, it is critical to the communication service providers who are our customers, to consumers and to the American public more generally. First, to address communication service providers. Over the past 15 years, we have provided our customers with extraordinary service as the technology landscape and market requirements have evolved. In 2011, we achieved 100% compliance on over 2,200 individual service-level metrics that measure our performance and reliability while concurrently implementing the most substantial upgrade ever to our infrastructure.

In 2011, our customers rated us 3.8 out of 4 for customer satisfaction, offering further proof of our unparalleled customer focus and ability. Today, we process over 1.2 million transactions for our customers every single day. To do this, we engage in over 20 million interactions with thousands of service providers in realtime, and we must ensure that this information is received correctly and simultaneously at every single customer endpoint. All of these interactions occur within a complex hardware and software infrastructure that employs thousands of business rules. The combinatorial scenario of these rules in infrastructure must handle our needs [ph]. We math geeks think 1,000 factorial requiring an array of experts with extensive knowledge of the system itself and the number of portability in general. Using this same complex infrastructure, we make it easy and cost-effective for carriers to introduce new technologies and devices and to rationalize their networks and infrastructure.

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